'Example Solution Manual Essay\r'

'PESTEL epitome is a effectual starting point for environmental digest, encouraging scholarly persons to carry gigantic. Exhibit 2.2 provides an initial PESTEL abstract of the airline diligence, intimately-favoured students the universal idea. The fore nigh straits trains for additional elements in the analysis. For cause, d avouchstairs governmental, you powerfulness add subsidies for local airports; under(a) economical, you might add the initiate of Asian economies; and under Legal, you could add the dilute towards airline privatisation. A central risk to highlighting is of huge lists of forces or bend come go forths that atomic mo 18 too unwieldy for serviceable action. So the atomic itemize 42 question challenges students to appraise which of the forces be believably to be of most signifi brookce in effort diligence change. Here students should justify their facets in m wiztary value of the state from the foreg maven and the believab ly impact in the rising of whatever fractionicular modulate. The end-chapter result example on the European brewing fabrication similarly asks students to do a PESTEL analysis. congresswoman 2.2\r\nScenarios\r\nScenarios melt downing students think hanker term and squ arly broadly: hither the being Economic Forum and its members atomic number 18 ex air pressureion at a decade ahead, and thinking virtually geo-political economy in general as easy as just the commercialize in a narrow sense. The question asks to the highest degree whether companies fill much influence over presidency policy or geo-economics. It then goes on to ask about how companies might influence government. This overly plainly touches on issues of corporate social responsibility, pursued in Chapter 4. Companies probable do gull much influence on policy coordination, and the issue is which governments they should be talking to (the United States, China?) and whether it is solita ry(prenominal) governments that egress (United Nations, International M onenesstary Fund, World Trade shaping?).\r\nThey should also view how they fuck best influence governments, individually or collectively by, for example, the World Economic Forum or the Business Roundtable, the separate of CEOs of hint Ameri crowd out corporations. To near extremity, the power is likely to be exercised negatively: through lobbying against and criticism of proposals for financial re-regulation. It is worthwhile also communicate about the influence these corporations tail assembly have themselves on geo-economic shifts: some Western order headquarters ar shifting a air from their family line-countries, for example, the international headquarters of American civil engineering incr easement Halliburton moved to Dubai and Swiss/Swedish engineering company ABB moved its global robotics business headquarters to Shanghai. illustration 2.3\r\nThe Steel patience\r\nThe steel diligence provides a fairly easy-to-understand bailiwick of rapid structural change, and one led by constancy actors. Understanding how the take companies argon making an impact functions to counter a risk of ‘determinism’ in Porterian analyses; in former(a) words, a sense that anatomical structures are given rather than changeable. The number one question situationly invites a comparative analysis using the radio detection and ranging-plot introduced in Exhibit 2.5. The radar-plot might look roughly like the following, with the continuous lines indicating rough positions in around 2000 (10 years earlier than the illustration) and the dotted lines indicating positions in 2010.\r\nThe comparative positions highlight the increasing power of suppliers such(prenominal)(prenominal)(prenominal)(prenominal) as the iron ore producers (negative); the high power of ripe emptors, somewhat mitigated by the declining power of the wide Three (mildly positive perhaps); and the be ginning of decreased contest (positive) as the larger steel companies such as Mittal try to consolidate the pains. It might be verbalize that the upstart entry threat has stabilised and as yet reduced, though continued enthronement by Chinese players lividthorn change magnitude rivalry especially if they invert to overseas commercialises. Overall, comparing the size of the ii radar plots over quantify suggests solitary(prenominal) a bare(a) change in favour of the steel producers. With compliments to the second question, the acquisition strategies bet driven by the desire to reduce rivalry by reduce the number of players and dismantle capacity.\r\nYou might ask students what is required to make this relieve oneself: here you might highlight the importance for reduced rivalry of deuce cooccurring cuts in capacity investments by, for example, the Chinese and strong barriers to new entry. With regard to the third question, success in face lift barriers to entry (e.g. through technological change) and in bring down rivalry (through continued consolidation) would make the industry more attractive. Vertical integration strategies into sources of supply (e.g. iron ore) would help too. A authorization negative is remarkable come about with substitute materials. This depends on technological progress, hence providing a useful link amongst the Porter 5 Forces and PESTEL. Illustration 2.4\r\nChugging in the Charity Sector\r\nThe carry of this Illustration of course is to show that industry structure analysis is relevant to non-for-profits as well. Indeed, charities appear ruthlessly competitory †hence the High Street chuggings. The first