Chapter2 TheExternalEnvironment Opportunities Threats IndustryCompetition andCompetitorAnalysis MichaelA HittR DuaneIrelandRobertE Hoskisson 2000South WesternCollegePublishing TheStrategicManagementProcess ComponentsoftheGeneralEnvironment ComponentsoftheGeneralEnvironment ExternalEnvironmentalAnalysis Theexternalenvironmentalanalysisprocessshouldbeconductedonacontinuousbasis Thisprocessincludesfouractivities Top10U S StatesMovingTowardDigitalEconomy Statesinthetop10ofthosethataretryingtotransformthemselvestotherealitiesandneedsofadigitaleconomymayexperienceaninfluxofhigh techcompaniesandskilledworkersaswellasincreasesintaxrevenues ExternalEnvironmentalAnalysis Porter sFiveForcesModelofCompetition ThreatofNewEntrants ExpectedRetaliation ThreatofNewEntrants ThreatofNewEntrants Porter sFiveForcesModelofCompetition BargainingPowerofSuppliers Suppliersarelikelytobepowerfulif ThreatofNewEntrants ThreatofNewEntrants BargainingPowerofSuppliers Porter sFiveForcesModelofCompetition BargainingPowerofBuyers Buyergroupsarelikelytobepowerfulif ThreatofNewEntrants ThreatofNewEntrants BargainingPowerofBuyers BargainingPowerofSuppliers Porter sFiveForcesModelofCompetition ThreatofSubstituteProducts Keystoevaluatesubstituteproducts ThreatofSubstituteProducts ThreatofNewEntrants ThreatofNewEntrants BargainingPowerofBuyers BargainingPowerofSuppliers Porter sFiveForcesModelofCompetition RivalryAmongExistingCompetitors Cutthroatcompetitionismorelikelytooccurwhen RivalryAmongExistingCompetitors Highexitbarriersareeconomic strategicandemotionalfactorswhichcausecompaniestoremaininanindustryevenwhenfutureprofitabilityisquestionable RivalryAmongExistingCompetitors EffectsofEntryBarriersandExitBarriersonIndustryProfits EntryBarriers ExitBarriers High Low High Low Low StableReturns EntryBarriers ExitBarriers High Low High Low EffectsofEntryBarriersandExitBarriersonIndustryProfits High StableReturns EntryBarriers ExitBarriers High Low High Low Low StableReturns EffectsofEntryBarriersandExitBarriersonIndustryProfits Low RiskyReturns EntryBarriers ExitBarriers High Low High Low Low StableReturns High StableReturns EffectsofEntryBarriersandExitBarriersonIndustryProfits High RiskyReturns EntryBarriers ExitBarriers High Low High Low Low StableReturns High StableReturns Low RiskyReturns EffectsofEntryBarriersandExitBarriersonIndustryProfits CompetitorAnalysis Thefollow uptoIndustryAnalysisiseffectiveanalysisofafirm sCompetitors CompetitorAnalysis FutureObjectives Howdoourgoalscomparetoourcompetitors goals Wherewillemphasisbeplacedinthefuture Whatistheattitudetowardrisk WhatDrivesthecompetitor CompetitorAnalysis Whatisthecompetitordoing Whatcanthecompetitordo FutureObjectives Howdoourgoalscomparetoourcompetitors goals Wherewillemphasisbeplacedinthefuture Whatistheattitudetowardrisk CurrentStrategy Howarewecurrentlycompeting Doesthisstrategysupportchangesinthecompetitivestructure CompetitorAnalysis Whatdoesthecompetitorbelieveaboutitselfandtheindustry Doweassumethefuturewillbevolatile Areweassumingstablecompetitiveconditions Whatassumptionsdoourcompetitorsholdabouttheindustryandthemselves Assumptions CompetitorAnalysis Whatarethecompetitor scapabilities Whataremycompetitors strengthsandweaknesses Howdoourcapabilitiescomparetoourcompetitors Capabilities CompetitorAnalysis Response Whatwillourcompetitorsdointhefuture Wheredowehaveacompetitiveadvantage Howwillthischangeourrelationshipwithourcompetition CompetitorAnalysis