General External Env Analaysis REPORT

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    Analysis of the General External Environment

    Michael Alao

    MGMT 600

    September 19, 2009

    Introduction

    The purpose of this paper is to explore the general external environment in

    terms of the six segments presented in the textbook: demographic; economic;

    political and legal; sociocultural; technological; and global. The environment will be

    added as an additional, seventh segment. Each of the segments will be addressed

    in terms of the results of scanning and monitoring popular media such as

    magazines (The Economist, Wired, and Parents) and radio (NPR). For each segment

    the current state and short-term (e.g. one year forward) emerging trends will be

    considered. At the conclusion of the paper, the long-term trends identified through

    consideration of all seven segments and the current and short-term emerging

    trends will be addressed.

    Demographic

    The developed, industrialized half of the world is aging, while the developing

    world is becoming younger. In the US the topic of the baby boomers retirement is

    a frequent topic addressed throughout various media. Currently there is concern

    that the aging workforce will result in shortages of qualified management talent,

    and that social welfare programs such as social security and Medicare will be

    unsustainable without incurring massive deficit spending. The debates surrounding

    healthcare and social security are pitting the young against the old, with many of

    those opposed to healthcare reforms being among the older population who at the

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    same time staunchly defend the Medicare programs whose costs will be borne by

    the current workforce.

    The debates over healthcare in general, Medicare, and Social Security will still

    be ongoing a year from now. If anything, the debates will continue to intensify.

    Meanwhile, what may be the inevitable solution for maintaining entitlement benefits

    for an aging workforce immigration of young workers, will not result in significant

    immigration reform during this period.

    Economic

    Separating the healthcare debate from the economic environment is

    impossible, because much of the concern and resistance to reform is the fear of

    government deficit spending and the adverse effect it will have on future economic

    growth. Amid the arguments it is difficult to find an independent and unbiased

    source that can provide voters with an honest estimate of the proposed costs of

    healthcare reform. There may also be the inherent lack of honesty with regard to

    balancing the federal budget without increasing taxes. How do you spend more and

    at the same time balance the budget without increasing taxes? The public is

    concerned that the government has already spent too much to tame the recession.

    The recession is a topic on just about everyones mind and almost impossible

    to escape when perusing popular media. The public has changed its behavior and

    the personal savings rate in the US has actually increased. Bargain hunting and

    financial literacy are the current fashion, with a plethora of articles and stories on

    cost saving tips offered to people of all age groups and interests. Even big

    businesses are bargain shopping with mergers and acquisitions seeing a recent

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    uptick possibly a sign of an end to the recession and economic growth during the

    next year.

    Political and Legal

    Regulation is on the rise. The health care debate is essentially a debate

    about the extent of government regulation. The ongoing financial institution

    bailouts are also government regulation, or will be in the very near future as Wall

    Street will not be allowed to return to business as usual after such a massive

    government investment. The same can be said for any of the other industries that

    resulted in government bailouts they should expect continued and more

    government regulation in the next year.

    From an international relations standpoint, the major global players realize

    that much of their security is dependent on financial growth. Expect to see greater

    international collaboration to restrain potential threats to global commerce. Threats

    such as those posed by Afghanistan, Iran, and North Korea all of which are

    currently in the news and will continue to be over the next year.

    Sociocultural

    The general public displays greater awareness and interest in issues related

    to healthcare, the effect of lifestyle and diet on health, the environment, and

    financial responsibility. The current economic crisis has been remarkable in tying

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    all of these things together. The crisis seems to have gotten peoples attention,

    they are afraid and reexamining their priorities. Fear can be a great motivator for

    change, and the recent rise in the personal savings rate is a great example. Over

    the next year we should expect to see people continue to change their personal

    habits (e.g. smoking, diet, shopping, saving, etc.).

    Another significant change is that many older workers have realized that they

    cannot afford to retire. At the same time there is also greater acceptance and

    desire to have older Americans in the workforce. Expect this trend to continue as

    the economy begins to grow over the next year.

    Technological

    Communication technology is making significant differences in peoples lives

    with such things as social media and near-constant access to a wealth of

    information. Although the change as a result of communication technology in

    developed countries is remarkable, it pales in comparison to the effect that

    technology such as low-priced cell phones have had in developing countries. Over

    the next year expect to continue seeing massive growth in cell phone penetration

    throughout the developing world. With that growth expect to continue seeing news

    events from countries with repressive regimes whose censorship methods will be

    unable to keep up with the technological advances in communication.

    Global

    The effects of the financial crisis were felt globally, and Americans are not the

    only ones anxious to see the US economy recover. Concern for the global economy

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    will continue throughout the year. Expect to continue seeing interest in events

    throughout the world as instability anywhere is more likely to be seen as a threat to

    economic growth. As the economy in the US and throughout the world begins to

    recover, expect to see more companies involved in cross-border acquisitions and

    mergers.

    Environmental

    The health care bill is not the only significant bill working its way through the

    US congress. There is also the cap and trade bill, which in some form is likely to

    become law during the next year. The risks posed by global warming will continue

    to be topic of conversation during the next year. Expect to see more disasters such

    as drought, storms, and wildfires throughout the next year and those disasters

    being connected by popular media to global warning.

    The Long-Term

    Developed nations will realize that the only way to maintain a workforce

    sufficient to pay for the retirement and care of its aging citizens will be through

    immigration. The underdeveloped world is full of young people in stagnant

    economies that will not be able to create sufficient jobs to sustain their young

    population. Business must advocate strongly for immigration reform, because the

    public is unlikely to do so as a result of xenophobia. Business must also advocate

    for increased spending on higher education in order to develop the workforce that

    will be required to replace the aging Baby Boomers. Expect the government to

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    increase spending on higher education in order to attract and retain talent

    internationally. Competition among developed and newly-developed nations for the

    best and the brightest will be fierce.

    Taxes will increase. Supply-side economics, never accepted by economists,

    has been disproven in the real world. Further, people want security and a social

    safety net, which costs money. If the majority is not convinced today that higher

    taxes are warranted, they will be over the next five to ten years.

    Government regulation will increase across all sectors of the economy.

    Governments throughout the world, including the US, will select slower, but stable

    growth. Regulation will provide the stability that will prevent the near-economic

    collapse experienced during 2008. The voting public has a short memory, however,

    and de-regulation will begin anew in six to eight years. Environmental regulations,

    however, will continue to be strengthened significantly over the next decade,

    despite the fact that they will be too late to make a difference, but frightened

    citizens will demand that their governments appear to be doing something.

    The planet is warming, and it is irreversible. Weather patterns will become

    less predictable and natural disasters more frequent. Regional conflicts will

    increase as water becomes scarce. Organizations will have to develop ways to

    remain flexible and to deal with unforeseen circumstances.

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    Sources

    Wired, September 2009

    The Economist, September 12th

    18th

    2009

    Parents Magazine, September 2009

    91.7 WVXU Cincinnati, Various radio programs during the week of September 14,

    2009

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