ENVIRONMENTAL SCANNING AND INDUSTRIAL ANALYSIS

Must scan external environment to indentify possible opportunity and threats and internal for strength and
weakness.

Definition: Is the monitoring, evaluating and dissemehating of information from the external
environments to key people with in the corporation.

INDENTIFYING EXTERNAL ENVIRONMENTAL VARIABLES:

Societal and task environment

Influences long-run decision but do not touch directly

Economic factor-exchange of materials , money,energy,information

Technological – problem – solving inventions

Political – legal – allocate power and protecting laws and regulations

Socio – Cultural – regulate the morals values and customs of society

Task-Environment: Directly affects the corporation – Government, local, communities, supplier,

competitors, customers, creditors, employees/ labour unions, special – interest group, trade unions.

are Task environment is typically the industry with in which that firm operates.

Industry analysis refers to an in-dept examination of key factors with in a corporation task environment.
Both the Environment must be monitored to detect the strategic factors that are likely to have strong
impact on corporate success or failure.

Scanning the societal environment:

 No of strategical factors high in societal envt: Social value

 Role of business is primarily to make profits for the share holders

differences in trade regulation in repatriation of profits.(transfering profits from a foreign subsidiary to a

corporation headquarters)

MONITORING SOCEITAL TRENDS:

Economic part: Impact on business activity increase in interest rate and decrease in product

Technological part: Impact on multiple industries→ increase in computer →have computer

Development in technology had significant impact 2000-2010

 Portable information devices and electronic networking

 Fuel cells and alternatives and energy sources
 Precision forming – computerized managed crop →to suit land
  Virtual personal assistants- email, faxes and phone calls
 Genertically altered organisation – convergence of bio take agri→ new field of life sciences
 Smart, mobile robots→ factory work.

Economic Tech Political-legal Socio-cultural

GDP trends total govt spending Anti – trust Lifestyle charges

for R&D regulations
interest rates career expectations
Total industry Envtal protection
money supply spending for R&D laws tax laws consumer activism

inflation rates Focus of tech efforts special incentives rate of family

formation
unemployment levels patent protection foreign trade
regulations growth rate of
wage/price control new products population
attitudes toward
devaluation/revaluation new devt in tech age distribution of
foreign companies
population
energy availability &cost transfer from lab to laws on hiring and
marketable place promotion regional shift in
dispossable and
population life
discretionary income productivity stability of govt expectancies birth
improvements rates.
through automation
internet availability

Seven sociocultural trends that are helping to define what the world will soon look like are

 Increasing environmental awareness

 Growth of the seniors market
 Impact of generation & boomlet
 Decline of the mass market
  Changing place and location of life
 Changing household composition
 Increasing diversity of workforce and market

INTERNATIONAL SOCIETAL CONSIDERATIONS:

Multinational corporation(MNC) – a company with significant asserts and activities in multiple countries,
conducts its marketing, financial, manufacturing, and other functional activities…

Eg: European Union, North American free trade zone→ significant improve → rules of the game

Rupee conversations

 For strategy in particular location →company must scan the particular country right→ SWOT

Eg: successfully global industry in automobiles, tires, electronics, watches, a company established 3
developed areas of the world known as Traid→ Japan, north America, western Europe- because of high
valued good produced and consumed in there 3 countries.

Scanning the task environment

Economic Tech Political - legal Socio - cultural

Economic devt, Regulations on Tech Form of Govt Customs, norms,

Transfer values
percapita income political
climate Energy availability / languages
cost tax laws demographic
GDP trends
natural resources stability of govt. life expectancies
monetary and fiscal availability
policies Govt attitude toward social institutions
transportation foreign companies
network
un empt level status symbols
Regulations on foreign
skill level of work
currency ownership life styles
force
convertability
strength of oppositions Religions beliefs
patent – trademark
wage levels groups
protection literacy level
natural of legal system
internet availability human rights
competetion
Telecommunication
membership in
infracture
regional economic
associations.
SCANNING THE EXTERNAL ENVT:

Analysis of social environment

Economic Socio cultural Technological Political-legal factors

↓ ↓

Market Competitive
analysis
analysis

↓ ↓

↓ ↓
Supplier analysis
Community
analysis
→
←
Selection of strategic
factors Governmental
Interest group analysis
analysis  Opportunity
 Threats

INDENTIFYING EXTERNAL STRATEGIC FACTORS:

 Why do companies often respond differently to the environmental changes→ ability of manager
 No firm can sucessfully monitor all external factors
 The willingness to reject unfamiliar as well as negative information is called “strategic Myopia”
 Identifying a number of likely trends emerging in the societal and task environments →strategic
environmental issues→ if imp trends occur determine what impact and shows in near future.
  Assess the probability of these trends actually occuring from low to high
 Assess trends impact in corporation.

Probable impact on corporation

HIGH MEDIUM LOW

High High Medium

priority
HIGH Priority Priority

Probality of

occurence MEDIUM High Medium Low

priority priority
Priority
ISSUES PRIORITY
MATRIX
LOW Medium Low priority Low
Industry Analysis: priority Analysing the task
envt; priority

Industry: Is a group of firms producing a

similar product or service

Eg: soft drinks, electronic, devices financial services.

