The External Environment | My Assignment Tutor

190.211 – Aviation Strategic Management 1The External Environment190.211-Strategic Aviation Management 1The External Environment• The external environment includes all the forces beyondcompany’s control• These forces generally effects all players in the industry• Companies need to …– Identify any force that might impact on theorganisation– Gauge its magnitude– Estimate its timing– Estimate its impact on itself and the other players inthe industryThen …190.211-Strategic Aviation Management 2• Develop strategies to …– Avoid or mitigate any negative impact– Capitalise on any positive impact or opportunityForces range from those that are long-lasting, slow andeasy to predict (eg. The aging of the population) … tothose that are fast, rapidly changing and difficult tospot and predict (eg. Changes in legislation)190.211-Strategic Aviation Management 31 2 3190.211 – Aviation Strategic Management 2The Macro ExternalEnvironmentCompanyPoliticalEconomic anddemographicSocialEnvironmental TechnologicalLegalEvents190.211-Strategic Aviation Management 4The Macro & MicroExternal EnvironmentCompanyPoliticalEconomic anddemographicSocialEnvironmental TechnologicalLegalEvents5IntermediariesCustomersPublicscompetitorsSuppliersMacroenvironmentMicroenvironment190.211-Strategic Aviation ManagementAnalysis of the external environment provides anunderstanding of the opportunities and threats facingan organisation.Forces generating opportunities and/or threats toairlines in New Zealand?Forces generating opportunities and/or threats toairports in New Zealand?190.211-Strategic Aviation Management 64 5 6190.211 – Aviation Strategic Management 3Strategic Analysis Tools• A technique for understanding the “environment”PEST Analysis in which a business operates• A technique that builds various plausible views ofpossible futures of a businessScenarioPlanning• A technique for identifying the forces which affectthe level of competition in an industryFiveCompetitiveForces Analysis• A technique which seeks to identify similaritiesand differences between groups of customers orusersMarketSegmentation190.211-Strategic Aviation Management 7Strategic Analysis Tools (cont.)• A technique which summaries the competitivestrength of a business operations in specificmarketsDirectionalPolicy Matrix• A wide range of techniques and analysis thatseeks to summarise a business overall competitivepositionCompetitorAnalysis• A technique to identify those areas in which abusiness must perform the competition in orderto succeedCritical SuccessFactor Analysis• A technique for summarising the key issues arisingfrom an assessment of a business “internal”position and “external” environmental influencesSWOT Analysis190.211-Strategic Aviation Management 8Video : Will BREXIT affect the Airline Industry?190.211-Strategic Aviation Management 97 8 9190.211 – Aviation Strategic Management 4Porter’s Five Competitive Forces ModelA strategic analysis tool to help us understand the leveland nature of the competitive forces shaping anindustry.190.211-Strategic Aviation Management 10Five Competitive Forces ModelCompetitiverivalryPower ofsubstituteproductsPower ofbuyersBarriers toentryPower ofsuppliers190.211-Strategic Aviation Management 11• Barriers to entry – How difficult it is for a newentrant to enter the industry/market• Capital investment required• Need for economies of scale• Access to patents, permits and consents• Access distribution channels• Access to key skills, facilities and resources• Access to key partners and relationships190.211-Strategic Aviation Management 12101112190.211 – Aviation Strategic Management 5The power of suppliers – the relative strength ofsuppliers when it comes to negotiating prices, terms andconditions• How essential/vital the product or service is• The number of alternative product or servicesavailable• The number of alternative suppliers in the market• The size and strength of the suppliers• How “badly” the suppliers need to make a deal• Are suppliers “coordinated”190.211-Strategic Aviation Management 13The power of buyers – the relative strength of buyerswhen it comes to negotiating prices, terms andconditionsAs for suppliers and …• Switching costs• Ability to source globally• Ability to integrate backwards• Urgency• Alternative technologies• Buyer knowledge190.211-Strategic Aviation Management 14Power of substitute products – The availability of, orpotential for products in other industries or newlydeveloped products to substitute for existing productsor services in the industry; accomplishing the samepurpose or delivering the same benefits.• The availability of supply• The ease and cost of switching• The ease and cost of adapting the substitute product• The risks associated with switching• The rate of technological development in the productcategory190.211-Strategic Aviation Management 15131415190.211 – Aviation Strategic Management 6Competitive rivalry among industry members – Theextent to which aggressive competition is common to,or “rewarded” or “successful” in the industry.• The use of “price” as a competitive weapon• The need for economies of scale to achieveprofitability• The ability to differentiate or niche• Brand, image, and reputation• The personality/type of people attracted to theindustry• The need for and level of help and cooperationwithin the industry190.211-Strategic Aviation Management 16Another Force is Often Added to Porter’sFive Competitive Forces ModelGovernment (e.g. bailouts for unprofitable airlines, orairline’s top management appointed by thegovernment, limitations on ownership, price control,subsidies etc)190.211-Strategic Aviation Management 17Video : Michael Porter – The Five Forces thatShape Strategy190.211-Strategic Aviation Management 18161718

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