BUS 1220 Week 4

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BUS 1220Week 4

• Environmental Scanning

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Environmental Scanning

• Environmental scanning
• The monitoring, evaluating, and disseminating of
  information from the external and internal
  environments to key people within the
  organization to avoid strategic surprise and
  ensure the long-term health of the firm.

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External Environment 4 Analytical Tools

• Model 1 Macro/Societal environment (PEST)
• General forces that do not directly touch on the
  short-run activities but often influence its
  long-run decisions.
• Model 2 Task Environment (5 forces 1)
• The collective strength of these forces in the
  task environment determines the ultimate profit
  potential in the industry. The corporation must
  assess the importance to its success of each of
  the six forces.
• Model 3 Issues Priority Matrix
• Used to help managers decide which environmental
  trends should be merel scanned (low priority) and
  which should be monitored as strategic factors
  (high priority)
• Model 4 Industry analysis (Group Map)
• An in-depth examination of key factors within a
  corporations task environment.

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What Environmental Forces Should Be Scanned?
Societal Environment (PEST)
Task Environment (Industry) Shareholders
Suppliers Governments Special-
Employees/ Interest
Labour Unions Groups
Customers
Competitors Creditors Trade
Associations Communities
Social-cultural Forces Political-Legal
Forces
Economic Forces Technological Forces
Internal Environment Structures Culture Resource
s
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1 Macro/Societal Environment

• PEST forces
• Political-legal forces
• Allocate power, provide laws and regulations
• Economic forces
• Regulate the exchange of materials, money,
  energy, and information
• Social-cultural forces
• Regulate values, mores, and customs
• Technological forces
• Generate problem-solving inventions

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Model 1 PESTMacro/Societal Environment
Important Variables
Economic GDP trends Interest rates Money
supply Inflation rates Unemployment
levels Wage/price controls Devaluation/revaluation
Energy availability and cost Disposable and
discretionary income
Technological Total government spending for
RD Total industry spending for RD Focus of
technological efforts Patent protection New
products New developments in technology transfer
from lab to marketplace Productivity improvements
through automation
Political-legal Antitrust regulations Environmenta
l protection laws Tax laws Special
incentives Foreign trade regulations Attitudes
toward foreign companies Laws on hiring and
promotion Stability of government
Social-cultural Lifestyle changes Career
expectations Consumer activism Rate of family
formation Growth rate of population Age
distribution of population Regional shifts in
population Life expectancies Birth rates
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Exercise 1 PEST Analysis of the athletic
footware industry

• Large Group Discussion
• Using the PEST framework, describe the key
  macro/societal variables that affect the athletic
  footware industry today
• Political-Legal Forces
• Economic Forces
• Social-Cultural Forces
• Technological Forces

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2 Task EnvironmentForces Driving Industry
Competition

MODEL 2 5 Forces 1 Michael Porters Forces
Driving Industry Competition
Relative Power Of Unions, Governments,
etc.
Other Stakeholders
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Model 2 Forces Driving Industry Competition

• Based on the model
• Strong Force a threat, because it is likely to
  reduce profits
• Weak Force an opportunity, because it may allow
  the company to earn greater profits

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Exercise 2 Porters 5 Forces 1 Analysis

• Large Group Discussion
• Using Porters 5 1 forces framework, assess the
  importance of each of the forces to the success
  of the athletic footware manufacturer Brooks
  today
• Threat of New Entrants
• Bargaining Power of Buyers
• Threat of Substitutes
• Bargaining Power of Suppliers
• Rivalry among Existing Firms
• Relative Power of Other Stakeholders
• Brooks Running - Men's Women's Running Shoes
  and Apparel

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Model 3 Issues Priority MatrixUsed to help
managers decide which environmental trends should
be merely scanned (low priority) and which should
be monitored as strategic factors (high priority)
Probable Impact on Corporation High Medium
Low
High Probability Of
Medium Occurrence Low
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Exercise 3 Issues Priority Matrix

• Small Group Exercise

• Choose several issues from the PEST and 5-Forces
  analysis (Ex 12)
• Assess the probability (low to high) of those
  issues actually occurring
• Assess the likely impact (low to high) of each
  issue
• Plot the issues on an Issues Priority Matrix
  (make your own!)

Probable Impact on Corporation High Medium
Low
High Probability Of
Medium Occurrence Low
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Model 4 Industry Analysis

• Industry
• A group of firms producing a similar product or
  service, such as soft drinks or financial
  services.
• Strategic Groups
• A set of business units or firms that pursue
  similar strategies with similar resources.

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Model 4 Industry Analysis (Group Map)
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Exercise 4 (Hand In)Industry Analysis (Group
Map)

• Identify key companies in the global athletic
  footware industry
• Plot companies on the group map
• Draw a circle around groups of companies that are
  closest to one another this is a strategic
  group. The size of the circle should reflect the
  relative market share of that group of companies
• Give each strategic group an appropriate name

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Exercise 4 Industry Analysis Group Map

• Place companies in the global athletic footware
  industry on the matrix
• Draw a circle around companies that are grouped
  together
• Develop an appropriate name for each strategic
  group

PRICE
Number of Models
Names ___________________________
___________________________