environmental nalysis
TRANSCRIPT
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External Environment
What the Firm Might Do
Internal Environment
What the Firm Can Do
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The environment composed of a wide variety of influences
& these are dynamic in nature. Manager everyday has to
face a new challenge because of these influences. Following
are some examples of challenges faced by todays manager.
stagnation of many markets market fragmentation
product proliferation
growing product parity
shorter product life cycles
increasingly frequent niche attacks by competitors
increased customer sophistication & demands
downward price pressures
increasing sales force costs changes in distribution
erosion of traditional bases of competitive advantage
increased emphasis upon environmental & green issues
increasingly global nature of many markets
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This difficulty in coping with the environment can be viewed
under two headings:
understanding the extent to which the environment affects
strategy.
understanding the ways in which environmental pressures
can be related to the capabilities of the organization.
Marketing strategy must be developed after detailedunderstanding of the environment.
know what to look for
know how to look
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assessments of
the nature of
the environment
identification of the
key environmental
forces
identification of
the competitive
position
identification of
principal opportunities
& threats
strategic
position
audit of
environmental
influences
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how uncertain is the environment?
what are the sources of this uncertainty? how should this uncertainty be dealt with?credible probabilities to possible outcomes cannot be
assigned.levels of uncertainty are directly attributable to the extent
to which environmental conditions are dynamic or complex.
dynamism
is due largely to the rates and frequency of change.
is the result of the diversity and interconnection of
environmental influences
complexity
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a small number of externalelements, with these elements
being similar.
elements remain the same or
change only slowly.
a small number of external
elements, and elements aresimilar.
elements change frequently
and unpredictably
large numbers of external
elements, and elements aredissimilar
elements change frequently
and unpredictably.
simple + stable =
low uncertainty a large number of externalelements, and elements aredissimilar.
elements remain the same or
change slowly
complex + stable =
low - moderate uncertainty
simple + unstable =
high - moderate uncertainty
complex + unstable =
high uncertainty
highstable
low
stab
le
low simple high complex
degre
eofenvironm
entalchanges
degree of complexity
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monitor events carefully
monitor events and assess their
potential impact upon the
organization. Develop thecontingency strategy needed to
manage each potential event
effectively.
analyze events in detail and
develop and implement the
strategy needed to manage themeffectively so that either the
opportunity is maximized or the
threat is minimized.
monitor events and assess thelikelihood of changes that will
cause them to have a greater
impact on the organization.
low
low
h
igh
highimmediacy
impact
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is made up of those elements that are closest to the
company and that exert the greatest and most directinfluence over its ability to deal with its markets.
micro-environment
consists of the rather broader set of forces that have a
bearing upon the company, including economic,
demographic, technological, political, legal, social and
cultural factors.
macro-environment
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the term is used to describe the fact that there are often
only limited periods when the fit between the key
requirements of a market and the particular competencesof a firm competing in that market is at an optimum.
to ignore what is happening and accept the consequences
of strategic drift and wear-out.
to respond quickly or slowly, but largely reactively.
to try to predict the nature of the changes and then
manage them proactively.
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stage 6 : creativity and risk-taking that leads to a very
different market profile.
stage 1 : the initial shock when managers recognize the
mismatch between the environmental demands and the
organizations marketing behavior.
stage 2 : rejection of the significance of the changes taking
place and a (temporary) retreat from reality.
stage 3 : gradual recognition of the significance of marketchange.
stage 4 : acceptance of the need to change the strategy and
patterns of marketing behavior in possibly fundamental
ways.stage 5 : a commitment to the future and adaptation to the
new reality
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recognizing this allows us to identify five types of manager:
those who make it happen those who think they make it happen those who watch it happen those who wonder what happened those who fail to realize that anything has happened appreciation stage - considering the wider implications of
the economic, technological, social and political factors.
analysis stage - which involves finding, compiling andexamining environmental data.
application stage - in which real attempts are made to
monitor the environment, assess the implications for change
and incorporate staff evaluations into strategy and plans.
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irregular systems
predominate in companies with a poorly developedplanning culture.
focus is upon responding to environmentally generated
crises.
net effect of this is that emphasis is simply placed upon
finding solutions to short term problems with little real
attention being paid to identifying and assessing the likely
impact of future environmental changes
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the environment is reviewed regularly and a longer-termperspective is developed.
Periodic models more systematic, resource intensive and sophisticated than
irregular systems.
represent a further development and involve focusing uponthe business environment generally and upon the long term
as opposed to short-term and specific issues.
continuous models
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continuous environmental analysis is based:
the determinants of success are dictated by the business
environment.
the firms response to environmental change represents a
fundamental strategic choice.
a knowledge of the business environment must precede
the acquisition of any degree of control over it.
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First market opportunity must be analyzed and second the
companys ability to take advantage of these opportunities
and cope with threats must be assessed.
under the first heading, there are four basic building blocks:
customers must be analyzed to determine how the market
can be segmented and what are there requirements.
competitors must be identified and their individual
strategies understood
market characteristics in terms of the evolution of supply
and demand and their interaction must be understood.
environmental trends (social, economic, political,technological) affecting the market must be isolated and
forecasted.