BUSINESSBUSINESS

““BUSINESS MAY BE UNDERSTOOD AS BUSINESS MAY BE UNDERSTOOD AS THE ORGANISED EFFORTS OF THE ORGANISED EFFORTS OF ENTERPRISES TO PROVIDE ENTERPRISES TO PROVIDE CONSUMERS WITH GOODS & CONSUMERS WITH GOODS & SERVICES FOR A PROFIT”SERVICES FOR A PROFIT”

ENVIRONMENTENVIRONMENT

““ENVIRONMENT REFERS TO ALL ENVIRONMENT REFERS TO ALL EXTERNAL & INTERNAL FORCES EXTERNAL & INTERNAL FORCES WHICH HAVE A BEARING ON THE WHICH HAVE A BEARING ON THE FUNCTIONING OF BUSINESS”FUNCTIONING OF BUSINESS”

Business enterprises cannot function in Business enterprises cannot function in isolationisolation

Open systems interact with their Open systems interact with their environmentenvironment

Society and business enterprises are Society and business enterprises are mutually dependentmutually dependent

Relationship between society and Relationship between society and business enterprises takes place in a business enterprises takes place in a changing environment.changing environment.

BUSINESS OBJECTIVES

VISIONVISION

INFOSYS: “TO BE A GLOBALLY INFOSYS: “TO BE A GLOBALLY RESPECTED CORPORATION THAT RESPECTED CORPORATION THAT PROVIDES BEST OF BREED PROVIDES BEST OF BREED BUSINESS SOLUTIONS, BUSINESS SOLUTIONS, LEVERAGING TECHNOLOGY, LEVERAGING TECHNOLOGY, VENDORS & SOCIETY AT LARGE”VENDORS & SOCIETY AT LARGE”

MISSIONMISSION

INFOSYS: “TO ACHIEVE OUR INFOSYS: “TO ACHIEVE OUR OBJECTIVES IN AN ENVIRONMENT OBJECTIVES IN AN ENVIRONMENT OF FAIRNESS, HONESTY & OF FAIRNESS, HONESTY & COURTESY TOWARDS OUR COURTESY TOWARDS OUR CLIENTS, EMPLOYEES, VENDORS & CLIENTS, EMPLOYEES, VENDORS & SOCIETY AT LARGE”SOCIETY AT LARGE”

BUSINESS OBJECTIVESBUSINESS OBJECTIVES

PROFIT MAXIMISATIONPROFIT MAXIMISATIONMARKET SHARE MAXIMISATIONMARKET SHARE MAXIMISATIONCORPORATE GROWTHCORPORATE GROWTHSURVIVALSURVIVAL

Business environment consist of all those Business environment consist of all those factors that have a bearing on the factors that have a bearing on the business.business.

Like the survival & success of individual Like the survival & success of individual depends on his innate capacity like depends on his innate capacity like physiological factors to cope with physiological factors to cope with environment similarly environment similarly BUSINESSBUSINESS firm firm depends on its innate strength like depends on its innate strength like Resources (Physical ,Human, Financial) Resources (Physical ,Human, Financial)

BUSINESS STRATEGYBUSINESS STRATEGYStrategy implementationStrategy implementation involves: involves:

Allocation of sufficient resources Allocation of sufficient resources (financial, personnel, time, technology (financial, personnel, time, technology support) support)

Establishing a chain of command or Establishing a chain of command or some alternative structure (such as some alternative structure (such as cross functional teams) cross functional teams)

Assigning responsibility of specific tasks Assigning responsibility of specific tasks or processes to specific individuals or or processes to specific individuals or groupsgroups

CONT……..CONT…….. Involves managing the process which Involves managing the process which

includes monitoring results, comparing to includes monitoring results, comparing to benchmarks and best practices, evaluating benchmarks and best practices, evaluating efficiency of the process and making efficiency of the process and making adjustments to the process as necessary. adjustments to the process as necessary.

When implementing specific programs, this When implementing specific programs, this involves acquiring the requisite resources, involves acquiring the requisite resources, developing the process, training, process developing the process, training, process testing, documentation, and integration with testing, documentation, and integration with (and/or conversion from) legacy processes. (and/or conversion from) legacy processes.

COMPONENTS OF THE BUSINESS COMPONENTS OF THE BUSINESS ENVIRONMENTENVIRONMENT

The survival of business depends onThe survival of business depends on

2 set of factors :-2 set of factors :-

a) External Factors a) External Factors Micro environmentMicro environment Macro environmentMacro environment

b) Internal Factors b) Internal Factors

External factors Analysis External factors Analysis Business Opportunity & Threats Business Opportunity & Threats

Internal Factors AnalysisInternal Factors Analysis Strengths & Weakness Strengths & Weakness

THE MICRO-ENVIRONMENTTHE MICRO-ENVIRONMENT

Comprises all those organisations and Comprises all those organisations and individuals who directly or indirectly affect individuals who directly or indirectly affect the activities of a company. It includes:the activities of a company. It includes:CustomersCustomers IntermediariesIntermediariesSuppliersSuppliersOther stakeholdersOther stakeholders

