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MANAGING PROJECTS

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Projects represent nonroutine business activities that often have long-term strategic ramifications for a firm. In this chapter, we examined how projects differ from routine business activities and discussed the major phases of projects. We noted how environmental changes have resulted in increased attention being paid to projects and project management over the past decade. In the second half of the chapter, we introduced some basic tools that businesses can use when planning for and controlling projects. Both Gantt charts and network diagrams give managers a visual picture of how a project is going. Network diagrams have the added advantage of showing the precedence between activities, as well as the critical path(s). We wrapped up the chapter by showing how these concepts are embedded in inexpensive yet powerful software packages such as Microsoft Project. If you want to learn more about project management, we encourage you to take a look at the Web site for the Proj...
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External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

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This chapter demonstrated various approaches to analyzing the firm’s external environment.
Generate a PESTEL analysis to evaluate the impact of external forces on the firm.
A firm’s macroenvironment consists of a wide range of political, economic, sociocultural, technological, ecological, and legal (PESTEL) factors that can affect industry and firm performance. These external forces have both domestik and global aspects.
The political environment describes the influence government bodies can have on firms.
The economic environment is mainly affected by five factors: growth rates, interest rates, levels of employment, price stability (inflation and deflation), and currency exchange rates.
Sociocultural factors capture a society’s cultures, norms, and values.
Technological factors capture the application of knowledge to create new processes and products.
Ecological factors concern a firm’s regard for environmental issues such as the natural environment, global warming, and sustainable economic growth.
Legal environment factors capture the official outcomes of the political processes that manifest themselves in laws, mandates, regulations, and court decisions.
Porter’s five competitive forces to explain the profit potential of different industries.
Competition must be viewed more broadly to encompass not only direct rivals but also a set of other forces in an industry: buyers, suppliers, the potential new entry of other firms, and the threat of substitutes.
The profit potential of an industry is a function of the five forces that shape competition: (1) threat of entry, (2) power of suppliers, (3) power of buyers, (4) threat of substitutes, and (5) rivalry among existing competitors.
The stronger a competitive force, the greater the threat it represents. The weaker the competitive force, the greater the opportunity it presents.
A firm can shape an industry’s structure in its favor through its strategy.
How competitive industry structure shapes rivalry among competitors.
The competitive structure of an industry is largely captured by the number and size of competitors in an industry, whether the firms possess some degree of pricing power, the type of product or service the industry offers (commodity or differentiated product), and the height of entry barriers.
A perfectly competitive industry is characterized by many small firms, a commodity product, low entry barriers, and no pricing power for individual firms.
A monopolistic industry is characterized by many firms, a differentiated product, medium entry barriers, and some pricing power.
An oligopolistic industry is characterized by few (large) firms, a differentiated product, high entry barriers, and some degree of pricing power.
A monopoly exists when there is only one (large) firm supplying the market. In such instances, the firm may offer a unique product, the barriers to entry may be high, and the monopolist usually has considerable pricing power.
The strategic role of complements in creating positive-sum co-opetition.
Co-opetition (co-operation among competitors) can create a positive-sum game, resulting in a larger pie for everyone involved.
Complements increase demand for the primary product, enhancing the profit potential for the industry and the firm.
Attractive industries for co-opetition are characterized by high entry barriers, low exit barriers, low buyer and supplier power, a low threat of substitutes, and the availability of complements.
The role of industry dynamics and industry convergence in shaping the firm’s external environment.
Industries are dynamic—they change over time.
Different conditions prevail in different industries, directly affecting the firms competing in these industries and their profitability.
In industry convergence, formerly unrelated industries begin to satisfy the same customer need. It is often brought on by technological advances.
A strategic group model to reveal performance differences between clusters of firms in the same industry.
A strategic group is a set of firms within a specific industry that pursue a similar strategy in their quest for competitive advantage.
Generally, there are two strategic groups in an industry based on two different business strategies: one that pursues a low-cost strategy and a second that pursues a differentiation strategy.
Rivalry among firms of the same strategic group is more intense than the rivalry between strategic groups: intra-group rivalry exceeds inter-group rivalry.
Strategic groups are affected differently by the external environment and the five competitive forces.
Some strategic groups are more profitable than others.
Movement between strategic groups is restricted by mobility barriers—industry-specific factors that separate one strategic group from another.

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