MT1 External Context of Strategy
Carpenter and Sanders (2008) provide great alternative tools to create strategy based on external context of the industries that companies may want to enter. As we continue to progress through our own professional careers we will be faced with analyzing various industries and making decisions that will help guide the companies that we will be working for. Furthermore, identifying external threats to the company through competing firms provides options and objectives to leadership on necessary changes that need to be made to continue being relative and successful. (Carpenter & Sanders, 2008) There are countless examples of companies that do not look at an inclusive view of an industry, and then become narrow sighted to industry competitors, and possible new entrants. Utilizing the various tools and models that were presented in this weeks textbook and research on the topic have provided me with a better understanding of how to formulate strategy to that faces a globalizing marketplace.
As we have learned, it is imperative for an organization to analyze and understand their external environment. Coca-Cola’s attempted entrance into the wine industry was interesting because they failed to do their due diligence and understand their current market. Coca-Cola had an intimate knowledge of their consumers, marketing and brand expertise, and superior distribution capabilities, which were strengths that were key to enter a new market (Markides, 1997). Wajma shared a really helpful reference regarding this mentioning that even though a company is a brand leader, they will have new competition if they aren’t first in a new category (as referenced by Nizam, 2018). It is important for a company to position themselves when entering a new market (2018).
MT2 Industry Analysis and Key Success Factors
Carpenter and Sanders (2008) provide Porter’s five forces model to provide additional support for a company in identifying the factors that play major roles in the success of the business. While I have only just started to understand how these forces play an integral role in the success of companies as they enter a industry I did find that certain forces stood out to me more than others. The five forces are outlined as degree of rivalry, threat of new entrants, supplier power, buyer power, and threat of substitution, each being able to be broken down for further analysis of competitors. (Carpenter and Sanders, 2008) I found that buying power and supplier power were two forces that were also connected to the size of the company. The larger the company the more potential it has to negotiate terms that would suit the company, and possibly make it more difficult for competitors. Another force from Porter’s model was increasing competitor concentration, eroding brand loyalty due to increases in price promotions and private labels has lead to an increase in the need for identifying the boundaries within industries. (Ailawadi et al., 1995) We see this with small start-ups that are able to create a diverse picture of an industry, and use this to create a strategy that allows the company to take a foothold within the industry. This force seems to have the potential to allow smaller organizations have an opportunity to create market share in a market that may be dominated by a few other major players.
An industry analysis can greatly impact the strategy of an organization. One of our portfolio companies is in the software industry, which changes rapidly and is frequently exposed to the threat of new entrants. Given that suppliers, especially in our industry, can also make a significant impact in our company, it is important to monitor this relationship. Allison brought up a great story in her workplace where suppliers were delayed and caused a domino effect that impacted their customers (Clark, 2018). One interesting item I learned this week was the use of a supplier report card. Liker and Choi (2004) discussed the importance of supervising your suppliers and suggests using a report cord to do so. We use a similar tool with our suppliers. It helps maintain the supplier relationship, entice them to meet our deadlines, and also helps us track our usage and profitability.
MT3 – Strategic Groups and Competitor Analysis
Strategic groups are represented as subgroups within an industry, and they often consist of competitors that hold different resources and capabilities. (Carpenter & Sanders, 2008) The example used in the textbook was useful in visualizing the variations that can be present in an industrial marketplace. Some subgroups may serve the economy or middle-class consumer, while others may serve a luxury or high -income consumer. I see this concept present in our SSM vehicles as some are designed with the pursuit of market share for that particular consumers. That is why the identification of strategic groups has been used primarily to explore systematic differences in profitability among firms. (Reger & Huff, 1993) This provides scope to the adjustments needed to the strategy for companies to remain competitive as they enter and maintain a presence in a new industry. Understanding how to navigate these subgroups was also discussed by the authors who laid out some starting points to review and assist in the mapping of subgroups. Carpenter and Sanders (2008) state that a good place to start in the mapping process is to identify the dimensions that differentiate firms, but can be expanded to view the company’s size, and geographic scope.
The topic of scenario planning was the most interesting to me this week as it is something I believe I do naturally, but is also highly underutilized in organizations that I have been involved with. An organization can use scenarios to gain a better understanding of the dynamics of change and help assess uncertainties in the external environment. Scenario planning enables organizations to see the future, innovate, and act accordingly (Amer et al., 2013). When I researched this further, I learned that the best scenarios are “built on a new insight—either something predetermined that others have missed or an unobvious but critical uncertainty” (Roxburgh, 2009, p. 3). This is why I believe a successful scenario planning team will be compromised of individuals throughout different levels in the organization.
Ailawadi, K. L., Borin, N., & Farris, P. W. (1995). Market power and performance: a cross-industry analysis of manufacturers and retailers. Journal of Retailing, 71(3), 211-248.
Carpenter, M.A., & Sanders, W.G., (2008). Strategic management: A dynamic perspective. Upper Saddle River, NJ: Pearson Prentice Hall.
Reger, R. K., & Huff, A. S. (1993). Strategic groups: A cognitive perspective. Strategic management journal, 14(2), 103-123.
Amer, M., Daim, T. U., & Jetter, A. (2013). A review of scenario planning. Futures, 46, 23-40.
Clark, A. (2018, February 10). Re: MT2 Industry Analysis and Key Success Factors. CSUMB Learn. Retrieved from http://csumb.elearningctr.com/mod/forum/discuss.ph…
Liker, J., & Choi, T. Y. (2004). Building deep supplier relationships. Retrieved from https://hbr.org/2004/12/building-deep-supplier-rel…
Markides, C. C. (1997). To Diversify or Not To Diversify? Retrieved from https://hbr.org/1997/11/to-diversify-or-not-to-div…
Nizam, W. (2018, February 9). MT1 External Context of Strategy. CSUMB Learn. Retrieved from http://csumb.elearningctr.com/mod/forum/discuss.ph…