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The micro-, market and macro-environment

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Chapter 5 The micro-, market and macro-environment Barriers to the adv of existing com, but makes it difficult for the buss should we like to branch out Power of ... – PowerPoint PPT presentation

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Title: The micro-, market and macro-environment


1
Chapter 5
  • The micro-, market and macro-environment

2
Techniques used for gathering data in 3 env
  • Resource based - micro
  • Value chain analysis - micro
  • SWOT - all 3
  • Environmental scan - external env
  • Porters five forces field - external env
  • PESTLE - external env

3
Sectors in macro-env
  • Primary
  • Extraction of raw material from nature
  • Farming, mining, forestry
  • Secondary
  • Process raw materials into finished or
    semi-finished goods
  • Tertiary
  • Where goods are sold
  • Include various services (banking, insurance,
    transport etc)

4
  • Consumer goods
  • Convenience goods - bread, milk etc
  • Shopping goods - shoes, clothing
  • Speciality goods - cars
  • Industrial goods - to make something else
  • Services - transport, insurance, grading,
    storage

5
Micro-environment
  • Vision stmt
  • Dream of the buss
  • Inspires and remind stakeholders what is
    important
  • Must be easily understood
  • Ambitious

6
  • Mission stmt
  • Describes buss customers
  • Major products or services
  • Differentiating qualities
  • Social responsibility
  • Environmental concerns
  • Also deals with values of buss ie
  • Honesty, integrity, transparency, innovation
  • Starting point for all major strategic initiatives

7
Long term objectives
  • Must be measurable
  • Compare actual performance against the objectives
  • Includes
  • Improving POI
  • Keeping costs low
  • Maintain or improve market share
  • Employee development
  • Public and social responsibility elements

8
Strategy
  • Based on competitive advantage that was
    identified when analysing the environments

9
Structure of the buss
  • Way in which labour, authority, responsibility
    and other resources are organised to make sure
    they all work together

10
Take into account the following when deciding on
org structure
  • Range of control
  • Ability to delegate
  • Authority
  • Responsibility
  • accountability

11
LINE ORGANISATION
12
LINE ORGANISATION - CHARACTERISTICS
  • Supervisors make all the decisions and give all
    the instructions
  • Instructions received from the person immediately
    superior
  • Only one person gives the orders

13
LINE AND STAFF ORGANISATIONAL STRUCTURE
14
LINE AND STAFF ORGANISATIONAL STRUCTURE
  • Line authority right to command
  • Staff authority right to give advice
  • Incorporates functional managers and consultants/
    advisors
  • Managers give order, advisors give advice.
  • Line and staff personnel work closely together

15
ADVANTAGES
  • Easy to understand
  • Only one manager giving instructions within a
    department
  • Manager assisted by advisors
  • Greater specialization
  • Span of control is limited
  • Greater division of labour
  • Quicker decision making

16
DISADVANTAGES
  • More complex structure
  • Some experts know more than their superiors
  • Channels of communication can be distorted
  • Advice can be too theoretical
  • Advisors are expensive
  • Managers can become too dependent on their
    advisors.

17
FUNCTIONAL STRUCTURE
  • Specialized staff with authority in their own
    departments
  • Workers have the benefit of specialized direction
  • Advice is available from other experts

18
FUNCTIONAL STRUCTURE
19
PROJECT ORGANISATIONAL STRUCTURE
20
PROJECT ORGANISATIONAL STRUCTURE
  • Specialists from various departments are brought
    together fro a specific project
  • Temporary structure for the duration for the
    project
  • Structure dissolved once the project has been
    completed
  • Disadvantage - same team seldom work on same
    projects
  • Difficult to get to know each other

21
Matrix
  • Projects move between specialist departments
  • Staff members not transferred back to original
    depts
  • Improves productivity
  • More permanent structure

