MBA671Dr. S. Borna

Objectives

Tracking & Identifying Opportunities in the Macroenvironment

Demographic, Economic, Natural, Technological, Political, & Cultural Developments

Strategic Environmental Issue Strategic Environmental Issue ManagementManagement

WHAT DO WE MEAN BY WHAT DO WE MEAN BY ENVIRONMENT?ENVIRONMENT?

The environment is the totality The environment is the totality of forces that are external of forces that are external and potentially relevant to the and potentially relevant to the particular agent.particular agent.

Rapid Change of Rapid Change of Environmental ForcesEnvironmental Forces

1. Economy1. Economy

2. Technology2. Technology

3. Governmental Regulation3. Governmental Regulation

4. Cultural Environment4. Cultural Environment

5. Political Environment5. Political Environment

To Identify Environmental To Identify Environmental Forces, Ask Two QuestionsForces, Ask Two Questions

1. Can I do anything about it?1. Can I do anything about it?

2. Does it matter relative to my2. Does it matter relative to my objective? objective?

2. Environmental forces are difficult2. Environmental forces are difficult to control to control

3. Since environmental forces are 3. Since environmental forces are

diverse, it requires diversity of diverse, it requires diversity of

expertise to handle these forces.expertise to handle these forces.

Environmental ForcesEnvironmental ForcesCharacteristics:Characteristics:

1. 1. It is difficult to detect and interpret It is difficult to detect and interpret environmental forces environmental forces

Layers of Product’s Layers of Product’s EnvironmentEnvironment

ProductProduct

Intraorganization EnvironmentIntraorganization EnvironmentTask EnvironmentTask Environment

Macro-EnvironmentMacro-Environment

GlobalGlobal

11

22

33

44

Economic Environment

Income DistributionIncome Distribution

Subsistence economiesSubsistence economies

Raw-material-exporting economiesRaw-material-exporting economies

Industrializing economiesIndustrializing economies

Industrial economiesIndustrial economies

Savings, Debt, & Credit AvailabilitySavings, Debt, & Credit Availability

Intraorganizational Intraorganizational EnvironmentEnvironment

Other CorporateOther CorporateDepartments and Departments and Personnel.Personnel.

Task EnvironmentTask Environment

SuppliersSuppliers CompanyCompany

Marketing Marketing IntermediariesIntermediaries

MarketMarket

MACROENVIRONMENTMACROENVIRONMENT

Cultural EnvironmentCultural EnvironmentEconomic EnvironmentEconomic EnvironmentTechnological Technological

EnvironmentEnvironmentNatural EnvironmentNatural Environment

Demographic Environment

Worldwide Population GrowthWorldwide Population Growth

Population Age MixPopulation Age Mix

Ethnic MarketsEthnic Markets

Household PatternsHousehold Patterns

Educational GroupsEducational Groups

Geographical Shifts in PopulationGeographical Shifts in Population

Shift from Mass Market to MicromarketsShift from Mass Market to Micromarkets

GLOBAL ENVIRONMENTGLOBAL ENVIRONMENT

International ChangesInternational Changes

Political-Legal

Environment

Political-Legal

Environment

IncreasedLegislation

IncreasedLegislation

Special-InterestGroups

Special-InterestGroups

NaturalEnvironment

Higher PollutionLevels

Higher PollutionLevels

Increased Costsof Energy

Increased Costsof Energy

Shortage of Raw MaterialsShortage of

Raw Materials

Changing Roleof GovernmentChanging Roleof Government

Accelerating Paceof Change

Accelerating Paceof Change

Unlimited Opportunitiesfor Innovation

Unlimited Opportunitiesfor Innovation

IncreasedRegulation

IncreasedRegulation

Issues in the TechnologicalEnvironment

Issues in the TechnologicalEnvironment

VaryingR & D Budgets

VaryingR & D Budgets

Social/Cultural Environment

OfOfOrganizationsOrganizations

OfOfNatureNature

OfOfOneselfOneself

OfOfSocietySociety

OfOfthe Universethe Universe

OfOfOthersOthers

ViewsThat Express

Values

ViewsThat Express

Values

Social/Cultural Environment

Strategic Environmental Strategic Environmental Issue ManagementIssue Management

1. Environmental Scanning1. Environmental Scanning2. Key Environmental Issue 2. Key Environmental Issue IdentificationIdentification3. Impact Evaluation3. Impact Evaluation4. Formulation of a Response 4. Formulation of a Response StrategyStrategy

