Chap2_External Env analysis Strategic Management

Chap2_External Env analysis Strategic Management

1. Module 02: ExternalEnvironmentalAnalysis

2. ➢Classification of Firm’s environment
➢Constituents of Firm’s macro, micro and relevant environment
➢PESTLE analysis
➢Framework for assessing impact of opportunities and threats
Concepts Covered
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3. External
Analysis
Internal
Analysis
Long-Term
Objectives
Generate,
Strategic
Alternatives
Evaluate,
Select
Strategy
Implement
Strategy:
Resource
Allocation
&Structure
Evaluate
Performance
& feedback
Vision
&
Mission
Comprehensivestrategic management model
Implement
Strategy:
Leadership
Functional
Policies
3

4. Classification of Firm’s Environment
Mega Environment
Micro
Environment
Relevant
Environment
Internal
Environment
Firm
•Why environmental analysis is important?
4

5. Constituents of Mega Environment
Political Economic Technological SocialRegulatory
Mega Environment
•Environment →International, regional, national
•Global economic environment, regional political environment, national social environment
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6. PESTLE Matrix
6

7. Marketing
Intermediaries
Market
Types
Market
Demand
CompetitionSuppliers
Micro Environment
Availability of
Skilled
Manpower
Industrial
Relations
Climate
Regulatory
Provisions
Financial
Institution
Constituents of Micro Environment
•Industry environment →Automobile, steel, chemicals, oil and gas, textile, banking, software
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8. Organisational Environment
Firm
Competitors
Community
Suppliers
Customers
8

9. I
Major Threat
II
Moderate Threat
III
Moderate Threat
IV
Minor Threat
High
Seriousness
Low
High Low
Probability of Occurrence
Threat Matrix –Assessing Impact
➢Assessing Impact of Opportunities & Threat
2. Environmental Analysis
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10. I
Very Attractive
II
Moderately Attractive
III
Moderately Attractive
IV
Least attractive
High
Attractiveness
Low
High Low
Probability of Occurrence
Opportunity Matrix –Assessing Impact
➢Assessing Impact of Opportunities & Threat
2. Environmental Analysis
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11. ➢Impact Matrix
2. Environmental Analysis
Trends
(Opportunities &
Threats)
Probability of
occurrences
Impact on Strategies
S1 S2 S3 S4
T1 (Economic)
T2 (Social)
T3(Technological)
T4(Political, Legal)
Impact scale:
+2 Highly favourable impact
+1 Moderately favourable impact
0 No impact
-1 Moderately unfavourable impact
-2 Highly unfavourable impact
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12. Related to a Company
•Annual Reports
•Chairman’s speeches
•Company’s advertisement
•Company’s house journals
•Company’s executives
•NSE, BSE –the relevant volumes
Related to the environment
•Annual issues of leading commercial
periodicals
•Competition Act, 2002 related Publications
•Articles published in leading newspapers,
journals related to the industry of the
company under study
•Hindu Annual Review
2. Environmental Analysis
Some useful Sources of Information on Indian Business Environment
Related to the environment (contd.)
•Times of India Directory
•Reserve Bank’s Annual Reports
•Publications of Chamber of Commerce,
trade associations and export councils
•Commerce Annual on public sector
undertakings
•The Economic Scene published by TECES
•Data India
•Business India, India Today, Business
World
•Journals like Commerce, Economic &
Political Weekly, Journal of Industry and
Trade, Industrial Times, etc.
•Guidelines to industries
•Newspapers like Economic Times,
Financial Express, etc.
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13. Conclusion
•Thebusinessenvironmentisever-changinganddynamicinnature.Anorganizationneedsto
scantheexternalenvironmentfornewopportunitiesandthreatsinasystematicand
continuousmanner.Thiswouldhelptheorganizationtosustainandgaincompetitive
advantage.
•Thevariouscomponentsandframeworkforexternalenvironmentalanalysishavebeen
discussedinthischapterincludingclassificationoffirm’senvironmentsuchasmega-,micro-,
andrelevantenvironment;PESTLEmatrixandotherframeworksforassessmentof
environmentalopportunitiesandthreatsforanorganization.
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14. References
1.CraftingandExecutingStrategy–TheQuestforCompetitiveAdvantage,ConceptsandCases,
Thomson&Strickland,McGraw-HillEducation.
2.ExploringStrategy–TextandCases,GerryJohnson,RichardWhittington,KevanScholes,Duncan
Angwin,andPatrickRegner,Pearson,10thedition.
3.StrategicManagement–PlanningforDomesticandGlobalCompetition,JohnPearce,R.Robinson
andAmitaMital,McGraw-HillEducation,14
th
edition.
4.StrategicManagement–AnIntegratedApproach,CharlesHill&GarethJones,CengageLearning,
9thedition.
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