ANALYZE THE ENVIRONMENT

Porter in the Matrix

Develop a strategy on how to respond to dynamics in the market.

MATRIX TYPE: Unlocked
analyze the environment oppotunities and threats from external environment strategy framework scientrix

PROCESS

  1. Use an unlocked matrix. Plot the market segments on the X-axis and the 5 forces on the Y axis.

    • Opportunities in a new industry or product segment.
    • Options of vertical (acquire a company in the production process value chain) or horizontal (acquire a similar company in the same industry) expansion.
    • Exiting industry under various scenarios.
  2. State your strategic aim or hypothesis in the top left corner. This is the context in which you perform analysis.

  3. Analyze each intersect - what is the supplier power under a given scenario, or in the specific expansion opportunity etc. Here is what would constitute significant impacts on the company's profitability.

  4. Summarize the conclusion for each and mark them red for increasing power, threat or rivalry, green for positive impact.

  5. Use your key threats and opportunities in your SWOT analysis to combine with your internal capabilities (Strengths & Weaknesses), or extend your external analysis through a PESTEL approach. All together these will then form the basis for your holistic strategic plan.

TIPS & TRAPS

  • Keep asking if your analysis is meaningful in the strategic context you have set.

  • For each threat identified, consider how you could turn these into opportunities.

  • For each opportunity, consider the window of the opportunity before competitors have exploited it already.

  • Consider the time frame of your analysis - are you doing this for the short term and would it change if you move 5 years on? Typically, the analysis framework is used for expansion strategies which are on the cards next year. But are they sustainable in the long term?

  • Competitive rivalry and supplier power is typically underpinned by factual numbers (e.g. price comparison over time; customer switches to competitors) and a deep understanding of their operation and cost structure. Don't skim on the deep dive if you want to convince your colleagues. Add your analysis to the intersect for updating during reviews.

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