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The External Environmental: Think in Terms of Opportunities and Threats - The "O" and "T" of TOWS
The External Environmental: Think in Terms of Opportunities and Threats - The "O" and "T" of TOWS
The External Environmental: Think in Terms of Opportunities and Threats - The "O" and "T" of TOWS
increased sales and/or market share (Cereal) new product offerings (Toys) processing technology innovation (Semiconductors) decreased environmental impact (Chemicals)
What is needed to respond to changes in the external environment and what does the company possess to respond to these changes? What does the company need and what does the external environment possess to provide to the company?
- To what degree does a company try to meet the needs of a increasingly fragmented market?
What changes are going on in the General Environment that you think businesses need to pay attention to?
Are these changes only short term? Are they cyclical? Are they more long term and lasting?
Competitive Rivalry
Threat Economies of Scale are high of Product Differentiation is high New Capital Requirements are high Entrants Switching Costs are high Access to Distribution Channels is limited Cost Disadvantages Independent of Scale are high Government Policy is restrictive
Supplier industry dominated by a few firms Suppliers products have few substitutes Bargaining Power of Buyer is not important customer Suppliers Suppliers product is an important input Suppliers products are differentiated Suppliers products have high switching costs Supplier poses credible threat to forward integration
They are concentrated or purchases are large relative to sellers sales Purchase accounts for a significant fraction of suppliers sales Product unimportant to quality Bargaining Power Products are undifferentiated of Buyers face few switching costs Buyers Buyers industry earns low profits Buyer has full information Buyer presents a credible threat to backward integration
Supply of packaging only one supplier in country with limited styles. Supply of raw material (fruits) large number of small suppliers located throughout the country for most fruits, imports tropical Limited, but increasing domestic incomes Brand conscious younger generation Health conscious parents
Forecasting perhaps the most challenging issue for business success directly impacts financial planning and internal resource allocation
Based on a mix of hard data and luck/intuition Use brainstorming, statistical modeling, and scenario planning.
Forecasting
What is existing industry demand in each segment? What market share of each segment does your company possess? How much will the segment grow? What will be the change (+ or -) in your market share of each segment?
Lets take a look under Tutorials for an excellent description of doing Sales Forecasts in the Simulation!
Future objectives: goals and risks, ability to achieve Current strategy: competitive advantages Retaliation: How will competitor(s) respond to your actions?
Assumptions: Can competitor(s) adapt to changing environment? Capabilities: relative strengths and weaknesses?
numerous and/or equally balanced competitors slow growth industry high fixed costs high storage costs lack of differentiation
capacity added in large increments diverse competitors high strategic stakes high exit barriers
Opportunities What are the most important opportunities for your firm? Threats What are the most important threats to your company Total
What is the How well relative is your importance company of each of able to the respond opportunities to the and threats? opportunit ies and threats? 1.00 ????
(Describe how you derived the weighted score for each line)
External Factors: List the 8 to 10 most important opportunities and threats (developments in the General and Industry environments) facing the company. Weight: Assign a weight to each External Factor from 1.0 (most important) to 0.0 (not important) based on the factors probable impact on the companys current strategic position. All weights must sum to 1.00. Rating: Assign a rating to each factor from 5.0 (Outstanding) to 1.00 (Poor) based on the companys current response to that particular factor.
Weighted Score: Multiply the weight times the rating to get the weighted score for each factor. Comments: Describe (1) why you selected each External Factor and (2) how you estimated the weight and rating. Total Weighted Score: Add the Weighted Scores for the External Factors to get the Total Weighted Score. The Total Weighted Score is useful as a comparison to other companies in the industry group. See pages 73 and 74 in the text for more information.