The monitoring, evaluation, and dissemination of information relevant to the organizational development of strategy
Environmental scanning
Identifying External Environmental Variables
1. Natural environment: includes physical resources, wildlife and climate that are an inherent part of existence on Earth. form an ecological system of interrelated life
2. Societal environment: mankind’s social system that includes general forces that do not directly touch on the short-run activities of the organization, but that can influence its long-term decisions. These factors affect multiple industries and are as follows: economic, technological, political-legal and sociocultural.
3. Task environment: includes those elements or groups that directly affect a corporation and, in turn, are affected by it. These are governments, local communities, suppliers, competitors, customers, creditors, employees/labor unions, special-interest groups and trade associations.
4. Industry analysis: an in-depth examination of key factors within a corporation’s task environment
· includes physical resources, wildlife and climate that are an inherent part of existence on Earth
· form an ecological system of interrelated life
Natural environment
· ___mankind’s social system that includes general forces that do not directly touch on the short-run activities of the organization, but that can influence its long-term decisions.
· These factors affect multiple industries and are as follows: economic, technological, political-legal and sociocultural.
Societal environment
· includes those elements or groups that
directly affect a
corporation and, in turn, are affected by it.
· These are governments, local communities, suppliers, competitors, customers, creditors, employees/labor unions, special-interest groups and trade associations.
Task environment
An in-depth examination of key factors
within a corporation’s
task environment
Industry analysis
Scanning the Societal Environment: ____
· Monitoring trends in the societal and natural environments, sociocultural, technological, economic, ecological and political-legal forces
STEEP Analysis
8 Current Sociocultural Trends
Eight current sociocultural trends are transforming North America and the rest of the world:
• Increasing environmental awareness. Recycling and conservation are becoming more than slogans. Busch Gardens, for example, has eliminated the use of disposable styrofoam trays in favor of washing and reusing plastic trays.
• Growing health consciousness. Concerns about personal health fuel the trend toward physical fitness and healthier living. As a result, sales growth is slowing at fast-food “burgers and fries” retailers such as McDonald’s.
• Expanding seniors market. As their numbers increase, people over age 55 will become an even more important market.
• Impact of Millennials
• Declining mass market. Niche markets are defining the marketers’ environment. People want products and services that are adapted more to their personal needs.
• Changing pace and location of life. Instant communication via e-mail, cell phones, and overnight mail enhances efficiency, but it also puts more pressure on people
• Changing household composition. Single-person households, especially those of single women with children, could soon become the most common household type in the United States.
• Increasing diversity of workforce and markets. Between now and 2050, minorities will account for nearly 90% of population growth in the United States. Over time, group percentages of the total United States population are expected to change as follows: NonHispanic Whites—from 90% in 1950 to 74% in 1995 to 53% by 2050; Hispanic Whites—from 9% in 1995 to 22% in 2050; Blacks—from 13% in 1995 to 15% in 2050; Asians—from 4% in 1995 to 9% in 2050; American Indians—1%, with slight increase.
Technological Breakthroughs
Researchers at George Washington University have identified a number of technological breakthroughs that are already having a significant impact on many industries:
• Portable information devices and electronic networking.
• Alternative energy sources
• Precision farming
• Virtual personal assistants
• Genetically altered organisms
• Smart, mobile robots
Categories of Risk
1. Regulatory Risk
2. Supply chain Risk
3. Product and Technology Risk
4. Litigation Risk
5. Reputational Risk
6. Physical Risk
· ____ to an industry bring new capacity, a desire to gain market share and substantial resources
Threat of new entrants
an obstruction that makes it difficult for
a company to enter an industry
Entry barrier
Some of the possible barriers to entry are:
• Economies of scale. Scale economies in the production and sale of microprocessors, for example, gave Intel a significant cost advantage over any new rivals
• Product differentiation. Corporations such as Procter & Gamble and General Mills, which manufacture products such as Tide and Cheerios, create high entry barriers through their high levels of advertising and promotion
· Capital requirements. The need to invest huge financial resources in manufacturing facilities in order to produce large commercial airplanes creates a significant barrier to entry to any competitor for Boeing and Airbus.
• Switching costs. Once a software program such as Excel or Word becomes established in an office, office managers are very reluctant to switch to a new program because of the high training costs.
• Access to distribution channels. Small entrepreneurs often have difficulty obtaining supermarket shelf space for their goods because large retailers charge for space on their shelves and give priority to the established firms who can pay for the advertising needed to generate high customer demand.
• Cost disadvantages due to size. Once a new product earns sufficient market share to be accepted as the standard for that type of product, the maker has a key advantage.
• Government policies. Governments can limit entry into an industry through licensing requirements by restricting access to raw materials, such as oil-drilling sites in protected areas.
_____ in the production and sale of microprocessors, for example, gave Intel a significant cost advantage over any new rival.
Economies of scale.
•_____. Corporations such as Procter & Gamble and General Mills, which manufacture products such as Tide and Cheerios, create high entry barriers through their high levels of advertising and promotion
Product differentiation
_____. The need to invest huge financial resources in manufacturing facilities in order to produce large commercial airplanes creates a significant barrier to entry to any competitor for Boeing and Airbus.
Capital requirements
•____. Once a software program such as Excel or Word becomes established in an office, office managers are very reluctant to switch to a new program because of the high training costs.
Switching costs
•_____. Small entrepreneurs often have difficulty obtaining supermarket shelf space for their goods because large retailers charge for space on their shelves and give priority to the established firms who can pay for the advertising needed to generate high customer demand.
Access to distribution channels
•______. Once a new product earns sufficient market share to be accepted as the standard for that type of product, the maker has a key advantage.
Cost disadvantages due to size
•_____. Governments can limit entry into an industry through licensing requirements by restricting access to raw materials, such as oil-drilling sites in protected areas.
Government policies
· In most industries, corporations are mutually dependent.
· A competitive move by one firm can be expected to have a noticeable effect on its competitors and thus may cause retaliation.
Rivalry among Existing Firms