environmental appraisal

40
ENVIRONMENTAL ENVIRONMENTAL APPRAISAL APPRAISAL

Upload: smriti-chopra

Post on 28-Nov-2014

174 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Environmental Appraisal

ENVIRONMENTALENVIRONMENTAL

APPRAISALAPPRAISAL

Page 2: Environmental Appraisal

THE PARABLE OF THE BOILED FROGTHE PARABLE OF THE BOILED FROG

All organizations are faced with a series of environmental changes and challenges. The principal difference between the effective and the ineffective organization is how well it responds, something that was encapsulated several years ago in one the most popular of management fables, the parable of the boiled frog. What is now referred to as ‘the boiled frog syndrome’ is beside on the idea that if you drop a frog into a a pan of hot water, it leaps out. If, however, you put a frog into a pan of lukewarm water and turn the heat, up very slowly, it sits there quite happily not noticing the change in the water’s temperature. The frog, of course eventually dies.

The parallels with the management and development of any organization are – or should be– obvious. Faced with sudden and dramatic environmental change, the need for a response is obvious, Faced with a much slower pace of change, the pressures to respond are far less (this is the ‘we are doing reasonably well and can think about doing something else at some time in the future phenomenon), with the result that the organization becomes increasingly distant from the real, demands of its customers and other stakeholders. Given this, think seriously about whether you are one of the frogs that is sitting quite happily in a pan of increasingly hot water. If so, why, what are the possible consequences and what, if anything, are you going to do about it?

Page 3: Environmental Appraisal

1.1. Refers to all external forces which have a Refers to all external forces which have a

bearing on the functioning of business.bearing on the functioning of business.

2.2. Environment factors are beyond the control Environment factors are beyond the control

of individual industrial enterprise & their of individual industrial enterprise & their

managements.managements.

3.3. Environment gives opportunity or threat to Environment gives opportunity or threat to

the firms.the firms.

Concept of EnvironmentConcept of Environment

Page 4: Environmental Appraisal

1.1. Environment is complexEnvironment is complex

2.2. Environment is dynamicEnvironment is dynamic

3.3. Environment is multifaced.Environment is multifaced.

4.4. Environment has a far – reaching impact.Environment has a far – reaching impact.

Characteristics Characteristics EnvironmentEnvironment

Page 5: Environmental Appraisal

External environment includes all factors External environment includes all factors

outside, the control of organization which outside, the control of organization which

provide opportunities or pose threats to the provide opportunities or pose threats to the

organization.organization.

The internal environment provides strength The internal environment provides strength

or weakness within the control of or weakness within the control of

organization (SWOT)organization (SWOT)

External & Internal External & Internal EnvironmentEnvironment

Page 6: Environmental Appraisal

The technology, attitude external environment

encompasses a variety of factors like

international, national and local economy, social

changes, demographic variables, political

system,, towards.

Business, energy source, raw material & other

resources, and many other macro level factors

known as general environment.

Immediate concerns of the organization is

confined to just part of general environment

(relevant environment)

General versus relevant General versus relevant EnvironmentEnvironment

Page 7: Environmental Appraisal

Components of EnvironmentComponents of Environment

Organization

SupplierSupplier

CompetitionCompetition

EconomyEconomy

TechnologyTechnology

Govt. Govt. RegulationsRegulations

ReligionReligion

CommunityCommunity

SocietySociety

GroupsGroups

Interest/ PressureInterest/ Pressure

CustomersCustomers

Page 8: Environmental Appraisal

of environment Seven important component are:of environment Seven important component are:

1.1. Social;Social;

2.2. Political;Political;

3.3. Economic;Economic;

4.4. Regulatory;Regulatory;

5.5. Market;Market;

6.6. Supplier;Supplier;

7.7. Technology;Technology;

Components of Environment…Components of Environment…

Page 9: Environmental Appraisal

Some of important factors & influences operating

in the social environment are:

1. Demographic:- Population, Density, Age,

Sex, Rural Urban, Income Distribution.

2. Social attitudes & values: Social custom

beliefs, Rituals, Changing life style, &

materialism.

3. Social Concerns: Such as Role of Business

to Society – Pollution – Corruption –

Consumerism.

Social EnvironmentSocial Environment

Page 10: Environmental Appraisal

4. Family Structure:- Small family norms –

Breakage of Joint family system.