THE MACRO-ENVIRONMENTTHE MACRO-ENVIRONMENT

Comprises general forces and trends Comprises general forces and trends rather than specific organisations:rather than specific organisations:Macro-economic environmentMacro-economic environmentPolitical environmentPolitical environmentSocial and cultural environmentSocial and cultural environmentDemographic environmentDemographic environmentTechnological environmentTechnological environment

ENVIRONMENTAL SCANNINGENVIRONMENTAL SCANNING

Identification and forecasting phenomena Identification and forecasting phenomena in the environmentin the environment

Ongoing environmental scanning is Ongoing environmental scanning is essential for strategy formulationessential for strategy formulation

Enterprises continuously engage in Enterprises continuously engage in identifying and forecasting opportunities identifying and forecasting opportunities and threatsand threats

Enterprises need to proactively or Enterprises need to proactively or reactively respond to changing reactively respond to changing conditions in the environmentconditions in the environment

Various sources of information are Various sources of information are available to assist with scanning available to assist with scanning

External EnvironmentExternal Environment

MACRO MACRO External Business External Business

EnvironmentEnvironment

Technology Environment Technology Environment Need to spend on R&DNeed to spend on R&DFast changing TechnologyFast changing TechnologyHigh expectation of consumers.High expectation of consumers.Computers in the OfficeComputers in the OfficeElimination of JobsElimination of JobsSystem complexitySystem complexity

SOCIAL-CULTURAL SOCIAL-CULTURAL ENVIRONMENT ENVIRONMENT

How Consumers ,HH,& communities behave & How Consumers ,HH,& communities behave & their beliefs e.g change in attitude towards their beliefs e.g change in attitude towards health health

Public Service Provision - Roads, Water, etc..Public Service Provision - Roads, Water, etc.. Welfare Welfare Social SecuritySocial Security Labor MovementLabor Movement Diverse WorkforceDiverse Workforce Public Sector UnionsPublic Sector Unions

People’s attitude to business People’s attitude to business Caste systemCaste system

ECONOMIC ENVIRONMENT ECONOMIC ENVIRONMENT

Overall Economic ConditionsOverall Economic Conditions Infrastructure Infrastructure GDP, Unemployment Rate, Stock MarketGDP, Unemployment Rate, Stock MarketPer capita income Per capita income Population Population AgricultureAgriculture

Global / International Global / International Environment Environment

Globalization of IndustryGlobalization of Industry Improving qualityImproving qualityDeciding which market to enter and how to Deciding which market to enter and how to

enterenter International TradeInternational TradeEnd of CommunismEnd of CommunismWars, International StrifeWars, International Strife

Natural EnvironmentNatural EnvironmentAgriculture depends on natureAgriculture depends on natureTransport & communication depends on Transport & communication depends on

geographical factorsgeographical factorsTrade between two regions depending Trade between two regions depending

on their geographical factors on their geographical factors

Micro Micro External Business External Business EnvironmentEnvironment

SuppliersSuppliersSmooth functioning of businessSmooth functioning of businessMultiple source of supply helps to Multiple source of supply helps to

reduce riskreduce risk

CustomersCustomersWhole n soul of businessWhole n soul of businessSegmentation Segmentation Pull strategy from competitorsPull strategy from competitors

IntermediariesIntermediariesLink b/w Company n Customers Link b/w Company n Customers Assist company in stocking & moving Assist company in stocking & moving

goods from their origin place to goods from their origin place to destinationdestination

Assist company in promotions activities Assist company in promotions activities

CompetitorsCompetitors

FinancersFinancers

Internal FactorsInternal Factors

INTERNAL ENVIRONMENTINTERNAL ENVIRONMENT

Mission & ObjectiveMission & Objective Business domain of company, priorities, direction of Business domain of company, priorities, direction of

development ,business philosophy ,business policy development ,business philosophy ,business policy are guided by mission & objective of the company .are guided by mission & objective of the company .

E.g. Ranbaxy ‘s mission statement “E.g. Ranbaxy ‘s mission statement “To become a To become a research based international pharma company “research based international pharma company “

E.g. E.g. Arvind mills mission statement ” To achieve Arvind mills mission statement ” To achieve dominance in select businesses built around our dominance in select businesses built around our core competencies through continuous product and core competencies through continuous product and technical innovation ,customer orientation and focus technical innovation ,customer orientation and focus on cost effectiveness “on cost effectiveness “

MANAGEMENT STRUCTURE & MANAGEMENT STRUCTURE &

NATURENATUREOrganizational structure ,the Organizational structure ,the

composition of BOD ,extent of composition of BOD ,extent of professionalisation of management are professionalisation of management are important factors influencing business important factors influencing business decision .decision .