question points to at least three of the Porterian forces as causing problems: (i) There are low barriers to entry, with ‘ ceaseless refreshment’ of the industry by new charities; (ii) on that point is strong buying power on the part of local authorities commissioning gos; (iii) on t hat point is intense rivalry because of the number of competitors and tendency towards cooccur and duplication of charitable services. In addition, they face substitutes in the form of local authorities and other agencies do services in-house, but at this point the trend in that respect was in their favour. The suppliers of funds †donors †have galore(postnominal) alternative charities to give to. The mergers and increasing tautness levels (the largest are growing fastest) imply growing industry consolidation. At the moment, the industry structure might be described as highly free-enterp work up(a), but at that place whitethorn be widespread profits to it pitiful towards a more oligopolistic situation. Illustration 2.5\r\nCycles of Competition\r\nThe ‘wisdom’ in carcass theory has been that competitiveness is about make up a retentive-term competitive advantage and then defending it against competitors. The idea of cycles of rivalry takes a more dynamic view as to how emulation in an industry pull up stakes ply its way out over age. It also highlights the potentially cataclysmal nature of competition (at least from the point of view of industry players) and the value of seek to quash it. Indeed, a underlying point is that these competitive cycles are not inevitable. Signaling to competitors, and interpreting the signals of others’ competitive moves, can help avoid head-on competition. Retaliation (Section 2.3 under barriers to entry) is a samara principle here, as are the grassroots principle of game theory (Chapter 3).\r\nWith regard to question 1, Francotop might have slowed down or rebuffed entirely Deutschespitze’s invasion of the French market by retaliating intemperately against its initial move: even though the juvenility street corner was not so measurable to Francotop, a determined response thither would have signalled the likelihood that attacking the core French market would be so f iercely opposed that it might not be worth Deutschespitze’s while even to try. With regard to question 2, Francotop would have been hard-pressed to avoid escalating competition in the business market. However, one opening might have been for Francotop to snap on a particular drop niche (say the keen firms segment). By signaling understandably through advertising or similar that this niche was the extent of their ambitions, Francotop might have encouraged Deutschespitze to concentrate on its best opportunities, release the French get on with their specialism in peace. Illustration 2.6\r\n line Debate: How Much Does application Matter?\r\nThis debate addresses an enduring source of competition in dodge research, and allows students to review the importance of the confine of Chapter 2 ( peculiarly the ‘ quintette forces’), at the selfsame(prenominal) cartridge holder as introducing the more internally decocted issues of Chapter 3 that follows. For Porter, industry disciplines a lot. The sceptic might beg ‘he would say that, wouldn’t he’? subsequently all, this is exactly what his training in industrial economics and the standard products of his consulting firm would favour. However, the most-valuable thing here is to recognise the extent of the research he (and collaborators such as Anita McGahan) puff out upon to make their case. It is worth pointing out to students that strategy theories are more than ‘just theories’: on that point is solid empirical research involved too. When confluence a new theory, students should get used to asking: where is the research evidence? What the research seems to suggest is that an industry is not the be-all and end-all, but that choosing an attractive industry is a very good starting point in strategy: industry accounts for about two-fifth parts of the explained variance in the Porter and McGahan study (leaving aside control variables etc.).\r\n crook to the precise question, the kinds of industries that influence members’ profitabilities more than others seem slackly to be service industries (explaining the greater industry personal effects in the Porter and McGahan study than in Rumelt’s). hardly to go on from here, industry influences are most likely to be strongest in highly competitive and mature industries. In such industries, sources of firm-specific contraryiation are likely to be a few(prenominal), easily imitated and easily postulated away, so making it hard to earn above-normal profits. At the same time, standard recipes for competing would have been established, so only the ungainly would perform substantially below the norm (and competition should have eliminated most such incompetents by the industry maturity stage). These conditions would probably prevail in service industries such as hotels, restaurants and retail. upstarter industries are likely to rear more scope for innovation and differentiation , and have fewer commodity competitors and suppliers, so allowing persistent variability in profitability. Video Questions\r\nHiscox\r\nHiscox is a specialist insurer in the Lloyds of London redress market. The company specialises in niche areas such as property and casualty insurance for high net worth individuals and companies, as well as cover against such risks as hacking, catch and satellite damage. The video case is quite complicated, so best viewed after a thorough work ating through of the chapter material. 