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 Importance of environment
= External factors influence a firm͛s choice of
direction & action
= Ultimately it will influence the organizational
structure and internal processes
= Scan the external environment to identify the
possible opportunities & threats is essential
one
= It is used to avoid strategic surprises & ensure
long term health of the organization
 External environment
= Remote environment

= Industry environment ( Global & Domestic)

= Operating environment ( Global & Domestic)

    
 

  




  




 

 

 
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 Economic factors
= Gross domestic product
= Inflation rate
= Capital output ratio
= Balance of trade
= WPI & CPI
= Interest rate
= Per capita income
= Money supply
 Social factors
= Beliefs, values, attitudes, opinions, life style
= It is developed from cultural, ecological,
demographic, religious, educational & ethnic
conditioning
= It is dynamic
= Expectation from business and social values
= Ethical standard
= Example entry of women in labor market
= Consequences
 aechnological factors
= Government spending on R & D
= Industry spending on R & D
= Patent protection
= New products
= Commercialization & transfer from lab to
market place
= Productivity improvement
 Political factors
= Environment protection laws
= aax laws
= Special incentives and subsidies
= Foreign trade regulations
= Attitude towards foreign companies
= Labor and recruitment laws
= Stability of government
 Ecological factors
= Relationship among human beings & other
living things and air, water, soil
= Pollution
= Loss of habitat and bio-diversity
= Radiation - ozone depletion
= Global worming
 SWOa Analysis
= Strengths
= Weaknesses
= Opportunities
= ahreats
 Industry environment
= Michael E Porter five forces concepts
= Entry barriers
= Determinants of supplier power
= Determinants of buyer power
= Determinants of substitution threat
= Rivalry determinants
ahe purpose of SWOa Analysis
= It is an easy-to-use tool for developing an
overview of a company͛s strategic situation
It forms a basis for matching your company͛s
strategy to its situation
 SWOa is the starting point
= It provides an overview of the strategic
situation.
= It provides the ͞raw material͟ to do more
extensive internal and external analysis.
 Opportunities
= An OPPORaUNIa is a chance for firm
growth or progress due to a favorable
juncture of circumstances in the business
environment.
= Possible Opportunities:
Emerging customer needs
Quality Improvements
Expanding global markets
Vertical Integration
 ahreats
= A a
REAa is a factor in your company͛s
external environment that poses a danger
to its well-being.
= Possible ahreats:
New entry by competitors
Changing demographics/shifting demand
Emergence of cheaper technologies
Regulatory requirements
Opportunities and ahreats form a
basis for EXaERNAL analysis
= By examining opportunities, you can
discover untapped markets, and new
products or technologies, or identify
potential avenues for diversification.
= By examining threats, you can identify
unfavorable market shifts or changes in
technology, and create a defensive posture
aimed at preserving your competitive
position.
 ahe purpose of
Five-Forces Analysis
= ahe five forces are environmental forces
that impact on a company͛s ability to
compete in a given market.
= ahe purpose of five-forces analysis is to
diagnose the principal competitive
pressures in a market and assess how
strong and important each one is.
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 ahe Five Forces are Unique to
our Industry
= Five-Forces Analysis is a framework for
analyzing a particular industry.
et, the five forces affect all the other
businesses in that industry.
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 Operating Environment
= Competitive or task environment
= Market share
= Breadth of product line
= Effectiveness of sales distribution
= Price competitiveness
= Sales promotion activities
= Location
= Productive capacity
= Good will
= ears of experience
= Raw material costs
= Financial position
= Relative product quality
= R & D advantages
= Caliber of personnel
= General image
= Customer profile
= Patent and copy rights
= Union relations
= aechnological position