 Examinations of the important stakeholders groups such as suppliers, customers in a particular

corporations task environment is a part of industry analysis

POSTERS APPROACH TO INDUSTRY ANALYSIS:- MICHAEL PORTER

Potential
entrants
 Other
stake holders

Industry competitors
Rivalry among existing Buyers
firms

Suppliers

Substitute

Threat of new entrants:

No new companies sucessfully enter the indian IMCG Eg: interest cost advantage

Because of

Economies of sale: production and sales Eg; chips, microprocessor, high entry barriers network.

Product differentiation: Procter and gamble→ tide ,arial adding and promotion

Capital requirements: huge investments Eg: airplanes

Switching Cost: training cost reluctane

Access distribution channels: cost disadvantages independent of size

Government policy: access to raw materials Eg ; oil drilling sites.

RIVALRY AMONG EXISTING FIRMS: related to 7 factors

No of competitors: limited Eg: two wheeler and major home appliances

Rate of industry growth: only path to growth is take sales away from competitors Eg: Airlines

Product and service characteristics

Amount of fixed cost: Cheap standby fares whenever a plane has empty seats

Capacity : ↑selling prices ↓

Height of exit barrier diversity of rivals

BARGAINING POWER OF BUYERS:

Bulk purchase by buyer eg: industrial buyers

More alternative suppliers

Changing suppliers costs very little

Buyer earn less profits

Unimportant price and quality to final product Eg: electric wire for use in land

BARGAINING POWER OF SUPPLIERS:

Dominated by few companies (petroleum industry)

Product or service unique →switching cost (word processing s/w)

Substitute is not readily available.

RELATIVE POWER OF OTHER STAKEHOLDERS:

 Local communities, creditor ,TA, special- internet

Threat of Substitute products:

INDUSTRY EVOLUTION

 Industry evolution from services and stages growth through maturity to events decline.
 Industry life cycle is useful for explaining and predicting trends among the six forces driving
industry competition.
Eg: New product→ people buy→ regardless price fulfills unique need.

No firm has large market share and each firm save as small piece of the total market in competetion with
other Eg: chinese restaurant, financial institutions ,Transport services.

CATEGORIZING INTERNATIONAL INDUSTRIES:

Multi domestic industries →specific to each country or group of countries

Global industries → operates worldwide

Multi domestic ↔ global

MULTI DOMESTIC

industry in which companies Tailor their products and no the specific needs

of customers in a particular country

 Retailing
 Insurance
 Banking

GLOBAL
Industry in which companies manufacture and sell the same products with only minimum
adjustments made for individual countries around the world
 Automobiles
 Tires
 Television Sets

Factors to decide whether an industry primarily domestic or global

 Pressure for co-ordination within the multinational corporations operating in that industry
 Pressure for local responsiveness on the part of individual country markets.

International risk assessments:

 Big companies like TATA & ONGC, develop elaborate information networks & computerized
systems to evaluate risk.
 Small companies hire consultants such as:
  Political system stability index and business environment stability index to assess →economic &
business risk

STRATEGIC GROUPS
It is a set of business units or firms that pursue similar strategies with similar resources
categorizing firms in any one industry into asset of strategic groups is very useful as a way of
better understanding the competitive environment
Eg: MC Donalds& haldirams
↓
Match with burger king

STRATEGIC TYPES;

It is a category of firms based on a common strategic orientation & a combination of structure, culture &
process consistent with that strategy.

Defenders:-

Focus on improving the efficiencyof their existing operations

Eg: Aircel, Vodafone, Logitech, limited product lines, nokia, mouse, suppliers of Hyundai

Prospectors

Broad product lines “ focus on product innovation & marketing opportunities

Eg: electronic devices , automobiles, home appliances

Analyzer

Atleast 2 different products- market areas. 1 stable & another 1 variable.. stable→efficiency,
variable→innovation

Eg: Hindustan lever limited, HP, L&T

Reactors ;

Which is a consistent strategy- structure-culture

L/S responses to environmental pressure→ strategic changes

Eg: ,sathyam , Maytas, Tata motors

Hyper competition:-

Most industries are more complex & dynamic , multi domestic→ global.

Using key success factors to create an industry matrix:

Are those variables that can affect significantly the overall competitive positions of all companies within
any particular industry.

Eg: home appliances- low cost , varieties , r/s with retailers

Key success factors deal with entire industry and strategic factors→particular company.

COMPETITIVE INTELLIGENCE:-

Competitive intelligence is a formal program of gathering information on a companies competitors

Eg; few Indian companies

Eg: fully Japanese & European countries

Information on market conditions , govt regulations, , competitors information brokers.

Eg: india infolive.com

Industrial espionage (intelligence)- gathering techniques to get their information straight from their
competitors.

Forecasting:- techniques

Predicting for the future eg: tupperwear

a) Brain storming:- without criticism

b) Expert opinion
c) Delphi technique→ questionnaire
d) Statistical modeling → discover causal or atleast explanatory factors that link two or more time
series together
e) Scenario writing:- description of different likely futures presented in a narrative fashion.