Strategic Management -The Enviroment

8/11/2019 Strategic Management -The Enviroment

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IMPORTANT DEFINITIONS A firms EXTERNAL ENVIRONMENT is broken

down into three parts:

General Industry

Competitor A firms strategic actions are influenced by theconditions in all three parts.


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IMPORTANT DEFINITIONS General Environment

Dimensions in the broader society thatinfluence an industry and the firms withinit

Industry EnvironmentSet of factors that directly influences a firmand its competitive actions and response

Competitor Environment Focuses on each company against which afirm directly competes

MACRO

MICRO


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THE EXTERNAL ENVIROMENT


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OPENING CASE

External environment affects a firms strategicactions

BP seeks to expand its oil reserves after the DeepwaterHorizon oil and gas drilling platform disaster in the Gulfof Mexico by forming joint ventures in Russia withRosneft Corporation and in India with RelianceIndustries. BPs strategic actions are also affected by conditions inother segments of its general environment: e.g., thepolitical/legal, social/cultural, and physical environmentsegments.

BRITISH PETROLEUM (


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THE EXTERNAL ENVIRONMENT A firms external environment creates:

OPPORTUNITIES e.g., the opportunity for BP to enter other global markets,

and THREATS e.g., the possibility that additional regulations in its markets

will reduce opportunities for BP to extract oil and gas

Collectively, opportunities and threats affect a firms strategic actions.


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THE EXTERNAL ENVIRONMENT

EXTERNALENVIRONMENT

UNDERSTANDING

INTERNALENVIRONMENTKNOWLEDGE

VISION, MISSION, AND STRATEGY


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GENERAL The General Environment is grouped into seven environmentalsegments:[1] Demographic

[2] Economic[3] Political/Legal[4] Sociocultural[5] Technological[6] Global[7] Physical To successfully deal with uncertainty in the external environmentand achieve strategic competitiveness, firms must be aware of andunderstand these segments.


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GENERAL

Firms cannot directly CONTROL the generalenvironments segments.

However, these segments influence the actionsthat firms take.

Successful firms learn how to gather theinformation needed to understand all segments andtheir implications for selecting and implementingthe firms strategies.


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THE DEMOGRAPHIC SEGMENTDemographic segments are commonly analyzed on a globalbasis because of their potential effects across countriesborders and because many firms compete in globalmarkets.

Demographic SegmentPopulation size

Age structureGeographic distributionEthnic mixIncome distribution

GENERAL SEGMENTS AND ELEMENTS


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Economic SegmentInflation ratesInterest ratesTrade deficits or surpluses

Budget deficits or surpluses

Personal savings rateBusiness savings ratesGross domestic product


THE ECONOMIC SEGMENTThis segment refers to the nature and direction of theeconomy in which a firm competes or may compete. Firmsgenerally seek to compete in relatively stable economies withstrong growth potential. With globalization and theinterconnectedness of nations, firms must scan, monitor,forecast, and assess the health of their host nation and thehealth of the economies outside their host nation .



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THE POLITICAL LEGAL SEGMENTThis segment represents how organizations and governments mutually try toinfluence each other, and how firms try to understand these influences(current and projected) on their strategic actions.

Political Legal Segment Antitrust laws

Taxation laws Deregulation philosophies Labor training laws Educational philosophies and policies



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THE SOCIOCULTURAL SEGMENTThe sociocultural segment is concerned with a societys attitudesand cultural values. Because attitudes and values form the

cornerstone of a society, they often drive demographic, economic,political/legal, and technological conditions and changes.Sociocultural Segment

Women in the workforce Workforce

Diversity attitudes about the quality of work lifeShifts in work and career preferencesShifts in product and service preference characteristics



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THE EXTERNAL ENVIRONMENT GENERAL SEGMENTS AND ELEMENTS

THE TECHNOLOGICAL SEGMENT Technological changes occur through new products, processes, and materials.The technological segment includes the activities involved in creating newknowledge and translating that knowledge into new outputs, products,processes, and materials. Given the rapid pace of technological change and riskof disruption, it is vital for firms to study this segment.

Technological SegmentProduct innovationsNew communicationtechnologies

Applications of knowledgeFocus of private andgovernment-supported R&Dexpenditures


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THE GLOBAL SEGMENTMarkets and consumers are more global. This segment includes relevant new global markets, existing markets thatare changing, important international political events, andcritical cultural and institutional characteristics of globalmarkets.

Global Segment

Important political eventsCritical global marketsNewly industrialized countriesDifferent cultural and institutional attributes



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THE EXTERNAL ENVIRONMENT GENERAL SEGMENTS AND ELEMENTS

THE PHYSICAL ENVIRONMENTSEGMENT

Concerned with trends oriented to sustaining the worlds physical environment,firms recognize that ecological, social, and economic systems interactivelyinfluence what happens in this particular segment. This segment refers topotential and actual changes in the physical environment and business practicesthat are intended to positively respond to and deal with those changes.

Physical Environment Segment

Energy consumptionPractices used to develop energy sourcesRenewable energy effortsMinimizing a firms environmental footprint

Availability of water as a resource

Producing environmentally friendly productsReacting to natural or man-made disasters


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Strategic Management -The Enviroment