Review

BU111 SI SESSION
CONSTANCE YOUNG
AGENDA
External Analysis
Critical Success Factors
Diamond-E Framework
PEST
Porters 5 Forces

Entrepreneurship
Ethics
Social Factors
Demographics
EXTERNAL ANALYSIS

Process of scanning evaluating the external

environment to determine opportunities and
threats
2 Types
General

Specific
EXTERNAL ANALYSIS

What are the benefits of conducting an external

analysis?

What are the challenges?

EXTERNAL ANALYSIS
Benefit:
Makes managers proactive
Provides information used in planning
Helps organization get needed resources
Helps organization cope with uncertainty
Improves consistency and performance

Challenges
Rapidly changing environment hard to keep up with
Time consuming
Forecasts and trend analyses imperfect
CRITICAL SUCCESS FACTORS

What are the critical success factors?

 CRITICAL SUCCESS FACTORS
Critical Success Factor
Achieving Financial
Performance
Meeting Customer Needs
Building Quality Products &
Services
Encouraging Innovation &
Creativity
Gaining Employee
Commitment
Creating a distinctive
competitive advantage
How Why
generating required for business to be
income/revenue sustainable
reliability, variety, customers provide
timeliness, quality, safety revenue/sales
quality assurance Encourages customers to
buy products/services
Builds reputation
training programs Businesses should be
Incentives constantly changing and
Open forum adapting to the envnt
Incentive plans Employees are the driving
Training force behind the business
Participation in mgmt
decision-making
adding value To encourage customers
and outcompete competitors
DIAMOND-E FRAMEWORK

What are the components?

What is the purpose of the model?

DIAMOND-E FRAMEWORK
PEST

What does PEST stand for? Explain an element

for at least one of the components.
PEST
Definition/Elements Effects on Business
Political Laws, regulations Effects how business can operate
Taxes (i.e. wage laws, product labeling)
Trade Agreements Taxes create incentives
Political systems Political environment capitalist vs
Political Stability socialist
Economic Economic growth Influences costs, potential sales, and
Trade balance financial uncertainity
National Debt More government borrowing = less
Economic Stability funds for businesses = higher
Interest rates interest rates & taxes
Exchange rates Exchange rates affect trade balance
Social Customs, values, attitudes, Influence customer preference,
and demographics worker attitudes and behaviours,
standards of business conduct
Technology Internet Affects buying, selling,
communication, information access
(good and bad)
PORTERS 5 FORCES
PORTERS 5 FORCES
Suppliers
Fewer suppliers of an important input means you have no choice but to
accept the price demanded
Potential Entrants
New entrants can introduce new technologies or business models
Counter with high barriers to entry
Substitutes
More substitutes =more competition, puts ceiling on prices that can be
charged (bargaining power lies with consumer)
Buyers
Product you are selling is standardized or there are lots of substitutes for
it the bargaining power of the buyer increases because he has many other
sources to choose from other than you
Rivalry
Price competition and increased costs because similar type of firm,
consumers, growth rate same in entire industry
PORTERS 5 FORCES

Value
Predicts industry profitability
Helps determine whether a firm should enter a
particular industry
Helps determine whether and/or how it can carve
out an attractive position in that industry
ENTREPRENEURSHIP

Which of the following are characteristics of a

small business?
A) Is a dominant figure in the market
B) Consists of <100 employees
C) Generally owner-managed
D) A & C are both characteristics
E) B & C are both characteristics
ENTREPRENEURSHIP

identifying an opportunity and accessing

resources to capitalize on it
Small Business: owner-managed, not dominant in
market, <100 employees
New Venture: recently formed commercial
organization that sells goods/services
Paradigm Shift: abandoning traditional
assumptions about how things work or ought to be
and seeing what others do not
ENTREPRENEURSHIP

3 main steps in entrepreneurial process

Entrepreneur must match in knowledge,
experience, and interest
Opportunity good idea

Resources
SCREENING

Idea creates or adds value satisfies

previously unmet need or resolves problem that
customer is willing to pay for
Idea has a sustainable competitive advantage

Idea is marketable and financially viable

Marketsize? Key competitors? Barriers to entry?
Fragmented or growing
Safety Is there a low exit cost
ENTREPRENEURSHIP
Debt Financing
Obtaining resources with the promise
to pay back principle and interest
Ex: financial institutes, suppliers
Advantage maintain control of
business
Disadvantage legally required to pay
back principle & interest; must put up
goods for collateral
Equity Financing
Obtaining resources usually in
exchange for share of the business
Ex: savings, love money, angel
investors, venture capitalists
Advantage no interest
Disadvantage must share control and
profit of business
ETHICS
Ethics is:
A) What is good or wrong under the eye of the legal
system
B) An individuals perception and beliefs of what is
right and wrong
C) Based on an individuals personal values,
morals and the social context in which they occur
D) None of the above
E) All of the above
ETHICS

Beliefs about what is right and wrong or good

and bad; based on individuals personal values
and morals and the social context in which they
occur
Managerial Ethics: standards of behavior that guide
individual managers in their work
CATEGORIES OF ETHICAL BEHAVIOUR
Employees
Ex: Two equally able applicants, but one applicant is
female and is getting married. You do not hire her
because she mentioned hopes of starting a family
soon.
Towards the Organization
Ex: Accepting gifts from suppliers
Towards other Economic Agents (i.e. customers,
shareholders, competitors, suppliers, dealers)
Ex: Bribing a competitors employee for insider
information
ETHICS

The following are approaches to ethical

behaviour:
A) Utilitarian, Legal, Justice, Caring
B) Utilitarian, Legal, Equality, Caring
C) Utilitarian, Rights, Equality, Caring
D) Utilitarian, Rights, Justice, Caring
APPROACHES TO ETHICAL BEHAVIOUR

Utilitarian: Benefit the majority

Rights: must respect the rights of the individual

Justice: rewards and burdens must be

equitable
Caring: Must be consistent with peoples
responsibilities to each other
STAKEHOLDERS
Stakeholder Expectations Importance
Owners & Creditors ROI Provide Capital
Customers Quality, choice, Provide business; financial
communication, safety, performance
respect
Employees Fair pay, meaningful work, Driving force for business
safety, fair treatment,
training
Board of Directors Responsible mgmt In charge of management,
set general tone for
business
Natural Environment Responsible stewardship Reputation, resources
needed to run business
CORPORATE SOCIAL RESPONSIBILITY
way in which a business tries to balance its
commitments to its organizational stakeholders
how a business addresses ethical conduct at the
organizational level - collective code
two opposing views:
focus only on profits
actively considering other stakeholders

Areas:
natural environment, society, customers (health and
safety), customers, employees, investors
VALUE CREATION
DEMOGRAPHICS

Demography
Study of human population
Importance
People = market
Predict behaviour
# of people in group
Activity participation rate

Certainty and simplicity of data

COHORTS