BOD is highest decision making body BOD is highest decision making body which sets the direction for the which sets the direction for the development development

Internal Power RelationshipInternal Power Relationship

Factors like the amount of support the top Factors like the amount of support the top management enjoys from different levels of management enjoys from different levels of employees ,shareholder and BOD have employees ,shareholder and BOD have important influence on decision and their important influence on decision and their implementation.implementation.

Human ResourcesHuman Resources – –

Skills ,Quality ,Morale, Commitment ,Attitude Skills ,Quality ,Morale, Commitment ,Attitude could contribute to Strength & Weakness of an could contribute to Strength & Weakness of an organization . organization .

Company image Company image The image of company matters while raising The image of company matters while raising

finance ,forming joint ventures or other finance ,forming joint ventures or other alliances ,entering purchase or sale contracts alliances ,entering purchase or sale contracts ,launching New Products.,launching New Products.

Miscellaneous Factors.Miscellaneous Factors. Physical Assets & Facilities like production Physical Assets & Facilities like production

capacity ,technology ,distribution capacity ,technology ,distribution logistics .are among the factors which logistics .are among the factors which influences the competitiveness of a firm .influences the competitiveness of a firm .

Cont ……..Cont ……..e.g. Quality important aspect in Pharma e.g. Quality important aspect in Pharma

Industry particularly for global player Industry particularly for global player R & D R & D and Technologicaland Technological capability capability

determine company’s ability todetermine company’s ability to innovate & compete.innovate & compete.

Marketing resource quality of work force Marketing resource quality of work force (sales team) ,brand ,logistics have a (sales team) ,brand ,logistics have a direct bearing on marketing efficiency .it direct bearing on marketing efficiency .it also helps in brand extension, New also helps in brand extension, New Product development Product development

Financial factorsFinancial factors

Financial policies ,financial positions capital Financial policies ,financial positions capital structure are also important internal structure are also important internal environment affecting business environment affecting business performance ,strategies and decisions performance ,strategies and decisions

ANSOFF MODELANSOFF MODEL(PRODUCT / MARKET GROWTH (PRODUCT / MARKET GROWTH

MODEL) MODEL)

FOUR TYPES OF GROWTH:FOUR TYPES OF GROWTH: MARKET PENETRATIONMARKET PENETRATION MARKET DEVELOPMENTMARKET DEVELOPMENT PRODUCT DEVELOPMENTPRODUCT DEVELOPMENT DIVERSIFICATIONDIVERSIFICATION

IGOR ANSOFF’S PRODUCT/MARKET EXPANSION GRIDIGOR ANSOFF’S PRODUCT/MARKET EXPANSION GRID

Current Product New Product

Current

Market

New

Market

Market

Penetration

Market

Development

Product Development

Diversification

Market Penetration (Current Market –Current Market Penetration (Current Market –Current Product):Product):

Encourage current customers to buy more.Encourage current customers to buy more. Attract competitors customers to switch to Attract competitors customers to switch to

its brandits brand Convince non users who resemble current Convince non users who resemble current

users to start using the company’s productusers to start using the company’s productE.g - Pepsodent, ColgateE.g - Pepsodent, Colgate

Market Development:Market Development: Geographical expansionGeographical expansion Channel expansion : If only present in Channel expansion : If only present in

consumer market, then look at institutional consumer market, then look at institutional sales also. Geographical expansion: Opening sales also. Geographical expansion: Opening retail outlets in other areas.retail outlets in other areas.e.g --- Mc-Donalds, Shoppers’ Stope.g --- Mc-Donalds, Shoppers’ Stop

Product development Strategy :Product development Strategy :

Introduce products with new featuresIntroduce products with new features

Introduce different quality versionsIntroduce different quality versions

Alternative product forms Introduce Alternative product forms Introduce products with new featuresproducts with new features

e.g – e.g – LG in colour TVs– Flat TVs, Plasma TVs, LG in colour TVs– Flat TVs, Plasma TVs,

LCD TVs, Projection TVsLCD TVs, Projection TVs..

Diversification StrategyDiversification Strategy

Vertical Integration (V I) : When an organization starts Vertical Integration (V I) : When an organization starts making new products that serve its own needs , vertical making new products that serve its own needs , vertical integration takes place.integration takes place.

V I are of two types--- V I are of two types--- Forward and Backward integrationForward and Backward integration Backward integration : When a company starts making Backward integration : When a company starts making

some or all of its material requirements (Inputs ) it is some or all of its material requirements (Inputs ) it is backward integration.backward integration.

Forward Integration : moves the company nearer to the Forward Integration : moves the company nearer to the ultimate consumer.ultimate consumer.

E.g If Tata Indica starts making tyres --- backward E.g If Tata Indica starts making tyres --- backward integrationintegration

If Sona Steering starts making cars--- its forward If Sona Steering starts making cars--- its forward integrationintegration

Backward Integration: -- Backward Integration: --

BenefitsBenefits

1)1) It ensures smooth supply of materialsIt ensures smooth supply of materials

2)2) Better control on quantity and quantity.Better control on quantity and quantity.

