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8/14/2019 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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