Market-Based View on Strategy: External
Environment Analysis
SESSION 2: EXTERNAL ANALYSIS AND MBV
Market Based View of Strategy: External environment analysis > strategic issues-> winning strategies-> superior performance
Market based view of strategy (MBV) - sometimes known as Industrial Organisation based view (IO) places primary importance on external conditions faced by the firm. In this view, strategy is about the firm creating for itself a ‘market position’ via strategy whereby it can defend itself from external environmental forces and/or influence them in a way that places it at an advantage vis-à-vis its competitors . MBV paradigm is firstly connected to the ‘structure–conduct–performance’ approach, where the structure of a macro and micro external environment determines firm conduct/strategy (e.g. innovation strategies, strategies for neutralising 5 forces etc., ) and hence firm performance (e.g. profits).MBV also focuses on a ‘dynamic competition approach’, where firms not only are influenced by the external environment, but also actively seek to change it (e.g. the Schumpetarian approach such as influencing EV forces ). According to MBV therefore, a firm’s external environment plays a key role in determining its strategy and performance.
According to MBV, insightful diagnosis of a company’s external environment is a prerequisite for a firm to succeed in formulating winning strategies and hence achieve superior returns. Consequently , the task of formulating a winning strategy should always begin with an appraisal of the company’s external environment to identify strategic issues ( future threats and opportunities , current barriers ) then addressing these strategic issues by matching firm’s strategies to the conditions , characteristics and structure of its external environmental forces acting upon on it – Slide 1
This section presents the theories, analytical tools and concepts (TTC) of a firm’s external environment that should be considered in formulating strategic choices for
Market Based View of Strategy: External environment analysis > strategic issues-> winning strategies-> superior performance
Market based view of strategy (MBV) - sometimes known as Industrial Organisation based view (IO) places primary importance on external conditions faced by the firm. In this view, strategy is about the firm creating for itself a ‘market position’ via strategy whereby it can defend itself from external environmental forces and/or influence them in a way that places it at an advantage vis-à-vis its competitors . MBV paradigm is firstly connected to the ‘structure–conduct–performance’ approach, where the structure of a macro and micro external environment determines firm conduct/strategy (e.g. innovation strategies, strategies for neutralising 5 forces etc., ) and hence firm performance (e.g. profits).MBV also focuses on a ‘dynamic competition approach’, where firms not only are influenced by the external environment, but also actively seek to change it (e.g. the Schumpetarian approach such as influencing EV forces ). According to MBV therefore, a firm’s external environment plays a key role in determining its strategy and performance.
According to MBV, insightful diagnosis of a company’s external environment is a prerequisite for a firm to succeed in formulating winning strategies and hence achieve superior returns. Consequently , the task of formulating a winning strategy should always begin with an appraisal of the company’s external environment to identify strategic issues ( future threats and opportunities , current barriers ) then addressing these strategic issues by matching firm’s strategies to the conditions , characteristics and structure of its external environmental forces acting upon on it – Slide 1
This section presents the theories, analytical tools and concepts (TTC) of a firm’s external environment that should be considered in formulating strategic choices for
Links: * A collection of academic articles on the latest views on PESTEL, and similar is the special issue of International Studies of Management and Organization, vol. 36, no. 3 (2006), edited by Peter McKiernan. * A classic article on macro-environment analysis is by Ginter, P. and Duncan, J. (1990) ‘Macro-environmental analysis for strategic management’, Long Range Planning, 23(6): 91– 100.