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Chapter 2

As an MBA student, I have always thought about the reason why a not only big and

successful companies such as Blackberry, Nokia or Siemens but also some industry such as Iranian

garment industry suddenly disappeard from the business. In this report, I will bring some of my

understanding which helps me to know more about the importance of analyzing both external and

enternal enviornment, which led to losing the position of those companies and industries in the

market. One of the responsibilities of both managers and leaders is analyzing the external

environment where the company has a business, and right forecasting can be helpful for them for

creating a competitive advantage. This can justify why some powerful company such as blackberry

even by having efficient operational effectiveness, they were not successful in reading the change

in the external environment. Consequently, there were not successful in meeting the market

demand, and their market leader’s position was overtaken by new rivals. In this stage, the concept

of sustainable competitive advantage plays a critical role in stabling the position of the company

in the market over time. Thus for keeping up to change, managers can use several tools such as

SWOT analysis and Porter’s five forces.

Environmental Forecasting

For this purpose, we use Environmental Forecasting, which consists of a process of

scanning, monitoring, and competitive intelligence. This practice can help us to find about the

scope, direction, speed, and intensity of changes in the environment. Environmental scanning can
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help users to detect the changes that are currently happening and the future changes that can

happen, and this can learn use to be more proactive in this regard. Environmental monitoring is

finding the trends, events, and sequence that happens in the environment. For this purpose,

identifying hard and soft trends should be considered in defining the right strategic direction. The

aging population is considered a hard trend, and it will happen definitely; the future budget deficit

is an example of a soft trend, and it may happen.

We use competitive intelligence competitive intelligence to figure out the industry and the

strengths and weakness of competitors, the company can collect information and data, and analyze

them. In this way, by forecasting the potential move of rivals, the company can show the right

strategic move in a short period. SlideShare, Quora, Ispionage, and YouTube can be helpful for

managers to gain those kinds of information. However, having ethical and legal approach should

be considered in the process.

SWOT analysis

SWOT analysis can be used as a strategic technique to analyze internally and externally to

find out the trend for competition for both factory and the industry’s environment. This can be

useful as it can make the link between the internal and external environment, teach the manager to

be proactive, and increase the awareness of top management about the strategy’s role.

General environment

We can use several factors for segmentation of the general environment, and these

segments are:

 The demographic

 Sociocultural

 Political/Legal
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 Technological

 Economic

 Global

In the sociocultural segment, we use factors such as lifestyles, value, and beliefs, and these

forces can increase one side and simultaneously decrease another element in another industry. For

example, the employment of women in the automobile industry in BAM, a small city, which is the

main producer of date in Iran, can lead to decrease the traditional workforce for collecting the date,

and consequently, increasing the cost of agriculture business in that region. It should be considered

that there is a positive and negative relationship between these factors and changing one segment

can affect the other segments too.

Competitive environment

In analyzing the competitive environment, we analyze several factors that attribute to our

strategies such as customers, suppliers, our current, and potential rivals.

Porter five-forces model

Since 1979 when Michael Porter introduces its model , it has been one of the popular

models to analyze the factors such as competition, being profitable, intensity, and being attractive

in the industry. This model consists of 5 input forces, and this can explain why intensive industry

such as steel has less return than the mild-industry like soft drink producers, which has higher

returns.
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This model can help us to make a better strategic action; for example, when we want to

buy raw materials, we can identify the business that has the lowest power to make an influence,

which makes rooms for use to affect it adversely (Porter, 1979). It is important to note that in this

model we think about the whole industry, not about our company, so changing the situation in

these forces can change the balance, and we should modify the strategic direction.

The question here is how we can use this model to formulate our strategy. Porter (1979)

suggested after knowing the changes in these forces, we should (1) position the organization in

order to use from the capability to act as defensive layers to affect of competitive forces, (2) making

strategic moves in order to make balance with the forces, (3) and forecasting the future change in

elements that affects these forces and making suitable response to them whenever they happen.

Therefore, doing a comprehensive and detailed analysis, which contain a good time frame,

and quantification of these forces (total cost’s percentage) should be done find the underpinnings

of structure and the profitability’s root causes. When we want to compare the companies, we

assume that there is not exactly similar companies, and there are not different companies. For

example, the concept of ‘strategic group’ refers to those companies who have a similar strategy

(the breadth’ level, the level of price, the quality, distribution’s channel, and the vertical

integration’s level), and in this situation, the rivalry can play an important role. Interestingly, in

this kind of group can act as a barrier for all the companies in the group against the attack from

others. It can also help us to predict the overall effects of a new event in the industry of the specified

group.

 It can help us in designing a wise strategic move by monitoring the competitors

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 Using the concepts and ideas of another strategic group

 Identifying the untouched market by understanding the market’s target of other strategic

groups

What have I learned in Michele’s class regarding chapter 2

This week, I realized that why our experienced professor always talks about the importance of

Porter's five forces, SWOT analysis in doing our assignment. When I watched the video in the

class, I was motivated to go and find the original material from Porter, and interestingly that

information was the things that always professor repeatedly tough us. I think that I should read

more about those concepts and try to make some links between all the concepts I have learned in

UCW and Strategic Management course.

References

Porter, M. E. (1979). How competitive forces shape strategy. Harvard Business Review, 57(2),

137-145.