As a first step in a strategic plan or assessing a business model, it helps to assess the factors in the environment that could have an impact on the success of our organization.
In an earlier blog – A First Step in Strategic Planning, I introduced Michael Porters Five Forces Model. This model is very helpful in assessing the competitive dimensions of an industry.
In this article, I am introducing a more holistic model, from Strategizer https://platform.strategyzer.com.
The benefit of this model is that it includes the industry forces from Porter but also identifies Key Trends, Market and Macro Economic Forces, which could have consequences for a business.
Industry Forces help to identify the degree of difficulty for a company to operate within a specific industry. For example, if we have powerful suppliers and/or powerful customers this can inhibit our ability to influence prices. If the cost of a new entry into the industry is low that is another factor that can increase competition. My previous article provided a set of trigger questions for each aspect of Industry Forces.
Market Forces helps to address questions related to the demand side of the equation. It enables us to get a little more focused on elements of our own business model. Trigger questions could include:
- What are the specific market segments that are purchasing specific bundles of our value propositions?
- What are the distinguishing features of each market segment?
- What is the relative size of each segment and what do we know about their changing demographics?
- For each bundle of products/services, what are the customer pains we are alleviating, and customer gains we are assisting?
- Are there trade issues that currently exist or could emerge?
- Are there fashion/attitudinal/demographic changes that can alter market potential?
- Are we concerned about the effects of blindsiding if there are low costs of switching?
- What is the revenue attractiveness of our current markets over the next five years?
Macro Economic Forces alert us to global or regional factors that will affect the competitive and market forces. Questions include:
- What do we know about the prospects for global inflation, interest rates, and growth?
- Are there likely regional anomalies that will be a concern for our business interests?
- Are there any implications for our business, given what we anticipate will be the prospects for acquiring long-term debt (over a year) or equity-backed securities?
- How sensitive, if any, is our business to the likely fluctuations in the availability or prices of raw material or agricultural commodities?
- Is our business dependant upon an infrastructure that promotes economic activity, such as roads, highways, railroads, airports, seaports, electricity, telecommunications, water supply and sanitation?
Key Trends identify shifts that are social and/or governmental in nature, which can have a profound impact on our business. Questions include:
- What are the technological innovations that are likely to have an impact on our customers’ purchase decisions?
- What are the technological innovations that will change elements of our supply chain?
- What regulatory changes are likely to be enacted based upon emerging consumer/environmental/health-related issues; and what will be the consequences for our business?
- What customs, lifestyles and values changes are occurring that have implications for our business?
- Can we forecast any changing health, employment, education, and income prospects that could affect our business?
Summary Questions Include:
- What are the top three Key Trends we need to respond to?
- What Macro Economic Forces do we need to manage around?
- What are there Industry Forces that we need to exploit or mitigate?
- What Market Forces do we need to address within our business strategy?