Environmental Analysis

1
Environmental Analysis

• Managers must understand how the environment
  affects their organization
• It is difficult to predict how certain events
  will affect both the environment and the
  organization which creates uncertainty

2
Environmental Scanning

• Searching and sorting through information about
  the environment
• Commonly asked questions
• Who are our current competitors
• Are there few or many entry barriers to our
  industry?
• What substitutes exist for our product or
  service?
• Is the company too dependent on powerful
  suppliers?
• Is the company too dependent on powerful
  customers?

3
The Competitive Environment

• A smaller environment that includes the specific
  organizations with which the organization
  interacts
• Includes
• rivalry among current competitors
• threat of new entrants
• threat of substitutes
• power of suppliers
• power of customers

4
Rivalry Among Current Competitors

• Step one Identify the competition
• Small domestic firms
• Strong regional competitors
• Companies exploring new markets
• Overseas firms
• New entries to the market
• Step two How do they compete?

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5
RTE Breakfast

• Price
• Different outlets
• Mass Merchandisers
• WalMart
• Costco
• Sams Club

6
Threat of New Entrants

• New entrants into an industry compete with
  established companies
• By creating barriers to entry (conditions that
  prevent new companies from entering an industry)
  the threat of new entrants is less serious
• Barriers to entry include government policy,
  capital requirements, brand identification, cost
  disadvantages, and distribution channels

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7
RTE Barriers to Entry

• Brand identification
• Product proliferation
• Shelf space based upon historic sales volume

8
Threat of Substitute Products
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9
Power of Suppliers

• Suppliers provide the resources needed for
  production
• Organization are at a disadvantage if they become
  overly dependent on any powerful supplier
• Switching costs are fixed costs buyers face if
  they change suppliers
• Supply chain management is the process of
  managing the entire network of facilities and
  people that obtain raw materials from outside the
  organization, transform them into products, and
  distribute them to customers

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10
Power of Customers

• Customers purchase the products or services an
  organization offers
• Final consumers are those individuals that
  purchase products in their finished form
• Intermediate consumers are individuals who
  purchase raw materials or wholesale products
  before selling them to final customers
• Customers can demand lower prices, higher
  quality, unique product specifications, or better
  service
• Customers are powerful if they make large
  purchases or if they can easily find alternative
  places to buy

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11
Environmental Scanning
12
Environmental Uncertainty

• Managers do not have enough information about the
  environment to understand or predict the future

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13
Independent Action
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14
Cooperative Action
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15
Strong Cultures
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