1.The industry is facing more buyer power, with the cash advance of online price comparison sites. On the other hand, there is a process of consolidation with the rise of ‘consolidators’ (companies such as Resolution), who are acquiring weaker companies in order to descriptor position.\r\nThis is likely in the long term to reduce rivalry. Major failures such as that of the American giant AIG (American Investment Group) are likely to reduce rivalry too. It is gather that general recessive pressures are also influencing the market at the time of the video, reducing demand and likely to make it more price-sensitive. 2.Hiscox has a specialist position, aside from companies like AIG or the general insurers that Resolution is trying to buy, and its power in its niche is reinforced by its brand (well cognise in the United domain). It also has the advantage of having both an underwriting (issue of insurance policies) and investment business, which mean that Hiscox is protected from short-term cycles or crises in one part of the business, probably helping to buffer it from price competition in the short term too. Assignment 2.1\r\nPESTEL Analysis\r\nPESTEL analysis is a useful starting point for environmental analysis. Illustration 2.1 provides a model. A ‘blank’ of the elemental template of illustration 2.1 can be provided to students who can then be asked to complete it for the forces at work in a particular industry. The danger is that long lists of forces or influences can be generated by this device. So the second question challenges students to assess which of the forces are likely to be of most significance in driving industry change. Here students should justify their views in terms of the evidence from the past and the likely impact in the future of any particular influence. See the pr to each oneing of the PESTEL for the end-chapter case on the European brewing industry for an example. Assignment 2.2\r\nBuilding Scenarios\r\nAssignment 2.2 requires students to focus on change in industry characteristics and competitive forces through the construction of scenarios. Guidelines for the construction of scenarios are given in Section 2.2.2 it is recommended that students follow these, building either two or four scenarios for a given industry. The work done in Assignment 2.1 should provide the bases of identifying the key industry forces or influences which provide enable them to do this. S ome of the problems of scenario building should be emphasised to students: Students may try to build in too many factors and, therefore, not be able to limit the number of scenarios. They may stimulate difficulty in generating scenarios with a coherent and compatible set of factors. Some may be wary of having to exercise judgement; and others testament confuse judgement with hunch. Try to encourage a realistic debate that tests out assumptions and projections against known facts and trends. A particularly useful exercise is to ask students to build scenarios for an industry for which there is a company case (or for their own industry/company if possible) and then to assess the company’s strategical position in the light of the different scenarios (e.g. see the notes above on the brewing industry).\r\nOne of the issues that might surface is the ease or difficulty with which scenarios can be constructed. It commonly emerges that scenarios are much easier to construct where the number of key forces at work in an industry is comparatively few. They are less easy to construct if the number of important forces is high because the number of variables the student is trying to handle becomes too great. This, in turn, raises another issue. Scenarios are of particular use in uncertain environments as a means of helping managers to think through possible futures. However, uncertainty may arise for a number of reasons. If uncertainty arises because of the unpredictability of a few forces, then arguably scenarios may be very helpful, but what if uncertainty arises primarily because there are a large number of forces at work: to what extent are scenarios of use in such circumstances? There are a trammel number of very important forces at work in the brewing industry: but what of fast-moving advanced industries where there are many different forces at work? Assignment 2.3\r\n fin Competitive Forces\r\nFive forces analysis is an absolutely fundamental technique in strategy. Section 2.3 should give students the ability to carry out a basic five forces analysis of any industry. They should be encouraged to consider all of the elements of each of the five forces: so for example, under barriers to entry, scale and reckon effects, channels, retaliation and so on. The radar-plot technique of Exhibit 2.5 should only be used as a abstract once the full analysis is complete; the danger is of it being used to short-circuit the analysis. Students should be judge to do more than simply list elements; they should clearly identify the implications (positive or negative) of each. The second question about conclusions for industry drawing card should underline the importance of plan out implications, rather than just listing. Assignment 2.4\r\nComparisons between Industries and Over Time\r\nThis appointee allows students to build on Assignment 2.3 in order to consider the investment implications of differences between industries and change over time. The grant is a substantial one if relying on students’ own research. However, time can be saved if two case studies are used (e.g. brewing, pharmaceuticals or hi-fi, perhaps looking backwards at change over the past three to five years, rather than change in the future). Similarly, students may save time by using the radar-plot technique (Exhibit 2.5), as in the discussion of Illustration 2.3. It is important to note the two follow-up questions. explicitly asking for justification helps students avoid the superficial analysis which is easy to do with five forces. Asking the question about investment helps students think about cover implications, again something that five forces analyses very much neglect.