Muhamad Ibnu Fauzi - 29111315 Week 2 Reading Summary Business Strategy MM5012

RTB chpr 2: The external environment: Opportunities, Threat, Competition, and Competitor Analysis In the chapter it discussed about the general environment, industry environment, and competitor environment which is having so many different aspects including in there. In General environment is the discussion about the things in broader dimension that influence the industry and the competitor also. There are seven environmental segments which are: Demographic: Including about the population size, age structure, geographic distribution, ethnic mix, and income distribution. Economic: Directed to the nature and direction of the economy in which a firm competes or may compete. Politic/Legal: The arena in which organizations compete for attention, resources, and voices in overseeing the body of laws and regulations guiding interactions among nations as well as between firms and various local governmental agencies. Sociocultural: Discuss about a societys attitudes and cultural values. Technological: Including the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, and materials. Global: Including relevant new global markets, existing market that are changing, important international political events, and critical cultural and institutional characteristics of global markets. Physical Environment: Refers to potential and actual changes in the physical environment and business practices that are intended to positively respond to and deal with those changes.

Firms cannot directly control the general environments segments. To success, firms must learn how to gather information that needed to understand all segments and their implication for selecting and implementing the firms strategies. The industry environment is the set of factors that directly influences a firm and its competitive actions and responses. There are 5 factors that determine an industrys profit potential, they are; the threat of new entrants, the power of suppliers, the power of buyer, the threat of product substitutes, and the intensity of rivalry among competitors. The industry environment information also need to be gathered to be a precaution about the competitor action, the action named as competitor analysis. Industry environment information is focused on the factor and conditions that influence an industrys profitability potential and an analysis of competitors is focused on predicting competitors actions, responses, and intentions. To do external environmental analysis, there are 4 main steps that should be done: Scanning: Identify early signals of environmental changes and trends

Monitoring: Detecting meaning through ongoing observations of environmental changes and trends Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends Assessing: Determining the timing and importance of environmental changes and trends for firms strategies and their management

Lastly in competitor environment the firms need to do competitor analysis that focused on each company which a firm directly competes. In general of the competitor analysis there are 5 component that should be known to be agile in the competition, they are: Future Objectives, example like comparing goals, and action to the risk, etc Current Strategies, the current strategy on facing towards the condition Assumptions, working on details on each action, considering all could be happens Capabilities, checking ours and competitors strength and weakness Response, the effect of those strategy changes will occurs

All of those environment need to analyze thoroughly by having a good information analyst like in the consultant which is having all industry and competitor data and analysis. The keys to win a battle are knowing our own and opponents strength and weakness and lastly know the battlefield, if those things are in check, no doubt the firm could be the market leader if in normal condition where market in predictable situation.

RM-5: Sustaining competitive advantage in the global petrochemical industry (Saudi Arabian Perpective) To sustain in global petrochemical industry we need competitive advantage which is a competitive strategy that should be based on deep analysis of the structure of the industry and the growth of it. By using porters five force model, it could be described the all aspects that need to make a competitive strategy. The five aspects and the analysis are: The intensity of rivalry among existing competitors within the petrochemical industry Petrochemical industry has been increasing rapidly due to globalization, because of that so many merger and acquisition happens overtime. Major Player have been taking place to improve their competitive advantages and strengthen their position. Asian market is one of the biggest market for petrochemicals. The basic price went down sharply close to floor price. Price war is happen in this market, it give a disaster to the producer which is having a minimum margin that most of the causal is high maintenance and storage due to complexity. Technology and capacity is also critical which is determine if the producers could provide their customers well or no. Bargaining power of supplier Supplier of some critical raw material have a high bargaining power, as they are vital for production and non-availability of these may lead to a shutdown in production. Suppliers tend to make higher price and margins. For an example, the important material is aluminum alkyls which is a catalyst in the production process. This material doesnt have any substitute that could make any shortage in supply may jeopardize the production. Bargaining power of customers

There are no perceptible differences in terms of quality of the basic product, customers easily switch from one supplier to another. Threat of entry of new competitors To enter petrochemical industry is difficult because of the high investment on the equipment and such. Many corporation at start may joint venture at start and separating in the middle of the contract after having enough capital. Besides investment, technology also become the entry barrier for the new entrant. High technology often almost mandatory for this kind of industry because technology is one of the customer demand. Customer want a warranty of their things and good capacity, all of those almost had by the good technology. Threat of substitutes The threat of substitutes is high due to bad emission of the usage, the excess of activities also give bad effect to the nature. Food and beverages technology may develop further and maybe all industry will use more eco and green for usage like electricity or battery that could be recharged.

The conclusion is the intensity of rivalry amongst the sompetitor within the global petrochemical industry is high. Given the volatile nature of global market, any major change in its main international market segments will produce a big impact on its bottom line. The success of company in petrochemical industry is depend on how it adapts its strategies. Besides the competitive challenges, petrochemical industry also face difficulties of other challenges like high dependence on a skilled expatriate work-force, high cost of technology transfer, low levels of productivity of workforce due to lack of motivation to work, and the emergence of regional competitor.