Environmental Analysis and Business Strategy Life Cycle

Environmental Scanning

• An activity that is performed without knowing what you will find out.
• Surveillance of a firm's external environment to predict environmental changes and detect changes already underway.
• Alerts to critical trends and events that may affect the firm's business before competitors.
• Otherwise, it would be a reactive model.
• Requires a combination of knowing your business and your customers, and keeping an eye on what's happening.
• Scan to be the first to know about things that are happening.

Environmental Monitoring

• Tracks the evolution of environmental trends, sequences of events, or streams of activities.
• Enables firms to evaluate how trends are changing the competitive landscape.

Competitive Intelligence

• Competitive intelligence of the whole business system.
• Helps firms define and understand their industry and identify rivals' strengths and weaknesses.
• Includes collecting and interpreting data on competitors.
• Helps a company anticipate competitors' moves and decrease response time.

Environmental Forecasting

• Involves the development of projections about the direction, scope, speed, and intensity of environmental change.
• How long will it take a new technology to reach the market? Will the present social concern about an issue result in new legislation? Are current trends likely to continue?
• Uncertainty plays a major role and may pose wrong scenarios.

Strategies in the Introduction Stage

• Characterized by:
  • New products not known to customers.
  • Poorly defined market segments.
  • Unspecified product features.
  • Low sales growth.
  • Rapid technological change.
  • Operating losses.
  • Need for financial support.
• Success requires an emphasis on R&D and marketing activities.
• There are benefits and damages for both being a "first mover" or a "last mover".

Strategies in the Growth Stage

• Characterized by:
  • Strong increases in sales.
  • Growing competition.
  • Developing brand recognition.
  • A need for financing complementary value-chain activities: marketing, sales, and customer service.
• Success requires increases in the proportion of repeat buyers to new purchasers.

Strategies in the Maturity Stage

• Characterized by:
  • Slowing demand growth.
  • Saturated markets.
  • Direct competition.
  • Price competition.
  • Strategic emphasis on efficient operations.
• The only way to win is to take market share from the competition.
• By repositioning products, firms can reset from the product life cycle and exit (partially) from the mature market.

Strategies in the Decline Stage

• Characterized by:
  • Falling sales and profits.
  • Increasing price competition.
  • Industry consolidation.
• Motivated by changes in consumer tastes or technological innovation.
• Firms should decide either to exit or to stay and attempt to consolidate their position in the industry.
• Strategy becomes dependent on the rivals.