5. Role of women in society: Increase in

working women – 33% reservation

(Parliament). Education levels –

awareness. Rights and Work Ethics.

Social Environment…Social Environment…

Page 11: Environmental Appraisal

Social Environment is related to human Social Environment is related to human

Relationship, and the development, of such Relationship, and the development, of such

a relationship.a relationship.

Social environment effects the strategic Social environment effects the strategic

management process within the management process within the

organization, in the area of mission , organization, in the area of mission ,

objective setting and decisions related to objective setting and decisions related to

productsproducts and markets.and markets.

Social Environment…Social Environment…

Page 12: Environmental Appraisal

NoteNote: : The Social changes take place slowly and The Social changes take place slowly and

do not seem to have an immediate effect/ do not seem to have an immediate effect/

impact on short term strategic decisions.impact on short term strategic decisions.

Some social change are too prominent to be Some social change are too prominent to be

ignored.ignored.

ExampleExample: :

Emergence of middle class.Emergence of middle class.

MTV – Effect on YouthMTV – Effect on Youth

Social Environment…Social Environment…

Page 13: Environmental Appraisal

Exhibit: The rise of the Indian middle-classExhibit: The rise of the Indian middle-classAccording to the World Development Report for 1987 of the World Bank, the top 20

percent of India’s population have an income share of 50 pr cent of the GDP or a per capita income of the Rs. 10,000 and a family income of Rs. 50,000. This part of the population, consisting of 15 crore people, constitutes what is known as the rising middle-class of India. Owing to the black economy which largely benefits this class and the repatriation of money from abroad by non-resident Indians who mainly belong to this class, the rising Indian middle-class possesses the real purchasing power. By 2006 A.D., this class is expected to expand to the size of 40 crore and would, most probably, be the single largest middle class group in the world.

There are important implications of the changing socio-economic structure, taking shape in India currently for the economy in general and industry and business in particular. Much of the macro-level sectoral shift away from agriculture to manufacturing and services could be attributed, directly or indirectly, to the middle-class affulence. To the corporate sector, the middle-class provides more than a crore investors and a continuing demand potential for a variety of consumer items, ranging from detergents to refrigerators, and a number of services like insurance, leisure and advertising. New lifestyles and images have appeared due to the consumerist and materialistic ethos prevailing in the middle-class society. Urban middle-class spend time and money on leisure activities like amusements parks while the rural middle-class takes pride in wearing readymade garments and driving motorcycles.

In sum, the social environment facing Indian business is radically changing and these changes have to be taken into consideration for strategic management.

Page 14: Environmental Appraisal

Environmental influences on the instant Foods Environmental influences on the instant Foods IndustryIndustry

Instant foods industry one of the sunrise

industries that has come up well in India in the

recent past. Essentially meant for middle and

upper-middle class urban consumers, instant foods

are a product line that offers considerable potential

for growth.

The business environment in which the

instant foods industry exits at present could be

explained in terms of the opportunities and threats

operating currently.

Page 15: Environmental Appraisal

Environmental influences on the instant Foods Industry…Environmental influences on the instant Foods Industry…

Opportunities are supported by factor like: High demand potential, estimated at around Rs. 20,000 crore. At

present, the total industry output is just Rs. 300 crore. Rising personal incomes, emergence of nuclear families and rise

in the number of working women. Availability of packaging material to keep instant foods fresh and

unadulterated. Spread of television as a media for advertising.

Threats arise due to factors like: Problem of acceptability, as Indians are typically used to eating

fresh vegetables and foods. High taxes, as instant foods are considered a luxury item; direct

and indirect taxes constitute 70 to 80 percent of the price of processed foods.

High raw material costs. High overhead expenses.

Page 16: Environmental Appraisal

The political environment consist of factors related to management of public affairs & their impact on the business.

Important Factors

The political system, ideological forces, political parties & centers of power.

The political structure, its goals & stability.

Political processes like operation of the party system, elections, funding of the elections, and to economic & Industrial legislation with respect promotion & regulations.,

Political Environment

Page 17: Environmental Appraisal

Political philosophy, Government Role in Business, its policies & interventions in economic & business development.

Example:

Janta Government Forcing Coca-Cola – IBM to leave – 1977.

Pepsi Cola factory in Punjab to deal with Punjab problem.

Appollo Tyres – Kerala Government Take over.

Political Environment…

Page 18: Environmental Appraisal

The Economic environment consists of Macro –

level factors related to the means of production &

distribution of wealth that have an impact on the

business of an organization.