3)3) Results in economies of scaleResults in economies of scale

DisadvantagesDisadvantages

1)1) The cost of making may be higher then the The cost of making may be higher then the cost of buyingcost of buying

2)2) Exiting the business in future may be more Exiting the business in future may be more difficultdifficult

Forward Integration :Forward Integration :

Benefits:Benefits:

1)1) It creates a captive demand for the It creates a captive demand for the productproduct

2)2) It generates additional profits .It generates additional profits .

e.g Raymond’s getting into ready made e.g Raymond’s getting into ready made shirts –(Park Avenue, Parx)shirts –(Park Avenue, Parx)

Disadvantages :Disadvantages :

1)1) The new business may not succeedThe new business may not succeed

Horizontal Integration : Integration at the Horizontal Integration : Integration at the same level of business – same level of business –

e.g HLL buying TOMCOe.g HLL buying TOMCO

Or sister concerns of the same company Or sister concerns of the same company can be combined into one entity.can be combined into one entity.

Three types of diversification:--Three types of diversification:--

1)1) Concentric Diversification StrategyConcentric Diversification Strategy : : company makes products that have company makes products that have technological and / or marketing synergies technological and / or marketing synergies with existing product lines , even though with existing product lines , even though the product may appeal to a new class of the product may appeal to a new class of customerscustomers

e.g--- A audio cassette/CD company may e.g--- A audio cassette/CD company may start making computer CD --- start making computer CD ---

A washing machine company starts A washing machine company starts making dishwasher.making dishwasher.

Horizontal Diversification strategy : Horizontal Diversification strategy : Company searches for new products that Company searches for new products that serve the same customer though serve the same customer though technologically unrelated to its current technologically unrelated to its current product . product .

e.g – A cassette manufacturing company e.g – A cassette manufacturing company starts making tray to hold the cassette.starts making tray to hold the cassette.

A CD company starts making CD boxesA CD company starts making CD boxes

Conglomerate DiversificationConglomerate Diversification : When an : When an organization seeks new businesses that have no organization seeks new businesses that have no relationship to the company’s current relationship to the company’s current technology, products or markets its known as technology, products or markets its known as Conglomerate diversification.Conglomerate diversification.

e..g : ITC ( Cigarettes, Hotels, Paper )e..g : ITC ( Cigarettes, Hotels, Paper ) TATA ( Steel, salt, cement, power, tea, TATA ( Steel, salt, cement, power, tea,

retail, hotels,coffee chain, software)retail, hotels,coffee chain, software)TTK ( Pressure cookers, TTK ( Pressure cookers,

chemicals, contraceptives, pharmaceuticals)chemicals, contraceptives, pharmaceuticals)Anchor (consumer electronics, Toothpaste, talcum Anchor (consumer electronics, Toothpaste, talcum

powder, electrical switches)powder, electrical switches)

Porter's Five ForcesPorter's Five Forces

(Assessing the Balance of (Assessing the Balance of Power in a Business Situation)Power in a Business Situation)

The Porter’s 5 Forces tool is a The Porter’s 5 Forces tool is a simple but powerful tool for simple but powerful tool for understanding where power lies understanding where power lies in a business situation. This is in a business situation. This is useful, because it helps you useful, because it helps you understand both the strength of understand both the strength of your current competitive your current competitive position, and the strength of a position, and the strength of a position you’re looking to move position you’re looking to move into.into.

With a clear understanding of where With a clear understanding of where power lies, you can take fair advantage power lies, you can take fair advantage of a situation of strength, improve a of a situation of strength, improve a situation of weakness, and avoid taking situation of weakness, and avoid taking wrong steps. This makes it an important wrong steps. This makes it an important part of your planning toolkit.part of your planning toolkit.

Conventionally, the tool is used to Conventionally, the tool is used to identify whether new products, services identify whether new products, services or businesses have the potential to be or businesses have the potential to be profitable. However it can be very profitable. However it can be very illuminating when used to understand illuminating when used to understand the balance of power in other situationsthe balance of power in other situations

Supplier Power:Supplier Power:

Here an individual assess how easy it is for Here an individual assess how easy it is for suppliers to drive up prices. This is driven by suppliers to drive up prices. This is driven by the number of suppliers of each key input, the the number of suppliers of each key input, the uniqueness of their product or service, their uniqueness of their product or service, their strength and control over you, the cost of strength and control over you, the cost of switching from one to another etc.. The fewer switching from one to another etc.. The fewer the supplier choices you have, and the more the supplier choices you have, and the more you need suppliers' help, the more powerful you need suppliers' help, the more powerful your suppliers are. your suppliers are.

Buyer PowerBuyer Power it is easy for buyers to drive prices down. it is easy for buyers to drive prices down.

