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What is organizationalenvironment?

What is organizational

context?


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Questions for Strategic Assessment to address

What are our chances of survival if wecontinue as we are?

What are the best opportunities forgrowth given our existing capabilities?

What are our competitive advantagesand disadvantages?

Where can we invest to improve ourcapabilities most efficiently?

What changes can we realisticallyimplement?


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What do we mean by Context?

The environment in which

the enterprise operates

The characteristics of the

enterprise itself

Realities and perspectives


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Why is context important?

The background for strategy

Each context is unique

Sets the agenda for strategic

management Context poses problems and

dilemmas

Unique context Unique strategies


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normal business Knowledge intensive enterprises

Mature businesses and decliningindustries

Turnaround, recovery and end-game

Public sector e.g., education,

health, local government, executiveagencies, police etc.

Diversity of Context


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Normal Business Context

Privately owned

Moderately large

Significant investment in

tangible assets

Growing or intending to grow


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Knowledge-intensive Enterprises

Knowledge as key to wealth creation

Examples:

Professional service firms Creative businesses

Educational services

Publishing of all kinds

Knowledge management becomes a

part of strategic management


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The Organization and the Environment

The Organization

Owners/Board of Directors

Managers

Employees

The Operating Environment

The Broad Environment

FinancialIntermediaries

Government Agenciesand Administrators

LocalCommunities

Competitors

Suppliers Customers

ActivistGroups

Unions

Socio-cultural Influences Technological Influences

Economic Influences Political/Legal Influences

The Media

Global


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Purpose of External Analysis

To understand the external

environment as it affects the

enterprise


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Features of Environment

Complex

Dynamic

Challenging


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Important to achieving long

term and annual objectives

Measurable

Applicable to all competing firm

Hierarchical applicable to wholecompany and to lower levels

External Analysis: Key points


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Levels of analysis:

General changes in

business environment

Changes within theindustry (Industry

Analysis)

Activities of competitorsand other specifics

(Competitive Analysis)

External Analysis


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General Environment:

Key External Forces

Economic forces

Social cultural,demographic

environmental forces

Political, legal and governmental

forces

Technological forces

Competitive forces

Global


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Interest rates

Unemployment

Consumer price Index

Trends in GDP

Changes in stock market

valuations

Two income households

Trade Deficit

Exchange Rates

Economic:Trends and Events


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Population size

Aging population

Rising affluence

Changes in ethnic composition

Geographic distribution ofpopulation

Greater disparities in incomelevels

Demographics: trends and issues


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More women in the workforce

Increase in temporary workers

Greater concern for fitness

Greater concern for environment

Delays in family formation

Role of Government in HealthCare and Child Care

Declining Quality of Education

Terrorism and Levels of Crime in

General

Major Socio cultural Issues


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Security of Travel and Public

Places

Importance and Role of theMilitary

Levels of Foreign

Investment/Ownership.

Social Costs of Restructuring,

Especially Layoffs

Major Socio cultural Issues


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Organizations should monitor New Production Processes

New Products/Product Ideas

Current Process ResearchEfforts

Scientific Discoveries that May

Have an Impact

Technology is knowledge about

products and services and theway they are made and

delivered

Technological Trends and Issues


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Characteristics of

innovation

New innovations often

emerge from existingtechnologies

A dominant design will

eventually be widely

adoptedRadical innovations

often come from

outside the industry


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Genetic engineering

Emergence of Internet

technology

Computer Aided Design /

Computer-Aided ManufacturingSystems

Pollution/Global warming

Miniaturization of computingtechnologies

Wireless communications



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Political/legal Forces

New Laws

New Regulations

Current Administrative

Policies

Government Stability

Wars

International Pacts and

Treaties


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Patent laws, tax rates, NAB

factor, lobbying ,example

sugar prices

Governments provincial and federalmajor regulators, deregulators,

subsidizers, employers and

customers and are key opportunities.

Anti trust legislation

Special Tariffs

Political/legal Forces


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Increasing Global trade Currency Exchange Rates

Emergence of the Indian

and Chinese Economies Trade Agreements among

regional blocs

(e.g. NAFTA, EC, ASIAN)

GATT Agreement (leading to

decreasing tariffs)

Global

C f G i


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Components of the General EnvironmentDemographicSegment

Population size

Age structure

Geographic distribution

Ethnic mix

Income distribution

EconomicSegment

Inflation rates Interest rates

Trade deficits or surpluses

Budget deficits or surpluses

Personal savings rate Business savings rates

Gross domestic product

Political/LegalSegment

Antitrust laws

Taxation laws

Deregulation philosophies

Labor training laws

Educational philosophies andpolicies

SocioculturalSegment

Women in the workforce

Workforce diversity

Attitudes about work lifequality

Concerns about theenvironment

Shifts in work and careerpreferences

Shifts in preferences regardingproduct and servicecharacteristics

TechnologicalSegment

Product innovations

Applications of knowledge

Focus of private andgovernment-supported R&Dexpenditures

New communicationtechnologies

GlobalSegment

Important political events

Critical global markets

Newly industrialized countries

Different cultural and

institutional attributes


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External Environmental Analysis

The external environmental analysis process should be

conducted on a continuous basis. This process includesfour activities:

Scanning

Monitoring

Forecasting

Assessing

Identifying early signals of environmental

changes and trends

Detecting meaning through ongoing observationsof environmental changes and trends

Developing projections of anticipated outcomesbased on monitored changes and trends

Determining the timing and importance of

environmental changes and trends for firms'strategies and their management


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Questions

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