Some Important Factors are

1. The Economic stages existing at a given time in

a country.

2. The economic structure adopted, such as

capitalistic, socialistic or mixed economy.

3. Economic planning : five year plan annual

budgets etc.

Economic Environment

Page 19: Environmental Appraisal

4. Economic Policies: Industrial, monetary and

fiscal policies.

5. Economic indices like national income,

distribution of income.

6. Rate of saving & investment, value of exports &

imports, the balance of payment.

7. Infrastructure factors: Such as financial

institutions, banks, transport, communication.

Economic Environment…

Page 20: Environmental Appraisal

Examples:

1. Liberalization

2. Public saving in India from Fixed assets & Precious mental to stock markets & company deposits, leasing & financing companies, mutual funds, venture capital, entry of bank & financial institutions in stock market.

and and

Now with scams after scams

andand

Mismanagement of funds. Back to square one.

Economic Environment…

Page 21: Environmental Appraisal

Consists of factors related to planning, proposition,

and regulation of economic activities by the Govt.

that have impact on the business of an

organization.

Some Factors are

1. Industrial policy and licensing.

2. MRTP.

3. Legislation related to company operation.

4. Capital issues control & control over stock

exchange.

Regulatory Environment

Page 22: Environmental Appraisal

5. Import and export control.

6. Foreign exchange control.

7. Control over foreign investment.

8. Control over distribution & pricing.

9. Control over dev. & Reg. of industries.

10.Control through consumer protection. Control of Environment pollution

Excessive control & no control both are dangerous. Love & hate relation between Govt. & Industry is the prevailing situation.

Regulatory Environment…

Page 23: Environmental Appraisal

The market environment consists of factors related

to the groups & other organizations that compete

with & have impact on markets & organizational

Business.

Some Important Factors are

1. Customer

Needs, preferences, perceptions, attitudes,

values, bargaining power, buying behavior &

customer satisfaction.

Market Environment

Page 24: Environmental Appraisal

2. Product Factors

Demand, image, features, utility, function, design, life cycle, price, promotion, distribution, differentiation & availability of substitutes of products & services.

3. Market Intermediaries.

Level of customer service, middleman, distribution channels, logistics, costs, delivery system and financial intermediaries.

4. Competitors.

of Type of competitors, entry & exit of major competitors,nature competition.

Market Environment…

Page 25: Environmental Appraisal

factors. The supplier environment consists of

factors related to cost, reliability and availability of

production

Some Important Factors are

1. Cost and availability, continuity of Raw-

materials, sub-assemblies, parts &

components.

2. Cost & availability finance for projects.

3. Cost & availability of energy.

4. Cost & availability of Human Resources.

Supplier Environment

Page 26: Environmental Appraisal

1. Cost & availability of plant & machinery.

2. Infrastructural support.

Examples:- Power shortages, roads, acute

shortage of certain raw material (Grasim pulp

unit in Kerela)

Japan and western world: - Hardly worries for

supply of raw material & energy, Recently in

USA California is having power shortage.

Supplier Environment…

Page 27: Environmental Appraisal

The technological environment consists of those

factors related to knowledge applied and the

materials, machines used in the production of

goods & services that have impact on the business

of an organization.

Some Important Factors are

1. Sources of technology: - Domestic or foreign,

cost of technology, collaboration in and transfer

of technology.

Technological Environment

Page 28: Environmental Appraisal

2. Technology development, stages of dev, change & rate of change of technology, and R&D.

3. Impact of technology on human being, the man – machine system, effect on environment.

4. Communication & Infrastructural technology in management.

Strategist can ill afford to ignore technological changes because of the following It can change relative cost position. Create new markets & new Business

segments. It can collapse previous business.

Technological Environment…

Page 29: Environmental Appraisal

Rising petrol prices – technology for

automobile with fuel economy

Technology reaches people through business,

new discoveries would remain mere ideas in

mind – models in lab, but for business

institutions.

The economic prosperity of the nation depends

on – technology, 50% of economic growth of

USA, UK, Germany, France, Japan has come

form technological progress.

Technological Environment…

Page 30: Environmental Appraisal

Rise and decline of products & organizations Change of technology may spawn a major industry but it may destroy existing.

Examples – Transistors Vacuum Tube

““Today’s Growth Product is tomorrow Today’s Growth Product is tomorrow earthen pot”earthen pot”

Products like mortals, have life cycle

introduction, growth, maturity, decline &

abandonment.

