What you will learn in this section :

• Envisioning Strategy
– Definition
– Framework
– Visual Models
• External Analysis
– PEST
– PEST Impact Analysis
• Industry and Competitive Analysis
– Industry Structure
– Evolution of Industries
– Industry Supply Chain
– Potential Industry Earnings
– Porter’s 5 Forces Analysis
– Competitive Intensity
– Strategies for minimizing competitive forces
– Perceptual Map
– Barriers to Entry/Incumbency advantages
– DSIR effect
• Company Resources and Capabilities
– ARC Analysis/HR
– SWOT Analysis
– Value Creating Processes/Core Competencies
– Strategic Gameboard
– Balanced Scorecard
– Change Management © Sunil Mehrotra
Understanding Strategic Management is
like pealing an onion
 Analyzing the External Environment:
PEST Analysis GDP
GDP growth
External Exchange rate
Fiscal Policy
Monetary Policy Environment Unemployment rate
Skilled labor
Tax laws
ic Education levels
Intellectual Property protection
Poli m
Copyright laws tica ono ge Trade unions
Securities Laws l Cha Ec han
Infrastructure
Business climate ng e C
Healthcare costs
Raw materials

Opportunities
Opportunities

Threats
Threats
al
New technologies
Materials technologies i c
log e So Demographics
Process technologies o c
Ch ial
Income Distribution
Information technologies
chn ang ang Social stability
Communication technologiesTe
Government incentives
Ch e Ethnic patterns
Consumerism
Energy costs Discretionary income
Broadband penetration Fashions/fads
Technology incubation Consumer trends

© Sunil Mehrotra
 PEST Analysis using the Internet
http://delicious.com/smehro/mbam619+PEST+Politics%20
PEST Politics
http://www.nytimes.com/interactive/2008/10/18/business/20081019-metrics-graphic.html
Can Presidents tame business cycles
http://harvardbusiness.org/flatmm/hbextras/200805/recessions/
HBR Interactive graphics on recessions

http://delicious.com/smehro/mbam619+PEST+economy%20
PEST Economy
http://www.fedstats.gov/?cm_sp=ExternalLink-_-Federal-_-DOC
Fed Stats all in one place

http://www.allbusiness.com/marketing-advertising/market-research-analysis-market/11469816-
1.html
Collection of resources and links to free data
http://delicious.com/smehro/mbam619+PEST+Social%20
PEST Social

http://delicious.com/smehro/mbam619+PEST+Technology%20
PEST Technology
 PEST Analysis: Example
Federal Deficit as % of GDP
 Example of fiscal policy :
Visualizing federal budget
 Example of fiscal policy:
National Debt: 1940 to present
Who is funding our debt?
Citigroup's role in CDOs and the financial crisis
 Auto worker wages

http://www.nytimes.com/imagepages/2008/12/10/business/20081210_LEONHARDT_GRAPHIC.html
 Economy at a glance

Economic Indicators

Real Economic Grow th

Existing Home Sales

Consumer Prices Sept. 2008

Oct. 2008

Unemployment

Productivity

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

% change from previous period

World map:Population
New technologies are being adopted faster today
 Change Will Be Relentless:
Wireless industry example

Micro Fuel Cells

Light Emitting Polymer Displays

Mesh
Networks WCDMA
Visibility

802.11b Wi-Fi
GPRS
UWB EDGE
4G Wireless
MIMO MEMS Wireless Broadband
Smart Dust As of 2Q03

Technology Peak of Trough of Slope of Plateau of

Trigger Inflated Disillusionment Enlightenment Productivity
Expectations
Maturity 16
 Gartner Predicts: Hot Spots Explode …

75,000,000 Users
167,000 Hot Spots

Hot Spot
Users/
Hot Spots

30,000 Users
1,000 Hot Spots

2001 2008
17
How the Web has grown and evolved
 Two Key Forces Driving Business Change

Faster Economic Pace Impatient Customers

“Time Tortured”
Emerge Threats Appear

Triennial Strategy Rolling

Windows Opportunity Keyholes

Forecast Demand Chaotic Demand Convenience

This Is the
“Now Economy” 19
Culture: Innovation in art

20
21
 Analyzing the External Environment:
PEST Analysis GDP
GDP growth
External Exchange rate
Fiscal Policy
Monetary Policy Environment Unemployment rate
Skilled labor
Tax laws
ic Education levels
Intellectual Property protection
Poli m
Copyright laws tica ono ge Trade unions
Securities Laws l Cha Ec han
Infrastructure
Business climate ng e C
Healthcare costs
Raw materials

