Environmental Nalysis

8/2/2019 Environmental Nalysis

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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.

Documents

Environmental Nalysis