Again, this is driven by the number of buyers, Again, this is driven by the number of buyers, the importance of each individual buyer to the importance of each individual buyer to your business, the cost to them of switching your business, the cost to them of switching from your products and services to those of from your products and services to those of someone else etc. If you deal with few, someone else etc. If you deal with few, powerful buyers, they are often able to dictate powerful buyers, they are often able to dictate terms to you. terms to you.

Competitive Rivalry:Competitive Rivalry: the number and capability of competitors – if the number and capability of competitors – if

there are many competitors, and they offer there are many competitors, and they offer equally attractive products and services, then equally attractive products and services, then most likely one will have little power in the most likely one will have little power in the situation. If suppliers and buyers don’t get a situation. If suppliers and buyers don’t get a good deal from you, they’ll go elsewhere. On good deal from you, they’ll go elsewhere. On the other hand, if no-one else can do what the other hand, if no-one else can do what you do, then you can often have tremendous you do, then you can often have tremendous strength.  strength.  

Threat of SubstitutionThreat of Substitution This is affected by the ability of your This is affected by the ability of your

customers to find a different way of customers to find a different way of doing what you do – for example, if you doing what you do – for example, if you supply a unique software product that supply a unique software product that automates an important process, people automates an important process, people may substitute by doing the process may substitute by doing the process manually or by outsourcing it. If manually or by outsourcing it. If substitution is easy and substitution is substitution is easy and substitution is viable, then this weakens your power. viable, then this weakens your power.

Threat of New EntryThreat of New Entry Power is also affected by the ability of people to Power is also affected by the ability of people to

enter your market. If it costs little in time or money enter your market. If it costs little in time or money to enter your market and compete effectively, if to enter your market and compete effectively, if there are few economies of scale in place, or if there are few economies of scale in place, or if you have little protection for your key you have little protection for your key technologies, then new competitors can quickly technologies, then new competitors can quickly enter your market and weaken your position. If enter your market and weaken your position. If you have strong and durable barriers to entry, you have strong and durable barriers to entry, then you can preserve a favorable position and then you can preserve a favorable position and take fair advantage of it. take fair advantage of it.

SWOT ANALYSIS SWOT ANALYSIS

OriginsOriginsAlbert S Humphrey, one of the founding Albert S Humphrey, one of the founding

fathers of what we know today as fathers of what we know today as SWOT analysis. SWOT analysis.

SWOT analysis is a tool for helping SWOT analysis is a tool for helping assess the current situation for the firm.assess the current situation for the firm.

To generate alternative strategies.To generate alternative strategies.The TOWS matrix is a tool designed to The TOWS matrix is a tool designed to

match external opportunities and threats match external opportunities and threats with our internal strengths and with our internal strengths and weaknessesweaknesses

Strengths and WeaknessesStrengths and Weaknesses

Goal: objective assessment of your Goal: objective assessment of your strengths and weaknessesstrengths and weaknesses relative to competitorsrelative to competitors important to customersimportant to customers

Note: This is difficult to do well.Note: This is difficult to do well.

The SWOT analysis is an extremely useful The SWOT analysis is an extremely useful tool for tool for understanding understanding and and decision-makingdecision-making for all sorts of situations in business and for all sorts of situations in business and organizations.organizations.

SWOT is an acronym for Strengths, SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. Weaknesses, Opportunities, Threats.

The SWOT analysis template is normally The SWOT analysis template is normally presented as a grid, comprising four sections, presented as a grid, comprising four sections, one for each of the SWOT headings: one for each of the SWOT headings: Strengths, Weaknesses, Opportunities, and Strengths, Weaknesses, Opportunities, and Threats Threats

Examples Examples a company (its position in the market, commercial a company (its position in the market, commercial

viability, etc) viability, etc) a method of sales distribution a method of sales distribution a product or brand a product or brand a business idea a business idea a strategic option, such as entering a new market or a strategic option, such as entering a new market or

launching a new product launching a new product a opportunity to make an acquisition a opportunity to make an acquisition a potential partnership a potential partnership changing a supplier changing a supplier outsourcing a service, activity or resource outsourcing a service, activity or resource an investment opportunity an investment opportunity

SWOT AnalysisSWOT Analysis

Opportunities1.2.3.

Strengths1.2.3.

Threats1.2.3.

Weaknesses1.2.3.

Internal Environment

ExternalEnvironment

StrengthsStrengths

Capabilities? Capabilities? Competitive advantages? Competitive advantages? USP's (unique selling points)? USP's (unique selling points)? Resources, Assets, People? Resources, Assets, People? Experience, knowledge, data? Experience, knowledge, data? Financial reserves, likely returns? Financial reserves, likely returns? Marketing - reach, distribution, Marketing - reach, distribution,

awareness? awareness? Innovative aspects? Innovative aspects? Location and geographical? Location and geographical? Price, value, quality? Price, value, quality? Accreditations, qualifications, Accreditations, qualifications,

certifications? certifications? Processes, systems, IT, Processes, systems, IT,

communications? communications? Cultural, attitudinal, behavioral? Cultural, attitudinal, behavioral?

