Environmental Scanning

External Environment

Mayflor Gaspar Lhynne Casilang

Reporters/Discussants

Prof. Jo B. Bitonio DM 214 Strategic Planning MDM – 1st Semester 2013

Strategic Vision Strategic Mission

The External Environment

Analysis of general environment

Analysis of industry environment

Analysis of competitor environment

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Environmental analysis is a continuous process which includes:

•Scanning: Identifying early signals of environmental changes and trends

•Monitoring: Detecting meaning through ongoing observations of environmental changes and trends

•Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends

•Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management

Environmental Scanning

- consists of identifying changing trends and patterns, monitoring specific trends and patterns, forecasting the future directions of these changes, and assessing the impact on the organization

Organization

Government

Especial interest groups

Suppliers

Customers

Competitors

Financial Institutions

Labor Unions

Media

Technological variables

The External Environment

Analysis of general environment

Analysis of competitor environment

Analysis of industry environment

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Competitor Analysis

Response

Response: What will our

competitors do in the future?

Where do we hold an advantage over our competitors?

How will this change our relationship with our competitors?

Capabilities

Current strategy

Future objectives

Competitive Environment

Competitive analysis – in similar industries

– Panelco III, Decorp and the like

What drives the competitor

– As shown by its future objectives

What competitor is doing and can do

– As revealed by its current strategies

What competitor believes about the industry

– As shown by its assumptions

What the competitors capabilities are

– As shown by its strengths and weaknesses

Industry Environment

A set of factors that directly influences a company and its competitive actions and responses

Interaction among these factors determine an industry’s profit potential

The following areas of analysis are used to look at all external factors effecting a company:

• Customer analysis: Segments, motivations, unmet needs

• Competitive analysis: Identify completely, put in strategic groups, evaluate performance, image, their objectives, strategies, culture, cost structure, strengths, weakness

• Market analysis: Overall size, projected growth, profitability, entry barriers, cost structure, distribution system, trends, key success factors

• Environmental analysis: Technological, governmental, economic, cultural, demographic, scenarios, information-need areas Goal: To identify external opportunities, threats, trends, and strategic uncertainties

It identifies target customers, ascertains the needs of these customers, and then specifies how the product satisfies these needs. A customer profile is a simple tool that can help business better understand current and potential customers.

Customer Analysis

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Two primary aspects of Customer Analysis:

Demographic Profile: break down

customers into age, income, geographic and other easily identifiable categories.

Behavioral Analysis: identifies the reasons

customers choose to buy a product instead of the alternatives

•Customer Buying Criteria

•Purchase Process and Patterns

- Knowledge on the industry

- Information on the current size and stage

- Growth history

- Projected rate of growth

- Trends and characteristics

- Target market

1. Distinguishing Characteristics – what makes your target

market special, including the location of the individuals

and seasonal/cyclical trends.

2. Size – the number of potential customers your target

market contains and the average annual purchases of your

product/service they make.

3. The percentage of market shares you expect to obtain.

4. Pricing – how much your customers will be charged for

your product/service (including any discount structures,

such as purchasing in bulk or annual sales) and your gross

margin levels.

Aspects in Defining Company's Target Market

5. Resources – how/from whom you obtained your information about your target market.

6. Media – what media outlets you will use to advertise to your target market (i.e. television, radio, billboards, fliers, newspaper ads, etc.)

7. Need/Solution – identify the needs of your target market; research and evaluate possible solutions; and identify who within your company has the authority to choose which solutions your business will be implementing.

8. Trends & Changes – what trends and changes may effect your target market and how well they respond to your product/service.

Aspects Cont.

General Environment

– Influences the firm and its industry

– Firms can not directly control these but collect information and formulate strategies

– Six Segments

• Demographic

• Economic

• Political/legal

• Socio- cultural

• Technological

• Global

Six Areas of Analysis in General Environment

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Economic

Technological

Industry Environment

Threat of new entrants Power of suppliers

Power of buyers Product substitutes Intensity of rivalry

Competitor Environment

For us to understand better the internal and external analysis lets take a look and have some review on SWOT analysis

SWOT Analysis

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control.

The External Analysis examines opportunities and threats that exist in the environment. Both opportunities and threats exist independently of the firm. The way to differentiate between a strength or weakness from an opportunity or threat is to ask: Would this issue exist if the company did not exist? If the answer is yes, it should be considered external to the firm. Opportunities refer to favorable conditions in the environment that could produce rewards for the organization if acted upon properly. That is, opportunities are situations that exist but must be acted on if the firm is to benefit from them. Threats refer to conditions or barriers that may prevent the firms from reaching its objectives.

• Organizations also need to analyze the external environment. This would include customers, suppliers, creditors, and competitors. Analyze the opportunities and treats or constraints that exist in the organization’s external environment, including industry and micro environmental forces. Several questions can be asked which may help analyze the external environment.

• What is the relationship between the PANELCO III and its customers?

• What is the relationship between the PANELCO III and its suppliers?

• Does PANELCO III have a good rapport with its creditors?

• Is the PANELCO III actively trying to increase the value of the business for its shareholders?

• Who is the competitor?

• What advantages do competitors have over the PANELCO III?

SWOT ANALYSIS

Purpose of External Environmental Analysis

• Organizations are affected by conditions in the environment

• Managers need to be aware of these conditions in order to: – Take advantage of opportunities that

lead to higher profits – Reduce the impact of threats – that can harm the organization’s

future

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Opportunities

refer to favorable conditions in the environment that could produce rewards for the organization if acted upon properly

Where can you apply your strength? How are your customers and their needs

changing? How is technology changing your business? Are there new markets for your strengths? Are there new ways of producing your

products? Are your rivals customers dissatisfied?

Opportunities

Opportunities may arise from market, competition, industry/ government and technology. Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter telecom sector and compete with existing firms for revenue.

Opportunities Opportunities are presented by the

environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable.

Organizations can gain competitive advantage by making use of opportunities. Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients while getting desired results is a difficult task.

Threats

* Are the customers meet their needs with alternative products?

*Are customers needs changing away from your products? * What are the competitors developing? * Are your rivals improving their products offering or

prices? *Is new technology making your product obsolete? *Is new competition coming?

- increase in trade barriers, new regulations and emergence of substitute products

Threats

Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. They compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are ; ever changing technology; increasing competition leading to excess capacity, price wars

Summary

SWOT analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates.

The SWOT analysis is the foundation for developing your strategies and tactics that then become the road map for writing the organization’s business operating plan.

In other words, it is the foundation

for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment.

It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also helps in including them in the decision-making process of the organization.

1. Be realistic about the strengths and weaknesses of your c organization when conducting your SWOT Analysis.

2. A SWOT Analysis should distinguish between where your organization is today, and where it could be in the future.

3. SWOT should always be specific. Avoid gray areas. Stay focused on the topic being analyzed.

4. Always apply SWOT in relation to your competition, i.e. better than or worse than your competition. It is important to identify who you are competing against; the competition may be private sector or other public agencies or non-profits.

5. Keep your SWOT short and simple. Avoid complexity and over analysis

6. SWOT is subjective.

Taken from: www.marketingteacher.com/Lessons/lesson_swot.htm

Six Simple Rules for a Successful SWOT Analysis

If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much. Jim Rohn

“Let there be light”

Thanks for your attention and participation

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