Alternative approaches to Alternative approaches to environmental Scanningenvironmental Scanning

Nature of Scanning Activity:Nature of Scanning Activity: IrregularIrregular Ad-hoc studiesAd-hoc studies RegularRegular Periodically updated studiesPeriodically updated studies ContinuosContinuos Structured data collection and Structured data collection and processing system processing system

Scope of ScanningScope of Scanning

Specific EventsSpecific Events

Selected ElementsSelected Elements

Broad range of environmental Broad range of environmental componentscomponents

Impetus for scanningImpetus for scanning

Crisis initiatedCrisis initiated

Problem areasProblem areas

Planning processPlanning process

Organizational ResponsibilityOrganizational Responsibility

Specially designed teamsSpecially designed teams

Various staff servicesVarious staff services

Environmental Scanning UnitEnvironmental Scanning Unit

Which of these three environmentalWhich of these three environmentalscanning approaches is suitablescanning approaches is suitablefor your organization?for your organization?

Answer:Answer:

Depends on the firm’s potentialDepends on the firm’s potentialvulnerability to environmentalvulnerability to environmentalforcesforces

Key environmental IssueKey environmental Issue IdentificationIdentification

Somehow the system (the firm)Somehow the system (the firm)must determine:must determine:

1. The 1. The probabilityprobability that an issue that an issue can materialize into a threatcan materialize into a threat or an opportunity;or an opportunity;2. The degree of 2. The degree of impactimpact it can have it can have on the firm.on the firm.

KEY ENVIRONMENTAL ISSUE KEY ENVIRONMENTAL ISSUE IDENTIFICATIONIDENTIFICATION

11 99

66 22

PROBABILITYPROBABILITY

HIGHHIGH LOWLOW

HIGHHIGH

LOWLOW

IMPACTIMPACT

Few examples:Few examples:

1. Interstate barriers to bank are1. Interstate barriers to bank are loweredlowered6. Antitrust actions are taken against6. Antitrust actions are taken against large bankslarge banks9. Government regulation favors9. Government regulation favors non-bank financial institutionsnon-bank financial institutions2. Technological breakthroughs occur2. Technological breakthroughs occur in information processingin information processing

Impact EvaluationImpact Evaluation

You have to answer the followingYou have to answer the followingquestions:questions:

1. Does the issue represents a threat1. Does the issue represents a threat or opportunity?or opportunity?2. How 2. How significantsignificant will its impact on will its impact on the performance of the firm?the performance of the firm?

3. What is the likely timing of the3. What is the likely timing of the impactimpact4. What specific marketing areas 4. What specific marketing areas will be affected?will be affected?

Formulation of a Response Formulation of a Response

StrategyStrategy

Reactive StrategyReactive Strategy

Proactive StrategyProactive Strategy

Response Strategies to Response Strategies to Environmental Issues:Environmental Issues:

1. 1. Opposition Opposition (N. Rifle A.) (N. Rifle A.)2. 2. AdaptationAdaptation (usually compulsory (usually compulsory ex. Auto industryex. Auto industry mandatory fuelmandatory fuel standards)standards)3. 3. Offensive StrategyOffensive Strategy Waste Management Inc.:Waste Management Inc.: How to improve waste disposal?How to improve waste disposal?

4. 4. Redeployment StrategyRedeployment Strategy:: Example Tobacco Industry andExample Tobacco Industry and diversificationdiversification

5. 5. Contingency StrategyContingency Strategy:: If saccharin is band in drugsIf saccharin is band in drugs foods, soft drinks, etc.foods, soft drinks, etc.

6. 6. Passive strategyPassive strategy: (do nothing: (do nothing wait and see strategy)wait and see strategy)

Review

Tracking & Identifying Opportunities in the Macroenvironment

Demographic, Economic, Natural, Technological, Political, & Cultural Developments