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External Environmental Analysis

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Contact author at dennis_at_middlemist.com ... A continuous process which includes Scanning: Identifying early signals of environmental – PowerPoint PPT presentation

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Title: External Environmental Analysis


1
External Environmental Analysis
  • A continuous process which includes
  • Scanning Identifying early signals of
    environmental changes and trends
  • Monitoring Detecting meaning through ongoing
    observations of environmental changes and trends
  • Forecasting Developing projections of
    anticipated outcomes based on monitored changes
    and trends
  • Assessing Determining the timing and importance
    of environmental changes and trends for firms
    strategies and their management

2
Three Component Relationship of the Firm to the
Business Environment
  • Deterministic - Regulatory, legal and market
    structures taken as givens
  • Probabilistic Areas where the firm has the
    ability to increase its odds of success.
  • Random Uncontrollable and uncertain elements
    from which the firm can attempt to protect itself

3
AN ORGANIZATIONS ENVIRONMENT
Task Environment
Raw Materials Sector Suppliers, Manufacturers,
Real Estate
Industry Sector Competitors, Industry size and
Characteristics, Related Industries
Human Resources Sector
Socio-Cultural sector
Labor Market, Employment Agencies, Universities,
Training Schools, Employees in Other Companies,
Unionization
Age, Values, Beliefs, Education, Religion, Work
Ethic, Urban vs. Rural, Birth Rate
DOMAIN
Financial Resources Sector
Government Sector
City, State, Federal Laws and Regulations, Taxes,
Services, Court System, Political Processes
Stock Markets, Banks, Savings and Loans, Private
Investors
ORGANIZATION
Market Sector
Economic Conditions Sector
Technology Sector
Customers, Clients, Potential Users of Products
and Services
Techniques of Production, Science, Research
Centers, Automation, New Materials
Recession, Unemployment Rate, Inflation rate,
Rate of Investment, Economics, Growth
Macro Environment
4
External Environmental Analysis
Analysis of macro/general environment
Analysis of task environment
Analysis of competitor environment
The External Environment
The External Environment
Strategic Intent Strategic Mission
5
Organizational uncertainty
Complex Stable LOW MODERATE UNCERTAINTY 1.
Large number of external elements 2. Elements
remain the same or change slowly or relatively
predictably Examples Universities, hospitals,
insurance companies
Simple Stable LOW UNCERTAINTY
1. Small number of external elements 2. Elements
remain the same or change slowly or relatively
predictably Examples Soft drink bottlers, beer
distributors, container manufacturers, local
utilities
Stable
Uncertainty
Simple Unstable HIGH MODERATE UNCERTAINTY 1.
Small number of external elements 2. Elements
change frequently, more unpredictably and
reactively Examples Fashion clothing, music
industry, toy manufacturers
Complex Unstable HIGH UNCERTAINTY 1. Large
number of external elements 2. Elements change
frequently, more unpredictably and
reactively Examples American airlines, oil
companies, electronic firms, aerospace firms,
personal computers
Unstable
Simple
Complex
6
Key Steps in an External Analysis
  • Determine which questions you are trying to
    answer.
  • What do you want to know?
  • Why do you need to know it?
  • Determine the Scope and Scale of the Analysis.
  • What is the appropriate level of analysis?
  • What trends do you need to investigate?
  • What segments are involved?
  • How would classify the issues?
  • How important are they to the firm?

7
Enactment of different parts of the environment (
Selection of the boundary) Standard operating
procedures Working capital
Standard operating procedures Working
Capital
Raw materials inventory
WIP inventory Maintenance programs Excess
capacity Project scheduling Labor scheduling
Finished Goods Inventory Negotiated lead times
Monopsony - captive suppliers, futures contracts
Monopoly
Technical core
Interconnections, i.e. interlocking boards,
vertical integration, etc. Boundary spanning
activities, i.e. marketing, purchasing, etc.
Administrative Level
ORGANIZATIONAL RESPONSES TO ENVIRONMENTAL
UNCERTAINTY
8
Key Steps Continued.
  • Determine information needs
  • What types and amounts of information are needed?
  • Where is that information located?
  • How can you get the required information?
  • How can we get the data to the people that need
    it?
  • Understanding the Data
  • What do the data mean?
  • How might the data benefit the firm?
  • What threats do the data represent?
  • How can you use the data to your firms
    advantage?
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