WeaknessesWeaknesses

Gaps in capabilities? Gaps in capabilities? Lack of competitive strength? Lack of competitive strength? Reputation, presence and reach? Reputation, presence and reach? Financials? Financials? Timescales, deadlines and Timescales, deadlines and

pressures? pressures? Cash flow, start-up cash-drain? Cash flow, start-up cash-drain? Continuity, \Continuity, \ Effects on core activities, Effects on core activities,

distraction? distraction? Reliability of data, plan Reliability of data, plan

predictability? predictability? Morale, commitment, leadership? Morale, commitment, leadership? Processes and systems, etc? Processes and systems, etc?

OpportunitiesOpportunities Market developments? Market developments? Industry or lifestyle trends? Industry or lifestyle trends? Technology development and Technology development and

innovation? innovation? Global influences? Global influences? New markets, vertical, horizontal? New markets, vertical, horizontal? Niche target markets? Niche target markets? Geographical, export, import? Geographical, export, import? New USP's? New USP's? Business and product development? Business and product development? Information and research? Information and research? Partnerships, agencies, distribution? Partnerships, agencies, distribution? Seasonal, weather, fashion influencesSeasonal, weather, fashion influences

ThreatsThreats Political effects? Political effects? Legislative effects? Legislative effects? IT developments? IT developments? Competitor intentions - various? Competitor intentions - various? Market demand? Market demand? New technologies, services, New technologies, services,

ideas? ideas? Vital contracts and partners? Vital contracts and partners? Sustaining internal capabilities? Sustaining internal capabilities? Obstacles faced? Obstacles faced? Loss of key staff? Loss of key staff? Sustainable financial backing? Sustainable financial backing? Economy - home, abroad? Economy - home, abroad? Seasonality, weather effects? Seasonality, weather effects?

TOWS MatrixTOWS Matrix

Weaknesses:1.2.3.

Strengths:1.2.3.

WO StrategiesUse Opportunities to

overcome weaknesses

SO StrategiesUse strengths to take advantage of opportunities

Opportunities:1.2.3.

WT StrategiesDefensive strategies

to minimize weaknesses and

avoid threats

ST StrategiesTake advantage of

Strengths to avoid

threats

Threats:1.2.3.

From Internal Analysis

From External Analysis (EFAS)

Source: Weihrich

TOWS MatrixTOWS MatrixTechnique used in strategy formulation Technique used in strategy formulation for combining for combining External analysisExternal analysis

OpportunitiesOpportunitiesThreatsThreats

Internal analysisInternal analysisStrengthsStrengthsWeaknessesWeaknesses

PEST ANALYSISPEST ANALYSIS

BenefitsBenefits PEST analysis is a useful tool for understanding PEST analysis is a useful tool for understanding

market growth or decline, and as such the position, market growth or decline, and as such the position, potential and direction for a business. potential and direction for a business.

A PEST analysis is also used as business A PEST analysis is also used as business measurement tool to assess the market for a measurement tool to assess the market for a business or organizational unit. business or organizational unit.

The PEST analysis headings are a framework for The PEST analysis headings are a framework for reviewing a situation, and can also, like SWOT reviewing a situation, and can also, like SWOT analysis, and Porter's Five Forces model, be used to analysis, and Porter's Five Forces model, be used to review a strategy or position, direction of a company. review a strategy or position, direction of a company.

PEST analysis also works well in brainstorming PEST analysis also works well in brainstorming meetings.meetings.

PEST analysis helps for business and strategic PEST analysis helps for business and strategic planning, marketing planning, business and product planning, marketing planning, business and product development and research reports. development and research reports.

PEST analysis exercises for team building games.PEST analysis exercises for team building games. It's simple, quick, and uses four key perspectives. As It's simple, quick, and uses four key perspectives. As

PEST factors are essentially external, completing a PEST factors are essentially external, completing a PEST analysis is helpful prior to completing a SWOT PEST analysis is helpful prior to completing a SWOT analysis (a SWOT analysis - Strengths, Weaknesses, analysis (a SWOT analysis - Strengths, Weaknesses, Opportunities, Threats - is based broadly on half Opportunities, Threats - is based broadly on half internal and half external factors). internal and half external factors). PEST analysisPEST analysis most commonly measures a most commonly measures a marketmarket; a ; a SWOT SWOT analysisanalysis measures a measures a business unit, a proposition business unit, a proposition or ideaor idea. .

