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MBA671Dr. S. Borna
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Objectives
Tracking & Identifying Opportunities in the Macroenvironment
Demographic, Economic, Natural, Technological, Political, & Cultural Developments
Strategic Environmental Issue Strategic Environmental Issue ManagementManagement
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WHAT DO WE MEAN BY WHAT DO WE MEAN BY ENVIRONMENT?ENVIRONMENT?
The environment is the totality The environment is the totality of forces that are external of forces that are external and potentially relevant to the and potentially relevant to the particular agent.particular agent.
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Rapid Change of Rapid Change of Environmental ForcesEnvironmental Forces
1. Economy1. Economy
2. Technology2. Technology
3. Governmental Regulation3. Governmental Regulation
4. Cultural Environment4. Cultural Environment
5. Political Environment5. Political Environment
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To Identify Environmental To Identify Environmental Forces, Ask Two QuestionsForces, Ask Two Questions
1. Can I do anything about it?1. Can I do anything about it?
2. Does it matter relative to my2. Does it matter relative to my objective? objective?
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2. Environmental forces are difficult2. Environmental forces are difficult to control to control
3. Since environmental forces are 3. Since environmental forces are
diverse, it requires diversity of diverse, it requires diversity of
expertise to handle these forces.expertise to handle these forces.
Environmental ForcesEnvironmental ForcesCharacteristics:Characteristics:
1. 1. It is difficult to detect and interpret It is difficult to detect and interpret environmental forces environmental forces
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Layers of Product’s Layers of Product’s EnvironmentEnvironment
ProductProduct
Intraorganization EnvironmentIntraorganization EnvironmentTask EnvironmentTask Environment
Macro-EnvironmentMacro-Environment
GlobalGlobal
11
22
33
44
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Economic Environment
Income DistributionIncome Distribution
Subsistence economiesSubsistence economies
Raw-material-exporting economiesRaw-material-exporting economies
Industrializing economiesIndustrializing economies
Industrial economiesIndustrial economies
Savings, Debt, & Credit AvailabilitySavings, Debt, & Credit Availability
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Intraorganizational Intraorganizational EnvironmentEnvironment
Other CorporateOther CorporateDepartments and Departments and Personnel.Personnel.
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Task EnvironmentTask Environment
SuppliersSuppliers CompanyCompany
Marketing Marketing IntermediariesIntermediaries
MarketMarket
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MACROENVIRONMENTMACROENVIRONMENT
Cultural EnvironmentCultural EnvironmentEconomic EnvironmentEconomic EnvironmentTechnological Technological
EnvironmentEnvironmentNatural EnvironmentNatural Environment
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Demographic Environment
Worldwide Population GrowthWorldwide Population Growth
Population Age MixPopulation Age Mix
Ethnic MarketsEthnic Markets
Household PatternsHousehold Patterns
Educational GroupsEducational Groups
Geographical Shifts in PopulationGeographical Shifts in Population
Shift from Mass Market to MicromarketsShift from Mass Market to Micromarkets
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GLOBAL ENVIRONMENTGLOBAL ENVIRONMENT
International ChangesInternational Changes
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Political-Legal
Environment
Political-Legal
Environment
IncreasedLegislation
IncreasedLegislation
Special-InterestGroups
Special-InterestGroups
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NaturalEnvironment
Higher PollutionLevels
Higher PollutionLevels
Increased Costsof Energy
Increased Costsof Energy
Shortage of Raw MaterialsShortage of
Raw Materials
Changing Roleof GovernmentChanging Roleof Government
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Accelerating Paceof Change
Accelerating Paceof Change
Unlimited Opportunitiesfor Innovation
Unlimited Opportunitiesfor Innovation
IncreasedRegulation
IncreasedRegulation
Issues in the TechnologicalEnvironment
Issues in the TechnologicalEnvironment
VaryingR & D Budgets
VaryingR & D Budgets
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Social/Cultural Environment
OfOfOrganizationsOrganizations
OfOfNatureNature
OfOfOneselfOneself
OfOfSocietySociety
OfOfthe Universethe Universe
OfOfOthersOthers
ViewsThat Express
Values
ViewsThat Express
Values
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Social/Cultural Environment
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Strategic Environmental Strategic Environmental Issue ManagementIssue Management