22
Strategic Buss Units (SBU)
  • Buss establish buss units according to products
    or geographical regions
  • If there are different buss units, management
    must make sure units have same strategies which
    may include IT or product strategies
  • Virgin - brand image amongst all units
  • Main adv - unlocks value in the supply chain and
    helps to build a competitive adv based on
    co-operation
  • Individual buss are worth far more in the
    CORPORATE structure than if they were independent

23
Networking or virtual structures
  • With use of technology, units operate across
    traditional buss units and often across regional
    boundaries
  • Require fewer middle managers because they are
    flatter and leaner structures

24
Culture of the buss
  • Values or attitudes that is shared in the buss
  • These shared values motivate people to act in a
    certain manner
  • Can be changed if it is not in line with the
    strategy of the buss
  • Difficult, time consuming process

25
Resources in the buss
  • Physical resources - assets, financial resources
  • Also knowledge
  • Knowledge human capital
  • Line managers must make sure that valuable staff
    are retained

26
Functions in buss
  • General manager must ensure there is
    co-ordination between the activities that make up
    the auxiliary functions of the buss
  • Purchasing
  • Production
  • Marketing
  • Financial
  • Administrative
  • Personnel
  • Public relations

27
  • Functional managers plus every employee must be
    aware of buss objectives
  • Internal co-operation is critical
  • Must have an understanding of how they are going
    to work together

28
Market environment
  • When investigating the market environment,
    Porters Five Forces Model is used
  • Level of rivalry in the market
  • Availability of substitute products
  • Threat of new entrants into the market
  • Power of suppliers
  • Power of buyers

29
  • Other models add in Trade unions
  • Model the buss use is not important, but rather
    that the buss scans the environment to pre-empt
    events

30
Level of rivalry
  • Porter separates competition from substitute
    products (look at them together)
  • Competitors may be more than people selling the
    same product
  • Who will be the competitors of Simba Chips?
  • Lays, Willards - Chip suppliers
  • Snack mixes like peanuts, rice cakes, biscuits,
    popcorn

31
  • Buss must find out as much as possible about
    competitor
  • Include
  • Ownership structures
  • Location
  • Financial performance (where?)
  • Products, including patents, quality, brand
    loyalty, new products, market share, promotion
    strategies, distribution channels,
  • Organisational culture and oral

32
  • Is it legal ? (ethical?)
  • Doing a competitor profile is not illegal
  • Get to know your enemy
  • Also look at future competitive threats

33
Threat of a new entrant
  • The greater the opportunity for profits, the
    more likely a new entrant will enter the market
  • Also true if there is not enough suppliers to
    meet demand
  • Threat diminished if certain barriers
  • Barriers
  • Brand loyalty
  • Govt policies (BEE)
  • Huge capital outlays
  • Ltd distribution channels

34
  • Barriers to the adv of existing com, but makes it
    difficult for the buss should we like to branch
    out

35
Power of suppliers
  • Raw materials or products to be sold
  • The right quality and the right quantity at the
    right time at a reasonable price
  • Costs involved if buss has a stock-out
  • Loss of production
  • Idle time of machinery
  • Difficult to negotiate discounts
  • Loose customer goodwill
  • What about labour suppliers (strike)?

36
The buyer
  • Buyer is more than final consumer
  • Include intermediaries (agents, wholesalers etc)
  • Control intermediaries
  • Sole agency
  • Sole right to sell in a specific area
  • Wholesaler gets commission
  • Wholesaler agrees to sell at prescribed price and
    not to sell similar goods

37
  • Contract system (price binding)
  • Manufacturer offers a discount to retailer, but
    has to sell at prescribed price
  • Not honoured, dealer is blacklisted

38
  • Financial control
  • Dealer gets fin assistance
  • Manufacturer gains control over dealer force him
    to sell only his goods
  • Petrol companies help garages selling their brands

39
  • Buss sells to final consumer, must know who
    customers are
  • Geographic profile Age, gender, income etc
  • Lifestyle criteria Hobbies, religion, cultural
    etc
  • Liquor Store scenario
  • Distribution channels on pg 99.

