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Linking markets to industries Customer market segmentation Blue Ocean Strategy-?New customer markets Competitive positioning matrix Industry key success factors Competitor analysis Identifying strategic groups From external to internal analysis Review 2. 66 References 2. 67 Optional reading 2. 70 Reading Suggested answers 2. 3 Preview Strategic analysis can be broken into two main components: analysis of those aspects outside the organization (I. E. Those that are external to the organization-? Module 2) and those aspects within the organization (I. . Those that are internal to the organization-?Module 3). The framework below will lead you through Modules 2 and 3. To develop a strategy and direction for an organization, an analysis of external and internal influences is required to ascertain their influence on the organization’s performance. Each category of internal and external influences is illustrated in Figure 2. 1 (referred to as the framework’), including the outputs of the organization-?the product or service through a range of distribution channels to the end customer.

Module 2 focuses on the external environment within which the organization operates and how that affects the formulation and evaluation of strategy for an organization. This module provides tools for strategic analysis of the external operating environment of the organization. The major topics covered in this module are as follows: n defining an industry; the key issues to be considered that might affect the industry; and n integrating the expected impacts on strategy of these complex issues, many of which are qualitative rather than quantitative, and subjective rather than objective.

In this module we begin the strategic analysis component by understanding he external environment. Having discussed the concept of strategy in Module 1, Modules 2 and 3 undertake the analysis component of strategy, focusing on organizational strategy. These modules focus on approaches used in undertaking strategic analysis of the external industry and internal organizational environments. The overall approach used for undertaking strategic analysis is based on the rational approach, which was introduced in Module 1. . 4 The first challenge in undertaking strategic analysis is to define the scope of the external environment, or industry, to be analyses. This challenge extends to the sourcing of meaningful data for analysis and reaching a common understanding of what it all means. This ultimately helps to develop responses to get the organization from its current position to where it wants to be in the future in an effective and efficient way. The external environment comprises remote environments (I. E. He macro environment), some aspects of which affect some industries more than others, and the specific industry environment that affects the growth and profitability of the industry. An important concept to understand in external environment analysis is that an external factor that has a negative effect on one industry may have a positive effect on another. Understanding both the remote environment and the industry environment helps clarify what drives growth and profitability in the industry and the basis for competition-?in other words, what organizations need to have in place to be competitive in this operating environment.

The overall aim Of undertaking an analysis Of the external environment is to determine how attractive the industry will be in the future. This assessment is made on the basis of industry growth, profitability and competitiveness. Once an organization has undertaken this assessment, it can then assess and develop its strategic plan in the context of what is happening in the external environment in which it operates.

After completing this module, you should be able to: define an industry and the value chain within which an organization operates; assess an industry life cycle position; summaries the industry historical performance to date as well as its key segments in terms of growth, profitability and competitiveness; n identify, analyses and evaluate key factors that may affect the future growth, reparability and competitiveness of the industry in which an organization competes; assess the estimated level of future growth, profitability and competitiveness of an industry; identify industry key success factors, and discuss how these affect competitive positioning and identify and assess the basis of competition within markets and industries.

As you work through this module you will have the opportunity to destroys understanding of the concepts by attempting a number of questions for which suggested solutions have been provided at the end of the module. It is suggested that you read quickly through the entire module to understand how all the concepts work together to provide a comprehensive understanding of an industry, and then work back through the module again, attempting the module questions.

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