1. McGraw-Hill/Irwin
Copyright 2009 by The McGraw-Hill Companies, Inc.All rights reserved.

2. Learning Objectives
L01: How do environmental forces influence organizations influence their environments?
L02: Can you distinguish between the macro environment and the competitive environment?
L03: Why should managers and organizations attend to economic and social developments?
3. Learning Objectives
L04: Can you identify elements of the competitive environment?
L05: Summarize how organization respond to environmental uncertainty.
L06: Define elements of an organizations culture.
L07: Discuss how an organizations culture affects its response to its external environment
4. The essence of a business is outside itself. Peter Drucker
2-4
5. How organizations interact with their environment
6. The Macroenvironment
General elements in the external environment that potentially can influence strategic decisions.
Laws and regulations
Economy
Technology
Demographics
Social Values
7. The External Environment
8. Managing the Macroenvironment
The economy affects a companys value
Technology is changing every business function
Demographics describe employees and customers
Social issues shape attitudes toward your company and its products
9. The Competitive Environment
10. Who is the Competition?
Worldwide Competition
New Entrants
Barriers to entry low
Substitutes and Complements
Resources from Suppliers
11. Barriers to Entry
Barriers to entry conditions that prevent new companies from entering an industry
Government policy (e.g., patent laws)
Capital requirements (start-up costs)
Brand identification (consumer brand loyalty)
Cost disadvantages (Established economies of scale)
Distribution channels (e.g., supermarket shelf space)
12. Resources from Suppliers
People from schools, colleges and universities
Raw materials from producers, wholesalers, and distributors
Information from researchers and consulting firms
Financial capital from banks and other sources
13. Suppliers are important because
They can:
Raise their prices
Provide poor quality goods and services
Fail to provide human resources
14. Supply Chain Management
The managing of the network of facilities and people that obtain materials from outside the organization, transform them into products and distribute them to customers.
The right product in the right quantity
available at the right place at the right time
15. Without customers, a company wont survive
Final consumers those who purchase products in their finished form.
Intermediate consumers those who purchase raw materials or wholesale products before selling them to final customers.
16. Environmental Analysis
Managers must identify organizational opportunities and threats.
Managers must use environmental analysis to make decisions
17. Environmental Scanning
Searching for and sorting through information about the environment that is unavailable to most people to determine what is important.
18. Questions managers can ask about the environment
Who are our current competitors?
Are there few or many entry barriers to our industry?
What substitutes exist for our product or service?
Is the company too dependent on powerful suppliers?
Is the company too dependent on powerful customers?
19. Competitive Intelligence
The information necessary to decide how best to manage in the competitive environment they have identified.
20. Identifying Your Environment
21. Scenario Development
Scenarios alternative combinations of different factors into a total picture of the environment and the firm.
Best-case scenario: occurrence of events that are favorable to the firm
Worst-case scenario: occurrence of events that are unfavorable to the firm
22. Forecasting
Predicts exactly how some variable or variables will change the future.
23. Successful forecasting involves
Using multiple forecasts, and perhaps average their predictions
Remembering that accuracy decreases as you go further into the future
Collecting data carefully
Using simple forecasts where possible
Remembering that important events are often surprises that depart from predictions
24. Benchmarking
Identifying the best-in-class performance by a company in a given area and then comparing your processes with theirs.
25. Adapting at the boundaries
Buffering creating supplies of excess resources in case of unpredictable needs
Internal (Contingent workers)
External (ending inventories)
Smoothing leveling normal fluctuations at the boundaries of the environment
26. Adapting at the core
Flexible processes methods for adapting the technical core to changes in the environment.
Mass customization use of a network of independent operating in which each performs a specific process or task
27. Influence your environment
Two proactive responses to changing the environment
Independent action when a company acts on its own to change some aspect of its current environment.
Cooperative action two or more organizations work together to change some aspect of the current environment.
28. Cooperative strategies make sense when
Taking joint action will reduce the organizations costs and risks
Cooperation will increase their power (their ability to successfully accomplish the changes they desire).
29. Ways to change the boundaries of your environment

Strategic maneuvering organizations can redefine or change which environment they are in

30. Domain selection the entrance by a company into another suitable market or industry. 31. Diversification when a firm invests in different types of business or products or when it expands geographically to reduce its dependence on a single market or technology