Technological Environment…

Page 31: Environmental Appraisal

1.1. Systematic approachSystematic approach: - Information is collected

on regular basis regarding markets, customers,

changes in lagislation & regulation, Govt. policies

pertaining to organizations & Industry etc

updating of such info is not only required for

strategic management but also for operational

activities.

2.2. Ad. Hoc ApproachAd. Hoc Approach: - Special surveys & studies

to deal specific problems, such as, evaluate

existing strategies, device new strategies.

Change & unforeseen development may also be

investigated with regard to their impact on

organization.

Approaches to Environmental Scan

Page 32: Environmental Appraisal

3.3. Processed – Form ApproachProcessed – Form Approach: - use of

secondary date from Govt. & private agency. A

highly systematic & formal procedure may be

used as a proactive measure in anticipation of

changes in environmental factors between the

two extremes, some time issues related data is

collected & processed for decisions.

Approaches to Environment Scanning…

Page 33: Environmental Appraisal

1. Secondary sources: - News papers, magazines,

Journals, Books, Trade & industry association,

publication, Govt. publications, annual reports.

2. Mass media

3. Internal source.

4. External agencies like customers, Market

research agencies, consultants.

5. Spying & surveillance.

Sources of Data for Environmental Scanning

Page 34: Environmental Appraisal

Some Important Publications areSome Important Publications are:: Census of India report. Five years plan report. Statistical abstracts of Indian union. Surveys (economic, Industries) Export – import policy.

Institutional PublicationsInstitutional Publications Bombay stock exchange directory. Publications of Market research agency (ORG),

provides extensive data on demographic profile of customer.

Publication by FICCI, Asso chom etc.

Sources of Data for Environmental Scanning…

Page 35: Environmental Appraisal

There are two broad techniquesThere are two broad techniques

Statistical forecasting

Intuitive methods.

Methods & Techniques use for Environmental Scanning

Page 36: Environmental Appraisal

A technique called Quest (Quick environmental scanning) technique

Uses scenario–Writing and four steps:

1. Strategists make observations about major events & trends in their Industry.

2. Then, they speculate on a wide range of important issues that might effect the future of their organization.

3. The Quest director prepares a report summarizing major issues & their implication and three to five scenarios report.

4. Report & scenarios are reviewed by the Group of strategist who. Identify feasible strategic options to deal with the evolving environment. The option are ranked and teams are designated to develop strategies.

Page 37: Environmental Appraisal

Identify the environment factors.Identify the environment factors.

A feasible approach in identifying the important

environment factors is to test each factor with regard to its

impact on the business of the organization and the

probability of such an impact.

Impact of business

Prob

abili

ty Im

pact

Low

M

ed.

Hig

hHigh Medium Low

Critical Height priority Low priority

High Priority - do - - do -

To be watched Low priority - do -

The issues which are likely to have high level of impact on org are critical issues & need immediate attention of the strategist.

Page 38: Environmental Appraisal

Structuring Environment Appraisal

There are many technique to structure the environment appraisal one such technique suggested by Glueck is that of preparing an environment threat & opportunity profile ETOP, for an organization.Environmental threat and opportunity profile (ETOP) for a Bicycle Company

Environmental sectors

Impact of each sector

Social ↑ Customer preference for sports cycles which are fashionable, easy to ride and durable

Political → No significant factor

Page 39: Environmental Appraisal

Environmental sectors

Impact of each sector

Economic ↑ Growing affluence among urban consumers; exports potential high.

Regulatory ↑ Bicycle industry a thrust area for exports.

Market ↑ Industry growth rate is 7 to 8 per cent per year; for sports cycles growth rate is 30 per cent; largely unsaturated demand.

Supplier ↑ Mostly ancillaries and associated companies supply parts and components; ERP licenses for imported raw materials available

Technologicl ↑ Technological up gradation of industry in progress; import of machinery under OGL list possible.

Up arrows indicate favourable impact , down arrows (if used) indicate

unfavourable impact , while horizontal arrows indicate a neutral impact.

Structuring Environment Appraisal…

Page 40: Environmental Appraisal

The preparation of ETOP provides a clear picture to the strategists of which sector, and the different factors in each sector, have a favorable impact on organization by means of ETOP a organization knows where it stands with respect to its environment.

Structuring Environment Appraisal…