1. Environmental Scanning1. Environmental Scanning2. Key Environmental Issue 2. Key Environmental Issue IdentificationIdentification3. Impact Evaluation3. Impact Evaluation4. Formulation of a Response 4. Formulation of a Response StrategyStrategy
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Alternative approaches to Alternative approaches to environmental Scanningenvironmental Scanning
Nature of Scanning Activity:Nature of Scanning Activity: IrregularIrregular Ad-hoc studiesAd-hoc studies RegularRegular Periodically updated studiesPeriodically updated studies ContinuosContinuos Structured data collection and Structured data collection and processing system processing system
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Scope of ScanningScope of Scanning
Specific EventsSpecific Events
Selected ElementsSelected Elements
Broad range of environmental Broad range of environmental componentscomponents
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Impetus for scanningImpetus for scanning
Crisis initiatedCrisis initiated
Problem areasProblem areas
Planning processPlanning process
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Organizational ResponsibilityOrganizational Responsibility
Specially designed teamsSpecially designed teams
Various staff servicesVarious staff services
Environmental Scanning UnitEnvironmental Scanning Unit
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Which of these three environmentalWhich of these three environmentalscanning approaches is suitablescanning approaches is suitablefor your organization?for your organization?
Answer:Answer:
Depends on the firm’s potentialDepends on the firm’s potentialvulnerability to environmentalvulnerability to environmentalforcesforces
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Key environmental IssueKey environmental Issue IdentificationIdentification
Somehow the system (the firm)Somehow the system (the firm)must determine:must determine:
1. The 1. The probabilityprobability that an issue that an issue can materialize into a threatcan materialize into a threat or an opportunity;or an opportunity;2. The degree of 2. The degree of impactimpact it can have it can have on the firm.on the firm.
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KEY ENVIRONMENTAL ISSUE KEY ENVIRONMENTAL ISSUE IDENTIFICATIONIDENTIFICATION
11 99
66 22
PROBABILITYPROBABILITY
HIGHHIGH LOWLOW
HIGHHIGH
LOWLOW
IMPACTIMPACT
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Few examples:Few examples:
1. Interstate barriers to bank are1. Interstate barriers to bank are loweredlowered6. Antitrust actions are taken against6. Antitrust actions are taken against large bankslarge banks9. Government regulation favors9. Government regulation favors non-bank financial institutionsnon-bank financial institutions2. Technological breakthroughs occur2. Technological breakthroughs occur in information processingin information processing
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Impact EvaluationImpact Evaluation
You have to answer the followingYou have to answer the followingquestions:questions:
1. Does the issue represents a threat1. Does the issue represents a threat or opportunity?or opportunity?2. How 2. How significantsignificant will its impact on will its impact on the performance of the firm?the performance of the firm?
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3. What is the likely timing of the3. What is the likely timing of the impactimpact4. What specific marketing areas 4. What specific marketing areas will be affected?will be affected?
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Formulation of a Response Formulation of a Response
StrategyStrategy
Reactive StrategyReactive Strategy
Proactive StrategyProactive Strategy
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Response Strategies to Response Strategies to Environmental Issues:Environmental Issues:
1. 1. Opposition Opposition (N. Rifle A.) (N. Rifle A.)2. 2. AdaptationAdaptation (usually compulsory (usually compulsory ex. Auto industryex. Auto industry mandatory fuelmandatory fuel standards)standards)3. 3. Offensive StrategyOffensive Strategy Waste Management Inc.:Waste Management Inc.: How to improve waste disposal?How to improve waste disposal?
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4. 4. Redeployment StrategyRedeployment Strategy:: Example Tobacco Industry andExample Tobacco Industry and diversificationdiversification
5. 5. Contingency StrategyContingency Strategy:: If saccharin is band in drugsIf saccharin is band in drugs foods, soft drinks, etc.foods, soft drinks, etc.
6. 6. Passive strategyPassive strategy: (do nothing: (do nothing wait and see strategy)wait and see strategy)
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Review
Tracking & Identifying Opportunities in the Macroenvironment
Demographic, Economic, Natural, Technological, Political, & Cultural Developments