40
Macro (External) Environment
  • Increasing globalisation, technological advances
    makes macro env exciting and volatile
  • Events in macro-env occur in 2 ways
  • Trends - predictable
  • - buss can plan for them
  • - impact difficult to predict
  • - technological change , labour
    developments etc

41
  • Crisis - unexpected, unplanned
  • - throw buss into unstable situation
  • - natural disasters, war
  • - labour strikes, diseases

42
Strategies as tools
  • Strategy - specific plan of action, formulated to
    set in motion the effective use of resources with
    the aim of achieving the org objectives
  • Without strategy
  • Haphazard decision making
  • Ineffective use of resources
  • Frustrated employees (not knowing what to expect
    etc)

43
Advantages of strategy
  • Gives direction to buss
  • Ensures consistent decision making
  • Differentiates management roles and areas of
    responsibility
  • Puts buss and role in the broader eco in
    perspective
  • Anticipates change in internal and external env

44
Steps in implementing a management strategy (x8)
  • Define buss mission, vision and objectives
  • Analyse the different env in detail using a SWOT
    analysis for micro and marker env and a PESTLE
    analysis for macro env
  • Identify strategic options available

45
  • Issues to consider
  • - ROI
  • - Financial and physical risk
  • - potential for buss growth
  • - image of buss
  • - effect on ownership and control
  • - political and social issues
  • Evaluate and analyse the viability of each option
    ( in order of priority)
  • Plan the implementation of the chosen strategy
  • Implement
  • Monitor and control of strategy

46
PESTLE Analysis (very NB)
  • P - Political factors
  • E - Economic factors
  • S - Social factors
  • T - Technological factors
  • L - Legal factors
  • E - Ethical factors

47
Extension of PESTLE analysis
  • Depending on type of buss, some buss may use
    PESTLE where
  • physical environment (mining)
  • ethical environment (p64)

48
Activity
  • Considering the Vision of Mr Price, conduct a
    PESTLE analysis for the business.

49
Events in external environment
  • Pre-empt what is going to happen, plan ahead
  • Environmental scanning - keeping a watchful eye
    on the economy that might affect your buss
  • NB to watch competitors

50
  • Competitors - what they do may give them edge or
    give good indication what not to do
  • Similar industries may also give clues
  • Developing eco look at other developing nations
  • Seasonal or occasional trends load shedding
    (devise better strategies)

51
Crisis in external environment
  • Crisis management part of every happenings in
    buss
  • Always unforeseen circumstances
  • Must have contingency plan to cope with
    happenings
  • 2 Strategies to cope with crisis management
  • A. risk management assessment strategy
  • B. decision tree strategy
  • Very complex (serve only as an introduction)

52
Risk management assessment strategy
  • Quantifying possible risks is not an exact
    science, but pre-deciding what would happen if
    is a good idea
  • Use this to assess potential physical or health
    risks, put plans is lace
  • Occupational Health and Safety Act No 85 of 1993
  • Employers must take precautions for all possible
    risks

53
  • Insurance cos use this to assess your risk
    profile
  • Factory would do risk assessment for occurrences
    such as fire, flood, labour unrest etc

54
Risk assessment plan
  • Who would be in charge in an emergency?
  • Critical duties (demarcation of safe areas, media
    liaison, crowd control etc
  • Emergency equipment such as spare phones, radios
    etc
  • Escape routes and procedures
  • Workers must be trained in emergency procedures

55
Decision tree
  • Used to graphically compare different options
    available when making a decision
  • Aim - Promote rational decision making and
    clarify available options
  • Benefit - each decision option is quantified, so
    each decision process can be calculated and a
    value is reached which shows the probability of
    success of each option

56
  • Simpler version is used for risk management
  • Scenarios are brainstormed with decisions noted
  • Case of a crisis, decision tree is used to apply
    to a specific situation
  • Because possibilities were analysed in a calm way
    when there was no crisis, it eliminates the
    possibility of overlooking an important option

57
Decision tree
58
Micro-, market and macro-environment
  • External env - ever changing demands that are out
    of buss control
  • Internal env - within control of management
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