Read the summary and the most important questions on STRATEGIC MANAGEMENT IN A GLOBAL CONTEXT (SOE09701)

• 1 L2) [PESTLE] External Analysis: Macro Environment

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• PESTEL Analysis | Overview, Factors, Examples, and Financial Analysis

  https://corporatefinanceinstitute.com/resources/management/pestel-analysis/

• External Environment Analysis - Opportunities & Threats (O & T)

  Opportunity
  A trend in the external environment which potentially has a positive impact on the organisation and, if exploited, will improve its performance.
  
  Threat
  A trend in the external environment which potentially has a negative impact on the organisation and, if not addressed, will hinder its performance.
  
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  Speaker's Note:-
  

  • BP overview: https://www.bp.com/en/global/corporate/what-we-do.html
  • Perform an opportunity / threats analysis for BP

• Combining SWOT with 5 Forces & PEST

  They could be used in complementary/ rather than alternatively.

• Combining SWOT with PEST

  Focus: O & T

• Porter’s Five Forces Model - in other words

  Source: From T1-27
  
  Competition in an industry is more than the visible rivalry between competitors, you must in addition to competitive rivalry, consider 4 other forces:
  

  1. Demand side (prices) – bargaining power of buyers
  2. Supply side (costs) – bargaining power of suppliers
  3. Potential for new entrants (more competitors)
  4. Threat from substitute products (less demand)

  
  
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  Source for description for each forces (more below): https://corporatefinanceinstitute.com/resources/management/competitive-forces-model/

• Bargaining Power of Buyers

  The bargaining power of buyers is high when:
  

  • Buyers are large or concentrated, so their decisions to purchase a product/service have bigger impacts on the company
  • Buyers purchase a large percentage of volume
  • Buyers have good information about the product, such as product pricing and demand

  
  Buyers are price-sensitive when:
  

  • There are many industry competitors, giving the buyers more choices with lower prices and better product attributes
  • There are many substitutes available
  • Switching costs are low, so buyers are indifferent between purchasing products from a company or its rivals
  • Product homogeneity is high

• Threat of Substitute Goods/Services

  Companies are likely to experience a high threat of substitute goods/services when:
  

  • Switching costs are low for customers
  • Substitutes have superior pricing relative to the current products
  • Substitutes have better attributes or performance characteristics

• Industrial Environment: Porter’s Model

  > Use the 5 Forces Model to evaluate competitiveness:
  

  • Assess profitability – industry attractiveness
  • Understand forces influencing competition
  • Identify which forces are critical to future competitiveness

  
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  which results in...
  ----> Opportunities & Threats to support strategy choices:
  

  • Can the firm develop strategies to influence the key forces?
  • How can a firm develop a position against the forces & rivals to gain competitive advantage?

• Applying the Five Forces Model

  • Forecast Industry Profitability by:
  • identifying and evaluating the key forces influencing the future competitive environment and their impact on profitability

  
  

  • Review strategies to improve industry profitability:
  • which key forces are lowering profitability
  • which key forces can be changed in the future by individual firm strategy or in collaboration between existing or potential competitors

• 2 L4) [Value Chain] Value Chain Framework: taking stock of capabilities

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• Value for customers rather than financial value - Intro

  1. Value is about to what extent a product or service can HELP customers.
  2. Value the result of weighing between the cost and the benefits.
  3. Value is what buyers are willing to pay.
  4. Creating more value for customers can help a business get more competitive advantage and make more money.