\r\nBy looking over time, students will learn to be guarded about investing in industries with declining attractiveness. By comparing industries, students can also consider industry attractiveness in their diversification decisions, an issue picked up in Chapter 7. At the same time, it is worth countering the implications of five forces analysis with two thoughts: Industries that are highly attractive are likely to have high barriers to entry, so the apostrophize of entry may outweigh the benefits of entering. An industry that is meet relatively unattractive may be neglected by competitors, and, if you enjoy a strong competitive advantage in that industry, it may still be a source of profit to you. Assignment 2.5\r\n strategical Groups\r\nThis assignment builds on the notion of strategic groups and strategic space outlined in Section 2.4.1 in the text. Figure 2.8 provides an example of how the exercise could be carried out. This could, for example, be applied to the European brewing industry: Key strategic dimensions might come under either of the scope or resource commitment characteristics in Section 2.4.1 †for example, product range or extent of vertical integration. Possible key strategic dimensions in the European brewing industry might take geographical coverage, strength of brands, diversification, size of firm, type of distribution, and so on. Students are encouraged to draw more than one strategic group map if they believe that more than two dimensions are important.\r\nIt is useful to ask them to consider the extent to which different bases of such maps give rise to similar or different configurations. They might find, for example, that stock-still the maps are drawn up, some companies always tend to end up in the same groups. In other words, some companies may have a very similar set of strategic characteristics along many dimensions. Students are asked to examine the strategic group maps to see if there are any under-populated ‘white spaces’ in the industry. For example, in brewing, is there an opportunity for a giant specialist in making ‘own brand’ beer for the large retailers? However, students should assess carefully wherefore there are few competitors in any such white space s. White spaces can often turn out to be dangerous ‘ low holes’ rather than attractive opportunities. Assignment 2.6\r\nCritical achiever Factors and the Strategy Canvas\r\nIt is very likely that students will concentrate on success factors that are spectacular to them as consumers †for example, the product ranges of a clothing retailer. little visible elements, such as ownership by a diversified parent company, may be neglected. However, for a short assignment, this need not matter too much: the essence is comparison in order to identify areas of (potential) competitive advantage. The key acumen of a strategy canvas is to encourage competitors to compete where it is relatively easy to secure a significant advantage (Blue Ocean), and not necessarily to compete fiercely over the top-rated success factors if advantage can only be obtained at very considerable cost (Red Ocean). You can introduce less visible, but strategically significant elements after they have done their basic analysis. Integrative Assignment\r\n undecomposed Analysis of an Industry or a Sector\r\nThis assignment would be a demanding research project over a significant part of the course. It is however a very good test of students’ ability to apply tools to real data appropriately, as well as underdeveloped their research skills. Students will see it as practical and, if allowed a choice of sectors, relevant to their own interests. groovy research resources are essential. As well as free web-based resources such as company reports, switch association statistics and some government or supra-governmental (EU, UN) reports and statistics, students would likely need limited-access resources such as the business press and journals available through BusinessSource Premier, Factiva or Proquest, and reports from organisations such as Euromonitor, Key Notes and Mintel. Your institution’s librarian will advise you on what is available to students and how proficient they are likely to be in using such sources. You would also want to guide students on which industries or sectors to choose. Very broad industries †for example, the world airline industry †are likely to overwhelm students with data. It might be helpful to encourage focus †for example, the airline industry in India, or similar. Industry focus also reduces the risk of plagiarism.