Opportunities
Opportunities

Threats
Threats
al
New technologies
Materials technologies i c
log e So Demographics
Process technologies o c
Ch ial
Income Distribution
Information technologies
chn ang ang Social stability
Communication technologiesTe
Government incentives
Ch e Ethnic patterns
Consumerism
Energy costs Discretionary income
Broadband penetration Fashions/fads
Technology incubation Consumer trends

© Sunil Mehrotra
 Political Change Impact

Fiscal Policy
Monetary Policy
Tax laws
Intellectual Property
protection
Copyright laws
Securities Laws
Business climate
International Trade
 “Economy” Change Impact

GDP
GDP growth
Exchange rate
Unemployment rate
Skilled labor
Education levels
Trade unions
Infrastructure
Healthcare costs
Raw materials
It is crucial to describe the subject for

PEST Impact Matrix

the PEST analysis clearly so that
people, contributing to the analysis,
and those interpreting the results
from PEST analysis, could
understand the purpose of the PEST
assessment and its implications

Impact of Opportunities Threats

Threats Strategic
Nature of
change response
change

Political Change

Economic
Change

Social
Change

Technological
Change

© Sunil Mehrotra
PEST Impact example:

Impact of Opportunities Threats

Threats Strategic
Nature of
change response
change

Political Change

Economic
Change

Social
Change

Technological
Change

© Sunil Mehrotra
PEST Analysis Example:
ic
m
Poli
tica ono ge
Ec han
Infrastructure Emerging
l Ch Technologies Markets
ang C
e

Digital
Connections
Originations

Opportunities
Opportunities

Environmental Demographics
Solutions

i c al So
l og c
o Ch ial
chn ange ang
Te Ch e

© Sunil Mehrotra
PEST Impact example:

Impact of Opportunities Threats

Threats Strategic
Nature of
change response
change

Political Change

Economic
Change

Social
Change

Technological
Change

© Sunil Mehrotra
PEST Impact example:
Demographics

© Sunil Mehrotra
PEST Impact example:

© Sunil Mehrotra
Student Examples: Pest Analysis

Breanne Hayes
April 2008 MBA
Graziadio School of Business and Management
Pepperdine University

Elizabeth Passeretti
April 2008 MBA Candidate
Graziadio School of Business and
Management
Pepperdine University
PEST example:

Impact of Opportunities Threats

Threats Strategic
Nature of
change response
change

Shorten
More
Political Change FDA Longer time Product
approval process conservative to market Development
Cycle

Economic US economic Consumer Generic Evaluate

drugs more acquisitions
Change downturn spending
accepted
down
Identify
Social Caring for
Aging New growth product/market
the elderly
Population opportunities
Change needs to serve
the elderly

New New New

Technological Potential
materials for cost/quality products Invest in
new promising
Change joint frontier competitors start-ups
replacement

© Sunil Mehrotra
PEST Impact example:

Impact of Opportunities Threats

Threats Strategic
Nature of
change response
change

Operational
Democratic party More
Political Change in power government
Pressure on Efficiency to
prices reduce costs
control

Economic $100+ crude oil Commodity Pressure Focus on

Operational
Change price prices on costs
Efficiency
increasing
Identify
Social Caring for
Aging New growth product/market
the elderly
Population opportunities
Change needs to serve
the elderly
Breakthrough New science New start- Potential Invest
Technological in science. and new ups. new in/acquire
Process technologies Disruptive competitors promising
Change improvement imminent technologies start-ups
technologies

© Sunil Mehrotra
Contemplating the Future
 Scenario Planning

http://strategicframing.com/strategic-planning-workshop/
 Nappies 1-6?

What is visual thinking?

What is Strategic Management?

-strategic planning framework

What is the role of the CEO/Leader?

-Leadership styles

What is PEST Analysis?

Using the Internet for PEST Analysis

-Data sources and web resources

Identifying business Opportunities and Threats

through PEST Impact analysis framework
Mnemonic 2