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the 3 dimensions of an external forces analysis

dimensions of an external forces analysis

dimensions of an external forces analysis

by Kenneth Rudich

In “Value Chain Marketing-Intro to External Forces Analysis pt1,” we explored the rationale for performing an external forces analysis while assessing your marketing strategy.  As noted in that post, the external forces analysis is part of the broader market opportunity scan.

We also saw a graphic that shows the various external forces to consider, and we concluded with a promise to briefly discuss each in the future.

Before proceeding to a discussion of the external forces, however, I’d like to point out there are three dimensions to an external force, and each merits consideration when assessing the impact of an external force on your marketing strategy.

The three dimensions of an external force are time, locality, and value.

time

Time has past, present and future components.  Each of these has the potential for revealing something useful during the strategic analysis.

You can view each component by itself as a snapshot in time, and you can view them side-by-side to see if there are observable patterns or trends taking shape.

For instance, knowing the past helps with understanding what lies behind an opportunity or threat; it offers a point of reference for determining the status of the present circumstance; what, if anything, has changed or is about to change; and if there are future strategic implications associated with existing or emerging patterns and trends.

The video rental company Redbox provides a good illustration of how the time dimension can influence strategy.  It started out by analyzing the past to determine how it might compete in the present against similar businesses like Blockbuster and Netflix.  As a result, it came up with store-placed vending machines, the Redbox kiosk, as an alternative delivery method.  This strategy gave it the kind of differential advantage that would help it to stand apart in the present.

At the same time, Redbox also recognizes that the strategy for future success will rest with the ability to provide on-demand internet delivery once it becomes an economically feasible option.

Consequently, Redbox regards the current kiosk model as a way station to the future.  The thinking goes something like this: there’s a window of opportunity to be profitable with the kiosk model until it becomes displaced by the internet delivery model.  This is a foreseeable and predictable event.  By the time it happens, Redbox hopes to have successfully transitioned into delivering videos over the internet.

locality

Locality refers to the geographic characteristics that exert an influence on the marketing strategy.  These can be local, regional, national or international in nature.

For example, two zip codes in the same city can have remarkably different demographic characteristics, or the cultural influences can be vastly different.  Such dissimilarities can change the complexion of each market opportunity just enough to warrant slightly different value chain approaches.

For instance, the selection of videos that are available in a Redbox kiosk may well vary due to local preferences that can be traced to demographic or cultural differences.

value

Value considers the impact the external forces are exerting on the value chain components.  Which are affected, and how are they affected?

The Redbox story once again offers a good example.  The present distribution channel system for video delivery, the kiosk model, is a low-tech operation as compared to the proposed high-tech internet delivery model. 

If or when delivery goes completely online, that one change alone will resonate with implications all across the value chain – particularly as it pertains to the inputs that must go into it.  Continued competitiveness will hinge on the ability to manage that transition without compromising customer value in the process.

time, locality, and value

There are three dimensions to an external force, and each should be taken into consideration when assessing its impact on the value chain.  Doing so can yield valuable insights for marketing strategy management.

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