PEST ANALYSISPEST ANALYSIS

PP-POLIYICAL -POLIYICAL EE-ECONOMICAL-ECONOMICALSS-SOCIAL -SOCIAL TT-TECNOLOGICAL-TECNOLOGICAL

POLITICAL POLITICAL

European/International legislation European/International legislation Regulatory bodies and processes Regulatory bodies and processes Government policies Government policies Government term and change Government term and change Trading policies Trading policies Funding, grants and initiatives Funding, grants and initiatives International pressure groups International pressure groups Wars and conflicts Wars and conflicts

EconomicEconomic

Home economy situation Home economy situation Home economy trends Home economy trends Overseas economies and trends Overseas economies and trends General taxation issues General taxation issues Taxation specific to product/services Taxation specific to product/services Seasonality/weather issues Seasonality/weather issues Market and trade cycles Market and trade cycles Specific industry factors Specific industry factors Market routes and distribution trends Market routes and distribution trends Customer/end-user drivers Customer/end-user drivers Interest and exchange rates Interest and exchange rates International trade/monetary issues International trade/monetary issues

Social Social

Lifestyle trends Lifestyle trends Demographics Demographics Consumer attitudes and opinions Consumer attitudes and opinions Media views Media views Law changes affecting social factors Law changes affecting social factors Brand, company, technology image Brand, company, technology image Consumer buying patterns Consumer buying patterns Fashion and role models Fashion and role models Major events and influences Major events and influences Buying access and trends Buying access and trends Ethnic/religious factors Ethnic/religious factors Advertising and publicity Advertising and publicity Ethical issues Ethical issues

TechnologicalTechnological

Competing technology development Competing technology development Research funding Research funding Associated/dependent technologies Associated/dependent technologies Replacement technology/solutions Replacement technology/solutions Maturity of technology Maturity of technology Manufacturing maturity and capacity Manufacturing maturity and capacity Information and communications Information and communications Consumer buying mechanisms/technology Consumer buying mechanisms/technology Technology legislation Technology legislation Innovation potential Innovation potential Technology access, licencing, patents Technology access, licencing, patents Intellectual property issues Intellectual property issues Global communications Global communications

Difference and Relationship b/w Difference and Relationship b/w

PEST and SWOTPEST and SWOT

PESTPEST is useful before is useful before SWOT SWOT - not - not generally vice-versagenerally vice-versa

i.e. PEST helps to identify SWOT i.e. PEST helps to identify SWOT factors. factors.

PESTPEST assesses a market, including assesses a market, including competitors, from the standpoint of a competitors, from the standpoint of a particular proposition or a business. particular proposition or a business. SWOTSWOT is an assessment of a business is an assessment of a business or a proposition, whether your own or a or a proposition, whether your own or a competitor's. competitor's.

PEST becomes more useful and relevant the PEST becomes more useful and relevant the larger and more complex the business or larger and more complex the business or proposition, but even for a very small local proposition, but even for a very small local businesses a PEST analysis can still throw up businesses a PEST analysis can still throw up one or two very significant issues that might one or two very significant issues that might otherwise be missed. otherwise be missed.

The four quadrants in PEST vary in The four quadrants in PEST vary in significance depending on the type of significance depending on the type of business, eg., social factors are more business, eg., social factors are more obviously relevant to consumer businesses or obviously relevant to consumer businesses or a B2B business close to the consumer-end of a B2B business close to the consumer-end of the supply chain, whereas political factors are the supply chain, whereas political factors are more obviously relevant to a global munitions more obviously relevant to a global munitions supplier or aerosol propellant manufacturer. supplier or aerosol propellant manufacturer.

VALUE CHAINSVALUE CHAINS

VALUE IS ADDED DURING VALUE IS ADDED DURING TRANSFORMATION PROCESSESTRANSFORMATION PROCESSES

MAY BE MULTIPLE FIRMS IN A VALUE MAY BE MULTIPLE FIRMS IN A VALUE CHAINCHAIN

WHO SHOULD BE IN VALUE CHAIN?WHO SHOULD BE IN VALUE CHAIN?

The Value ChainThe Value Chain A framework for identifying core A framework for identifying core

competenciescompetencies Inside the firmInside the firm In the supply chainIn the supply chain

Can be used toCan be used to Identify strengths and weaknessesIdentify strengths and weaknesses Identify sources of competitive advantageIdentify sources of competitive advantage Identify market opportunitiesIdentify market opportunities

The Value ChainFirm Infrastructure

Human Resource Management

Technological Development

Procurement

InboundLogistics

Operations Outbound Logistics

Marketing& Sales

Service

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Relationship with Suppliers Relationship with Buyers

Elapsed Time - Value added time cost

Primary Activities in the Value Primary Activities in the Value ChainChain

Inbound LogisticsInbound Logistics Materials handling, warehousing, inventory control used to receive, Materials handling, warehousing, inventory control used to receive,

store and disseminate inputs to a productstore and disseminate inputs to a product Fertilizer and chemical storage, delivery of inputs, application of Fertilizer and chemical storage, delivery of inputs, application of

inputsinputs OperationsOperations

Take inputs from inbound logistics and convert to final productsTake inputs from inbound logistics and convert to final products Plowing, planting, spraying, harvesting, feeding, medicating, Plowing, planting, spraying, harvesting, feeding, medicating,

weighing,etc.weighing,etc. Outbound LogisticsOutbound Logistics

Collecting, Storing, and physical distribution of the final product.Collecting, Storing, and physical distribution of the final product. Crop storage, finished hog handling, Processing and determining Crop storage, finished hog handling, Processing and determining

delivery dates, delivery to the packer or elevator etc.delivery dates, delivery to the packer or elevator etc.

