Analysing External Environment

7/31/2019 Analysing External Environment

1/18

1

BUSINESS STRATEGY - I

Course Code: 602

Prof. Sudip Bhattacharya Visiting FacultyE-Mail:[email protected] / 9433089728

Part -2


2/18


3/18

3

ENVIRONMENTAL SCANNING (ES)

The environment is the aggregate of conditions, events

& influences that affect an orgns way of doing things. Factors can be external as well as internal to orgn.

ES is a crucial function of strategic planning. As morerapid changes are taking place in environment, a

strategist has to do ES continuously to ensure fit withstrategic intent.

It is exploratory in nature.


4/18

4

EXTERNAL ENV. COMPONENTS - I

Political Environment

Government Stability

Government Attitude

Economic Model

Central State Co-alignment Subsidies & Protection

Licensing & Quotas


5/18

5

Economic Environment

GDP, Fiscal deficit Savings & Investment

Inflation & Interest Rates

Monsoon & Food stock reserves Economic Cycles

Capital Market

Forex Reserves Currency Stability

Infra-Structural Investments

EXTERNAL ENV. COMPONENTS - II


6/18

6

Social & Cultural Environment

Population Religious Composition Literacy Levels Inter-state immigration & Mobility Income Distribution Middle Class Customs, Beliefs, Rituals & Practices Language Barriers

Social Values & Attitude Age Distribution

EXTERNAL ENV. COMPONENTS - III


7/18

7

Technological Environment

Manufacturing Processes Flexible Production Systems

Obsolescence Rate

Patent Laws Research & Development

Backward Integration

Entry Barriers Nature of Competition

Enterprise Resource Planning (ERP)

EXTERNAL ENV. COMPONENTS - IV


8/18

8

Legal Environment

Corruption Transparency International 89th

Transparency RTI Act, 2005 Speedy Trials & Pending Cases

International Environment

Emerging Markets Forex Markets

War & Terrorism

FII & FDI Inflows

Mergers & Acquisition

Trends & Preferences

EXTERNAL ENV. COMPONENTS - V


9/18

9

ECONOMIC LIBERALISATION - I

New Industrial Policy (NIP)

Liberalising industrial licensing. FERA Liberalisation. MRTP Liberalisation.

Curtailment of PSUs. Encouraging Foreign Direct Investment.

Economic Reforms

Fiscal & Monetary Reforms. Banking Sector Reforms. Capital Market Reforms.


10/18

10

ECONOMIC LIBERALISATION - II

New Trade Policy (NTP)

Lowering import tariffs Abolition of import licenses Encouraging exports

Rupee Convertibility

Structural Adjustments Phasing out subsidies

Dismantling price controls PSU Disinvestments Exit Policy- VRS


11/18

11

DISCONTINUITY - I

Destabilization due to entrepreneurial freedom Cocoon of protection disappears

Diversification spree Existing notions of size shaken Industry structures change radically Economic Darwinism - Survival of the fittest

MNC Onslaught Enhancing stakes Power Equation JVs Technological Alliances Take-over threat, M&As

Hyper Competition

MNCs - Globalization Cheap Imports Access to technology

Challenges on technology front Competencies become technology based

Investment in R&D become inescapable


12/18

12

DISCONTINUITY - II Buyers exacting demands

Shortage to surplus Price competition

Life-style changes Stress on quality Consumerism

Compulsion to find export markets

Identifying competitive advantage Technological gap Global presence Depreciating Currency Exports

Corporate vulnerability

It is no longer business as usual Capital inadequacy Lack of product clout and brand power One product syndrome

Loss of monopoly


13/18

13

FIVE FORCES MODEL - PORTER

Threat of New Entrants

Threat of Substitutes

Bargaining

power ofSuppliers

Bargaining

power ofSuppliers

Bargaining

power ofCustomers

Competition from

Existing Players


14/18

14

PORTERS FIVE FORCES ANALYSIS - I

Competition from existing players

Introducing new product range.

Cutting prices of existing product range.

Offering better packages for existing

product range. Enhancing dealer networks.

Stronger market promotion, including

advertising. Backward or forward integration.

Upgrading technologies.


15/18

15

PORTERS FIVE FORCES ANALYSIS - II

Threat of New Entrants

Economies of scale Brand power

Product differentiation

Resource profile Locational advantages

Distribution channels

High switching costs Licensing & Quotas


16/18

16

PORTERS FIVE FORCES ANALYSIS - III

Bargaining power of Customers

Price elasticity of the product Nature of usage consumption or production

Customer spread

Customer age profile Repeat purchase

After sales support

Business margins


17/18

17

PORTERS FIVE FORCES ANALYSIS - IV

Bargaining power of Suppliers

Reduction in credit

Advances against order

Longer processing period

Low scope for vertical integration


18/18

18

PORTERS FIVE FORCES ANALYSIS - V

Threat of Substitutes

Source of latent competition timing

Substitute offering a price advantage and/orperformance improvement

Analysing External Environment

Documents

Transcript of Analysing External Environment