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Business Policy & StrategyChapter Two
The Field of Action:
Environment of a Business System
Murdick, Moor, Babson & Tomlinson
Sixth Edition, 2000
Business System
Inputs are transformed into outputs
Inputs include raw materials
Transformation involves labor, land, equipment
Outputs must be delivered to the customer
STAKEHOLDERS
CustomersShareholdersGeneral public/communitySuppliersCompetitorsGovernment(s) – local, state, country, trade associationsSpecial interest groupsEmployeesManagers
Corporations Should Act Morally Responsibly
Holding individuals accountable for specific actions
Following rules established by externally imposed societal norms
Allowing individuals to make decisions that produce in others a feeling of trust, respect, and rationality
Monitoring & Forecasting the Remote Environment
Economics Trends
Political & Legal Trends
Social & Demographics Trends
Technology Trends, and sometimes
Physical Environment (weather, climate, earth changes such as El Nino, etc)
Monitoring & Forecasting the Immediate Task EnvironmentCustomers & potential customers
Competitors
Labor forces
Suppliers
Creditors
Regulatory agencies at various levels of governments
Major Methods of Environmental Forecasting
Cross Impact Analysis – select 25 events and estimate probabilities/time of occurrences, interpret impact on futureTrend Analysis – five year results, regression analysis, statistical forecastingDelphi Process – group of experts individually assesses the future without face to face (F2F) discussion. The results are combined and returned for another round of estimations until consensus is reached
Opportunities & Threats in the External Environment
Immediate examples include: Unrecognized needs of individuals, firms &
companies New applications of products & services Sudden growth in demand Synergy achieved through M/A New distribution methods (Internet) New manufacturing process/substitute materials New or better methods for customer service
Threats
Management incompetence is often hidden by high rewards for short-term performance rather than for long-term survival.
US tile makers believed it was a mature market and were overcome by foreign producers/importers.
Environmental threats
CompetitorsChanges in customer preferencesDwindling resourcesRising prices and wagesLegislationInflation or RecessionInternational economic & political relationshipsTechnological breakthroughs
Constraints
Legal or pending legislation
Political instability
Lack of natural resources
Well established competitors
Declining GDP
Declining productivity
Cost of capital, equipment, union labor
Table 2.1
Pages 8-9 in Chapter Two provide an extensive list of environmental considerations to elaborate on the social, political, environmental and technological fields.
Assignment
For your company analysis, identify all of the stakeholders
Identify a list of opportunities
Identify a list of threats
Review Table 2.1 to determine which of these factors affect your firm
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