Primary Activities in the Value Primary Activities in the Value ChainChain

Marketing and SalesMarketing and Sales Provide means through which customers can purchase Provide means through which customers can purchase

products and to induce them to do soproducts and to induce them to do so Advertising, communicating with buyers, developing Advertising, communicating with buyers, developing

customer relationships, pricing products (futures, customer relationships, pricing products (futures, hedging, forward contracting, etc.), delivery schedulinghedging, forward contracting, etc.), delivery scheduling

ServiceService Activities designed to enhance or maintain a product’s Activities designed to enhance or maintain a product’s

valuevalue Timely delivery, identity preservation, ISO9000, Timely delivery, identity preservation, ISO9000,

certifying as organic, etc.certifying as organic, etc.

Supporting Activities in the Supporting Activities in the Value ChainValue Chain

ProcurementProcurement Activities to purchase the inputs needed to produce productsActivities to purchase the inputs needed to produce products Negotiating with suppliers, standard timing of replenishing parts and Negotiating with suppliers, standard timing of replenishing parts and

tools, setting up buying groups, etc.tools, setting up buying groups, etc. Technological DevelopmentTechnological Development

Activities that improve the firm’s products and/or processes Activities that improve the firm’s products and/or processes Volunteering for test plots, being a part of feeding trials, attending Volunteering for test plots, being a part of feeding trials, attending

technology seminars/field days, designing equipment to make specific technology seminars/field days, designing equipment to make specific production tasks more efficient, etc.production tasks more efficient, etc.

Human ResourcesHuman Resources Recruiting, hiring, training, developing, and compensating all Recruiting, hiring, training, developing, and compensating all

personnelpersonnel

Supporting Activities in the Supporting Activities in the Value ChainValue Chain

Firm InfrastructureFirm Infrastructure General Management, planning, finance, accounting, legal General Management, planning, finance, accounting, legal

support, governmental relations, etc.support, governmental relations, etc. Establishment of accounting practices, management information Establishment of accounting practices, management information

systems, compliance with environmental regulations, tracking systems, compliance with environmental regulations, tracking and reporting for government programs, etc.and reporting for government programs, etc.

Where strategy development takes place identifying Where strategy development takes place identifying opportunities and threats, resources and capabilities, and opportunities and threats, resources and capabilities, and support of core competenciessupport of core competencies

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations

Human Resource management

Firm Infrastructure

Service

Technology

Procurement

The Result of the Value The Result of the Value ChainChain MarginsMargins

CaptureCapture the value from performing value-creating the value from performing value-creating activities as cheaply as possibleactivities as cheaply as possible

The basic idea is that the consumer is willing to pay The basic idea is that the consumer is willing to pay a certain amount for the value you create. This is a certain amount for the value you create. This is depicted as the size of the overall pentagon.depicted as the size of the overall pentagon.

The size of the individual activity boxes represents The size of the individual activity boxes represents the cost of performing those particular activities.the cost of performing those particular activities.

Thus, the smaller the size of the individual activity Thus, the smaller the size of the individual activity boxes relative to the value the consumer is willing to boxes relative to the value the consumer is willing to pay, the greater the MARGIN will be for the firm.pay, the greater the MARGIN will be for the firm.

The Value Chain – Grains Farm

Firm Infrastructure

Human Resource Management

Technological Development

Procurement

InboundLogistics

Operations Outbound Logistics

Marketing& Sales

Service

MA

RG

IN

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IN

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Act

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Relationship with Suppliers Relationship with Buyers

Elapsed Time - Value added time cost

Primary Activities for a Grain Farm

InboundLogistics

Fertilizer and chemical storage,

custom application

of inputs

Operations

TillagePlanningFertilizingSprayingCultivateHarvest

Outbound Logistics

Grain transport

to elevator or buyer

Grain transport to storage

Marketing& Sales

Fwd. contractsFuturesOptionsIP grain

Value added grain

ServiceOn-time deliveryForward contractIPStorageTracingQA

Relationship with Suppliers Relationship with Buyers

Supporting Activities for a Grain Farm

Infrastructure: management, planning, finance, accounting, government compliance, quality control

Human ResourceHuman Resource:: motivation tools, compensation, motivation tools, compensation,training, and directing farm employees, including training, and directing farm employees, including

family, management, and laborersfamily, management, and laborers

Technological Development: research and adoption practices for things like GPS, VRT, GMO’s, No-Till, the Internet, IP storage facilities

Procurement: Purchasing inputs: seed, fertilizer, chemicals, fuel, land, Machinery, storage equipment, office supplies, parts, tools, insurance etc. with focus on negotiating capabilities

Thank You Thank You