Business Policy & StrategyChapter Two

The Field of Action:

Environment of a Business System

Murdick, Moor, Babson & Tomlinson

Sixth Edition, 2000

Business System

Inputs are transformed into outputs

Inputs include raw materials

Transformation involves labor, land, equipment

Outputs must be delivered to the customer

STAKEHOLDERS

CustomersShareholdersGeneral public/communitySuppliersCompetitorsGovernment(s) – local, state, country, trade associationsSpecial interest groupsEmployeesManagers

Corporations Should Act Morally Responsibly

Holding individuals accountable for specific actions

Following rules established by externally imposed societal norms

Allowing individuals to make decisions that produce in others a feeling of trust, respect, and rationality

Monitoring & Forecasting the Remote Environment

Economics Trends

Political & Legal Trends

Social & Demographics Trends

Technology Trends, and sometimes

Physical Environment (weather, climate, earth changes such as El Nino, etc)

Monitoring & Forecasting the Immediate Task EnvironmentCustomers & potential customers

Competitors

Labor forces

Suppliers

Creditors

Regulatory agencies at various levels of governments

Major Methods of Environmental Forecasting

Cross Impact Analysis – select 25 events and estimate probabilities/time of occurrences, interpret impact on futureTrend Analysis – five year results, regression analysis, statistical forecastingDelphi Process – group of experts individually assesses the future without face to face (F2F) discussion. The results are combined and returned for another round of estimations until consensus is reached

Opportunities & Threats in the External Environment

Immediate examples include: Unrecognized needs of individuals, firms &

companies New applications of products & services Sudden growth in demand Synergy achieved through M/A New distribution methods (Internet) New manufacturing process/substitute materials New or better methods for customer service

Threats

Management incompetence is often hidden by high rewards for short-term performance rather than for long-term survival.

US tile makers believed it was a mature market and were overcome by foreign producers/importers.

Environmental threats

CompetitorsChanges in customer preferencesDwindling resourcesRising prices and wagesLegislationInflation or RecessionInternational economic & political relationshipsTechnological breakthroughs

Constraints

Legal or pending legislation

Political instability

Lack of natural resources

Well established competitors

Declining GDP

Declining productivity

Cost of capital, equipment, union labor

Table 2.1

Pages 8-9 in Chapter Two provide an extensive list of environmental considerations to elaborate on the social, political, environmental and technological fields.

Assignment

For your company analysis, identify all of the stakeholders

Identify a list of opportunities

Identify a list of threats

Review Table 2.1 to determine which of these factors affect your firm