Basic Information about

Business Environment:

Environment Analysis, and Strategy

Formulation

Dipersiapkan Oleh:
Al Hasin
Source:
Marvin Washington

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 External Environmental Opportunities and Threats
Macroenvironment Industry Environment

The Internal Environment

The Firm’s Resources, Organizational Mission, and Goals

Strategy Formulation
Strategic Corporate Strategy
Formulation
Management Business Unit
PROCESS Strategy Formulation
Functional Strategy
Formulation
Feedback

Strategy Implementation
Organizational Structure
Leadership, Power, and Organizational Culture

Strategic Control
Strategic Control Process and Performance
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 What the Firm Might Do
External Environment
Five Forces Analysis

Sustainable
Competitive
Advantage
Internal Environment
Resources, Capabilities
and Core Competencies
What the Firm Can Do
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 Identify
Strategic
General & Task
Scan External
Environment Factors: Environment
•Opportunities
•Threats

Evaluate
Current:
•Mission
•Goals
SWOT
Analysis
•Strategies

Identify
Scan Internal
Strategic Internal
Factors:
Environment
•Strengths Environment
•Weaknesses 4
 SWOT Analysis
Threat

Weakness Strength
Organization

Opportunity 5
 External Analysis

Differentiate between external

environmental opportunities and threats
Understand the components of an
organization’s general environment
Understand the forces in Porter’s five
forces model

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What is an external analysis?

External analysis builds upon the notion

that organization’s are open systems.
 Often success is determined by the environment
around the organization and not the intelligence
inside the organization
Organization’s need to pay attention to
Opportunities and Threats
 Opportunities are positive external environmental
trends that improve the organization’s performance
 Threats are negative external environmental trends
that hinder the organization's performance

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 External Analysis

General
Environment

Technologi Economi
cal Specific Environment c
Industry-Competitors
Substit Current
ute Organization Rivalry
Product
sBargaini Potenti
ng
al
Power of Bargaini
Political- Supplier ng Entrant Demograp
Legal Power of s hic
s
Buyers

Sociocultu
ral
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 Economic Environment

Interest rates
Monetary exchange rates
Inflation rates
GNP or GDP
Consumer income, spending, and debt
levels
Unemployment levels
Workforce productivity
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 Demographic Environment

Gender
Age
Income levels
Ethnic makeup
Education
Family composition
Geographic location
Birth rates
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 Socio-Cultural Environment

Country’s culture
Social Values
 Traditions
 Values
 Attitudes
 Beliefs
 Tastes
 Patterns of behavior

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 Political Legal Environment

Federal, state, and local

 Laws
 Regulations
 Judicial decisions
 Political forces
Examples of legal changes
 Occupational Safety and Health Act of 1970
 Americans with Disabilities Act of 1990
 Family and Medical Leave Act of 1993
 North American Free Trade Agreement of 1993

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 Technical Environment

Communications
Computing
Transportation
Robotics
Biotechnology
Medicine and medical
Telecommunications
Consumer electronics
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 Industry’s environment
POTENTIAL ENTRANTS

Threat of New Entrants

Bargaining INDUSTRY Bargaining

Power COMPETITORS Power
of Suppliers of Buyers
SUPPLIERS BUYERS

Rivalry Among
Existing Firms

Threat of Substitute Products

or Services
SUBSTITUTES 14
 Industry Competitors

Opportunity Threat
 Few competitors  Numerous
 Industry sales growing competitors
 Low fixed or inventory  Industry sales
storage costs slowing
 Significant  High fixed or
differentiation inventory storage
 Minimal exit barriers costs
 No differentiation
 High exit barriers

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 Potential Entrants

Opportunity Threat
 Significant  No or low economies
economies of scale of scale
 Strong product  Weak product
differentiation differentiation
 Significant switching  Minimal switching
costs cost
 Controlled access to  Open access to
distribution channels distribution channels

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 Bargaining power of buyers

Opportunity Threats
 Buyer purchases  Buyer purchases large
small volumes volumes
 Purchases highly  Purchases standard or
differentiated and
unique undifferentiated
 Buyer’s profits are  Buyer’s profits are
strong weak
 Buyer can’t  Buyer can
manufacture products manufacture product
 Buyer’s have limited  Buyer has full
information information

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Bargaining Power of Supplier

Opportunity Threats
 Supplying industry is  Supplying industry
fragmented has a few companies
 Supplier’s products  Supplier products do
have substitutes not have substitutes
 Supplier’s products  Supplier’s products
aren’t differentiated are differentiated
 Minimal switching  Significant switching
costs in supplier’s costs
products

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 Substitute Products

Opportunities Threat
 There are no good  There are few
substitutes good substitutes
 There are several
not-so-good
substitutes

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 Examples of substitutes

Eyeglasses vs. Contact Lenses

Sugar vs. Artificial Sweeteners
Newspapers vs. TV vs. Internet
E-mail vs. Overnight Delivery

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 How do you do an external
analysis?
Find data
 Informal
 Customer comments
 Reading trade journals and general news media

 Talking with suppliers' sales representatives

 Formal
 External Information System (EIS)
 Market and customer surveys

Evaluate whether data is good or

bad
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Why do an external analysis?

Anticipate changes and plan accordingly

Provide information for Planning, Decision
making & Strategy formulation
Acquire and control needed resources
Make a difference with higher performance
Cautions
 Rapid environmental changes are difficult to keep up
with
 Amount of time that analysis can consume
 Forecasts and trend analyses are not actual fact

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 Internal Analysis

Understand organizational strengths and

weaknesses
Understand the relationship between
organizational resources, organizational
capabilities, core competencies, and
distinctive organizational capabilities
Understand the Value Chain
 Outsourcing
Take Aways

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 SWOT Analysis

Threat

Weakness Strength
Organization

Opportunity 24
 Capabilities
The Source of The Source of
Teams of
Resources
Core
Competencie
Resources s of
Sources
* Tangible Competitive
* Intangible Components of Advantage
Internal Analysis

Strategic
Sustained
Competitiveness Competitive The
Advantage Foundation
Above-Average
Returns of
Gained through
Core Competencies
The Pathway to 25
 Resources and capabilities that meet
these four criteria become a source of:

Valuable

Resources and Capabilities

Rare
Core Competencies
Costly to imitate

Nonsubstitutable

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 Core Competencies are the basis for a
firm’s

Competitive
advantage

Strategic
competitiveness Core Competencies
Ability to earn
above-average
returns

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 Outcomes from Combinations of the Criteria
for Sustainable Competitive Advantage
Costly to Nonsub- Competitive Performance
Valuable Rare
Imitate stitutable Consequences Implications
Below
Competitive
NO NO NO NO Average
Disadvantage
Returns

Competitive Average
YES NO NO YES/NO Parity Returns

Temporary Aver./Above
YES YES NO YES/NO Competitive Average
Advantage Returns
Sustainable Above
YES YES YES YES Competitive Average
Advantage Returns
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 What is an Internal Analysis

Identifies and evaluates resources,

capabilities, and core competencies
As such organizations need to
understand their
 Strengths are resources that an organization
possesses and capabilities that an organization has
developed that can be exploited and developed into
a sustainable competitive advantage
 Weaknesses are resources and capabilities that are
lacking or deficient and prevents an organization
from developing a sustainable competitive
advantage

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