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Chapter 4: External analysis:
Micro focus - industry and sector analysis
DR NGUYEN THI QUYNH TRANG
FAC ULT Y O F T O UR I S M & HO S P I TAL I T Y, N E U
Strategic process
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Chapter objectives
Understand the role and focus of external analysis
Understand the role and focus of analysing the micro-environment
Describe the industry’s structure using Porter’s five forces framework and relate it
to tourism and hospitality business
Understand industry dynamics: industry life-cycle & comparative industry structure
analysis (radar plot)
Understand how to analyse the firm’s competitors
1. EXTERNAL ANALYSIS: MICRO-ENVIRONMENT
2. INDUSTRY STRUCTURE ANALYSIS: PORTER’S 5-FORCES
FRAMEWORK
Contents
3. INDUSTRY DYNAMICS: INDUSTRY LIFE-CYCLE &
COMPARATIVE INDUSTRY STRUCTURE ANALYSIS (RADAR
PLOT)
4. COMPETITORS AND MARKETS
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1. External analysis
Why external analysis?
To respond effectively to changes in their environments, organizations must
understand the external and internal contexts
Organizations do not exist in isolation but do depend on its larger
environment
Analysis of the external environment identify opportunities and threats
decrease the likelihood of major surprises and shorten the reaction time to
emerging events
EXTERNAL ENVIRONMENT
Micro-environment
Internal environment
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Analysing micro-environment
Focuses (content) of analysis: Industry, markets, and competitors
Roles:
- Critical success factors in industry and markets
- Needs and opportunities for competence building and leveraging
- The potential for collaboration with suppliers, distributors, customers
and competitors
2. Analysing industry and markets
Industry analysis
Supply side of the economic system example in tourism and
hospitality industry
Aim to understand the nature of competition and the competitive position
of the organisation
Porter’s five forces model
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Industry structure analysis: Porter’s 5 forces framework
Group discussion
Explain 5 forces
Take an example of each force from the tourism and hospitality
industry in Vietnam
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Force 1. Threat of potential entrants
Barriers:
The capital cost of entry
Brand loyalty and customers’ switching costs
Economies of scale and experience advantage
Access to input and distribution channels
The expected reaction of established businesses
Government policy
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Force 2. Bargaining power of suppliers
The uniqueness and scarcity of the resource that suppliers
provide
How many other industries have the requirements for the
resource?
Switching costs between suppliers
The number and size of the resource suppliers
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Force 3. The bargaining power of buyers
The number of customers and the volume of their purchases
The number of businesses supplying the product and their size
Switching costs and the availability of substitutes
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Force 4. The threat of substitutes
The extent to which the price and performance of the substitute
can match the industry’s product
The willingness of buyers to switch to the substitute
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Force 5. The intensity of rivalty among competitors
The relative size of competitors
The nature of costs in industry
The maturity of the markets served
The degree of brand loyalty of customers
The degree of differentiation
Government regulation
The height of exit barriers
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3. INDUSTRY DYNAMICS: COMPARATIVE INDUSTRY STRUCTURE ANALYSIS
(RADAR PLOT)
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Industry dynamics: INDUSTRY LIFE-CYCLE
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4. COMPETITITORS AND MARKETS
Strategic groups: similar competencies, same demands in the same market
segment, similar quality of products/services
Strategic group analysis (competitive group analysis): analyse the competitive
structure and position of the key competitors
Construct two-
Analyse the
Identify crucial dimensional
firm’s position in
competitive plots of the
relation to
dimensions competitive
competitors
dimensions
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Short case illustration:
Strategic group analysis: Wyndham hotel group
(page 292-293)
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MARKET SEGMENTS
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Industry and market critical success factors (CSFs)
CSFs: reputation of the brand, service excellence, product range/features,
distribution and innovation
Competence and core competence should directly address these CSFs
CSFs drive the selection of strategy direction and strategy implementation
Short case illustration: Canadian DMOs (page 296, 297)
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Summary of chapter 4
Role of the external analysis
Micro environment analysis
Porter’s five forces
Industry dynamics: radar plot and industry life cycle
Strategic group analysis
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