Topic:External Strategic Analysis

From SharedExperienceProject

Contents 1 Topic Highlights 2 Introduction and Motivation 3 Learning Activities 4 Learning Objectives 5 Footnote

Topic Highlights

(What you will learn)

• The basics of conducting an external strategic analysis
• The three levels of external analysis: 1) Macro, 2) Industry, and 3) Competitive
• An understanding of the so-called PESTEL model
• How to use Porter's Five-Forces framework to analyze the attractiveness of an industry
  
• Various perspectives on how applicable the Five-Forces model is for today's strategist
• An introduction to how strategy might be derived from the external analyses treated here^[1]

Introduction and Motivation

(Why learn it)

In order to formulate an effective strategy for a business, it is critical that you have a solid understanding of its external environment. In this topic, we will add to our toolboxes the tools required to gain that understanding through an external situation analysis.

You've probably used the SWOT framework in previous courses (strengths, weaknesses, opportunities and threats). Here, you will develop the tools required to analyze the opportunities and threats more systematically for a given industry or business situation (i.e. the OT half of SWOT)^[2] . This will help you grow your analytical skills beyond those required for the intuition-based SWOT analysis.

This topic is usually treated over four hours (two two-hour sessions), as described below under Learning Objectives. A case about Costco will used to help us practice carrying out an external analysis.

Learning Activities

(How the levels of understanding will be gained)

Learning activities for class 1

Type	Name	Direction
Reading	Read before class: pages 1-10 of Competitive Strategy: The Core Concepts (in your course package) This is a high-level introduction to the concepts of Five Forces and generic strategies, assigned to provide context for our discussions	Self-directed
In-class lecture and discussion	External Analysis Slides This discussion provides an introduction to external strategic analysis, including the PESTEL and Five-Forces frameworks	Instructor-directed
Personal activities	Review the learning objectives given below in this page	Instructor and self-directed

Learning activities for class 2

Type	Name	Direction
Case and take-home quiz	Read the following case: Costco Warehousing Corporation: Strategies for Growth (in your course package) And respond to the following quiz questions: Take-home quiz (Five-Forces industry analysis) Read the following as you prepare your answers: How Competitive Forces Shape Strategy - this paper is the nitty gritty, straight from the horse's mouth: treat it as your recipe book for cooking up an industry analysis using the Five-Forces framework	Self-directed
In class discussion	Costco case debrief	Instructor-directed
Personal activities	Review the following: Sample analysis write-up (to be posted after the quiz) The learning objectives given below in this page	Instructor and self-directed

Learning Objectives

(Levels of understanding to be gained)

Learning objectives for this topic

Level of Understanding	Objective(s)
Very best	After having carried out an external analysis, can I write a clear succinct summary of the analysis, including conclusions the implications for the business strategy? Check out the sample analysis write-up for the Costco case (to be posted after the quiz)
Highly satisfactory	Can I carry out a PEST or PESTEL analysis for a situation not studied in class? Can I carry out a Five-Forces analysis for an industry not studied in class? Did I understand the discussion we had about "environmental turbulence" and the idea of an "emergent strategy"?
Satisfactory	Do I understand the role that an external analysis plays in the development of a suitable strategy? How does it help? What are it's limitations? Do I understand the Five-Forces analysis carried out in the take-home quiz and could I comfortably repeat the analysis myself? Do I know the basic steps for carrying out a PESTEL analysis (we discussed 4 steps in class)? How about the steps for a Five-Forces analysis (there were also 4 of these)?
Maybe just enough to pass	Can I identify the three levels of external analysis studied in class? Am I able to name the components of each, e.g.: What do the letters P, E, S, T, E and L stand for? What are the five forces in Porter's model?

Footnote

1. ↑ The topic of strategy development will be taken up in much more detail in a later topic.
2. ↑ In a later topic, we will study internal strategic analysis. This will provide the tools for systematically analyzing the strengths and weaknesses relevant to the development of a successful strategy.