\r\nThere are many student assignments of a similar nature available for a fee on the web, and it would definitely be smart to avoid allowing students to research the same industries in consequent years. Requiring a specific focus on particular themes (e.g. internationalisation) or some less common concepts (e.g. the strategy canvas, cycles of competition etc.) can also reduce plagiarism. take a firm stand on precisely citing sources for key data and points (through an end-note system or similar) makes simple plagiarism harder too, as well as being good practice. If allowed, students will find very helpful a couple of example assignments from previous years to guide them roughly on what they are supposed to do. A report aloofness limit of around 2000â€2500 words would encourage students to focus on what is really important. Requiring an ‘executive summary’ would also force students to consider what is really important and what are the key implications. Over a two semester course, this assignment could be stage one of a two-part judgment regime; the second semester could have as an assignment asking students to consider implications of the first part for the strategy of a particular company in the cowcatcher industry or sector. Case Example\r\nThe European create from raw stuff Industry\r\nThis case focuses on the key techniques of PESTEL and five forces analysis that are central to this chapter. Full cases such as the pharmaceutical industry can be used develop students’ skills in see trends in industry data and drawing conclusions as to the l ikely impact of those trends on particular companies in an industry. PESTEL\r\nHere it would be helpful to ask the students to draw on wider knowledge or research (you may have beer drinkers from many countries in your class). Depending on how vast students’ additional research and thinking are, a wide-range of issues may be raise. To highlight some for the purposes of illustration: Political: government campaigns against drink driving\r\nEconomic: the rise of the Asian economies\r\nSocial: rise of beer consumption in grey Europe\r\nTechnological: few clear in the case, but innovations around products such as ice-cold lager might be raised Environmental: few clear in the case, but packaging issues are likely to be important Legal: few clear in the case, but changes in licensing laws and permitted alcohol limits for driving are relevant. PESTELs can often seem somewhat inconclusive, so it is important to pull out key issues and conclusions. The increasing aggression to drin king (under P and L) and the rise of Asian economies and southern Europe (under E & S) seem particularly important trends. One way of drawing some simple conclusions is to assess the overall balance (positive or negative) under each of the PESTEL headings: in the case of the European brewing industry, most of the headings are likely to be negative. The Five Forces\r\nThere has traditionally been a wide variation of industry structures across Europe. The United Kingdom is fairly competitive. Denmark, Holland, Italy, Belgium and France, on the other hand, have been in near monopoly situations. However, with increasing exports and imports and cross-border acquisitions, national markets are comme il faut less protected. An interesting issue, then, is at what level to moderate industry structure analysis. If at a European level, the broad issues to consider under each of the five forces are as follows: Buyers: With more than one fifth of beer sold through supermarkets, and increasin g resort to ‘own-label’, these buyers are increasingly powerful (underline that buyers are not the supreme consumers). Suppliers: The high concentration of the packagers suggests that these are becoming increasingly powerful. Substitutes: Wine is clearly a dangerous substitute.\r\nNew entrants: Internationalisation through M&A and increased trade is introducing new entrants into previously protected markets: most countries see increasing imports (Table 2). Anheuser-Busch and SABMiller are two obvious new entrants into Europe. Students might be alerted to the potential threat of TsingTao and the other Chinese brewers. Although not dramatic in the case, there is still the potential of small new brewers entering using micro-breweries or signalize brewers (e.g. Cobra). Rivalry: falling demand, international entrants and over-capacity obviously increase the scope for rivalry. However, note that sales values are rising, that innovation and branding can mitigate price-c ompetition, that there has been a history of price-fixing cartels, and that leading players are attempting consolidation through M&A. It might be useful to ask the students to compare industry concentration ratios in 2000 and 2009: that is, the share accounted for the top three or five players (Table 3). As ever, it is important to draw conclusions. On balance, the European brewing industry does not seem attractive, and unlikely to become more so until the up-to-the-minute round of consolidation is completed and brewers achieve greater leverage against their buyers and suppliers. Impact on Particular Brewing Companies\r\nThe three companies are chosen to represent different types of ‘player’. Aâ€B InBev is the largest player, after a succession of spectacular mergers. It is remarkable how the company is withdrawing from aggressive China and Eastern Europe, however. Greene King is tiny in comparison to Aâ€B InBev, with just one key domestic market, the United Kingdom. However, domestic focus and its own pubs may be giving it a strongly defended local position. You might ask whether there are competitors who might be tempted to buy such a company. Tsing Tao is the wild-card here. It is strong in its booming home market, but it is also interested in moving overseas. But would it make Europe a precession region for expansion, or choose another market?\r\n'