business analysis
Chapter 2:
Strategy
Analysis
Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
The Importance of Strategy Analysis
• Strategy drives the actions of an organization.
• Studying a firm’s strategy provides:
– An understanding of what drives risks, profitability, and competitive advantages
– A basis for future performance to be forecasted
– An idea of how to measure the success of a firm’s actions Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
Key Concepts in Chapter 2
• The importance of industry-level analysis
• Porter’s “five forces” framework for industry analysis • Competitive strategy analysis of the firm
• Corporate strategy analysis for multi-business organizations Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
The Importance of Industry-Level Analysis
• A firm’s strategy is heavily influenced by the industry it belongs to.
• Understanding the environment and competitive forces within an industry helps with evaluating the quality of a particular firm’s strategy.
• Porter created a useful framework to evaluate the competitive forces at work in an industry, as seen in Figure 2-1.
Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
Industry
Structure and
Profitability
Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
Competitive Force 1:
Rivalry Among Existing Firms
• Higher degrees of competition among firms:
– Push prices towards the marginal cost of production.
– Make non-price dimensions of products or services more important.
• Determinants of the intensity of competition among firms:
– Industry growth rate.
– Concentration and balance of competitors.
Copyright (c) 2010 South-Western Cengage Learning
Chapter
Strategy
Analysis
Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
The Importance of Strategy Analysis
• Strategy drives the actions of an organization.
• Studying a firm’s strategy provides:
– An understanding of what drives risks, profitability, and competitive advantages
– A basis for future performance to be forecasted
– An idea of how to measure the success of a firm’s actions Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
Key Concepts in Chapter 2
• The importance of industry-level analysis
• Porter’s “five forces” framework for industry analysis • Competitive strategy analysis of the firm
• Corporate strategy analysis for multi-business organizations Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
The Importance of Industry-Level Analysis
• A firm’s strategy is heavily influenced by the industry it belongs to.
• Understanding the environment and competitive forces within an industry helps with evaluating the quality of a particular firm’s strategy.
• Porter created a useful framework to evaluate the competitive forces at work in an industry, as seen in Figure 2-1.
Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
Industry
Structure and
Profitability
Copyright (c) 2010 South-Western Cengage Learning
Chapter 2: Strategy analysis - Palepu, Healy & Peek
Competitive Force 1:
Rivalry Among Existing Firms
• Higher degrees of competition among firms:
– Push prices towards the marginal cost of production.
– Make non-price dimensions of products or services more important.
• Determinants of the intensity of competition among firms:
– Industry growth rate.
– Concentration and balance of competitors.
Copyright (c) 2010 South-Western Cengage Learning
Chapter