Adapting Your Competitive Strategy to Changing Industry Trends

Abstract

MGMT 475 MODULE 3 Part B Reading Identifying Changes in the Competitive Environment Your analysis of the five competitive forces helped you identify the key success factors for an industry. That is, you identified the underlying barriers superior performance all producers face in the external environment and converted those into statements about what producers must do to overcome those barriers in order to achieve and sustain competitive advantage. But the environment is always changing! So, it is critical that you are also aware of how changes in the environment might impact the quality of your firm’s competitive strategy. Drivers of Change The external environment is not static; the factors that are important for success today may be quite different in a few years. We thus must understand any broad (not industry-specific) issues that are causing, or are likely to cause, change in how our industry performs. We call these drivers of change. These are trends and developments that are or may change the level or way the buyers buy or how the producers produce. That is, these are issues with significant implications for the focal industry DEMAND and/or producer OPERATIONS (costs). BUT, remember - they are not industry-specific issues. The implications may be positive or negative. There are always many such changes going on in most industries, so we need a framework to identify and focus on those that are most critical. This is where the PESTEL analysis comes in handy. PESTEL Analysis: This is a simple framework for breaking down the external, macro environment into major categories of issues. Political – Economic – Social – Technological – Environmental – and Legal. Just like Porter’s five forces model, this analytical framework can be used to assess the attractiveness of an industry. HOWEVER – we use it now/here to identify the key Drivers of Change that are going to change our external environment such that we need to adapt our strategy (that is, to keep it well aligned with the competitive demands). Here is a link to a good video introducing the PESTEL framework. It is more tuned toward analyzing attractiveness, but it is still a good introduction. https://www.youtube.com/watch?v=bYn4CyL3r5w Again, our goal here is to ‘predict’ how the industry might be different in a few years. So, only trends, events, changes that will have a long-term, lasting effect on the industry are relevant (a hurricane, for example, is not a driver of change but ‘climate change’ linked to a risk of more frequent and more powerful hurricanes would be). Likewise, we are not interested in things that have already occurred and we are not speculating on all the possible things that ‘might’ occur. We are only focused on trends and developments we can argue, based on evidence, are causing change, will be causing change, or are likely to cause change in the next few years. Remember that this is not about...