pob stage 2_session_1_lecture_2
DESCRIPTION
B415 Stage 2 session 1 Lecture 2TRANSCRIPT
Lecture 2: Introduction to the Business Environment
Stage 2 Session 1
Principles of Business
2
Overview
• Review of lecture 1• Environmental scanning – why?• SWOT analysis• PESTEL analysis• LoNGPEST analysis• Scenario Planning• When it all goes wrong ….
3
Learning outcomesof this Lecture
• To be able to define why organisations carry out environmental analysis
• To become familiar with some of the key tools that organisations use to scan the environment
• To be able to distinguish between the various tools and where they will be used most effectively
Why do organisations scan their environments?
• To be able to compete effectively• To be able to make better informed decisions• To understand where to strengthen the business• To be aware of the dynamic and changing nature of the environment they work in • To inform their overall long term and strategic planning approach• To highlight potential threats and opportunities within a timescale that enables
effective action to be taken
• Sometimes they get it wrong, as we see in the cases of Kodak, Nokia and others
The tools they use
• This lecture will concentrate on the following tools:• The SWOT analysis• The PESTEL analysis
• The LoNGPEST analysis• Scenario Planning
SWOT analysis
• Stands for:
• Can be used to analyse a business, or a business unit, or a product or service• You can even do a SWOT analysis on yourself!• A well constructed SWOT analysis can provide some clear insights into the business
and inform what areas need to be strengthened either to mitigate against potential threats or take advantage of potential opportunities
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
USUALLY INTERNAL ISSUES USUALLY EXTERNAL ISSUES
Carrying out a SWOT analysisSTRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
What are your strengths?What do you do better than others?
What unique capabilities and resources do you possess?
What do others perceive as your strengths?
What are your weaknesses?What do your competitors do better
than you?What could you improve given the
current situation?What do others perceive as your
weaknesses?
What trends or conditions may positively impact you?
What opportunities are available to you?
What trends or conditions may negatively impact you?
What are your competitors doing that may impact you?
Do you have solid financial support?What impact do your weaknesses
have on your threats?
INTE
RNAL
EX
TERN
AL
The PESTEL analysis
• Originally known as the STEP analysis, but has been extended over the years
POLITICAL ECONOMIC
TECHNOLOGICAL ENVIRONMENTAL
SOCIO –CULTURAL
LEGAL
Political
• Local or national governmental issues • Alliances and agreements between countries • Changes in government and approaches to business• Changes in regulation • Changes in employment law
Economic
• Spending• Economic growth• Exchange rates• Employment statistics• Taxation changes
Socio-cultural
• Health conscious society• Age demographics• Lifestyle changes• Fashion changes• Multi-culturalism • Religious changes
Technological
• Information and Communications technology• New Machinery• Changes in energy • Social networks
Environmental
• Green issues • Corporate Social responsibility• Attitudes towards charity • Attitudes towards waste
Legal
• New laws, repeals of old laws• Regulation again• Licensing• Driving laws• Tendency to be more litigious
Another way of looking at it Political Economi
cSocio-cultural
Technological
Local Local authorities and associations
Local economy
Local community affairs
Difficult to segregate but rise in new communicationsTechnology, social networks etc
National National government and employer bodies
Central monetary and fiscal policiesStock market
Demographic change, immigration, culture
Global Alliances and agreements or disagreements
Trading blocsWorld money markets
Global demo-graphics, cross cultural issues, religious issues
Things to consider within a PESTLE analysis
• Each of the factors must be looked at when carrying out the analysis• BUT – the situation or the context may mean that one or more factors is looked at
more deeply than the others • Not all factors are threats – some are opportunities (cf SWOT analysis)• Carrying out a PESTLE analysis is not a substitute for continual environmental
scanning – the world changes very very quickly sometimes
Scenario Planning
• Industries that use scenario planning:
• Oil and gas• Counter-espionage and terrorism• Military• Insurance• Banking
Scenario Planning is:
• A strategic planning tool used to make flexible long term plans• A way of looking at how events could shape the future• A way of identifying how significant events, the protagonists involved and the way
they act will impact on the business• A way of helping organisations decide how best to face thefuture
6 steps to Scenario Planning
www.jiscinfonet.ac.uk/tools/scenario-planning
1. SCOPINGWhat is the question you want to address?
3. BUILDING
SCENARIOS
Using your outcomes from the first two steps build your
scenarios to explore
2. TREND ANALYSIS
Consider the external forces in operation and consider the
pressures they play
4. GENERATE OPTIONS
Consider the options available within the
scenarios - innovations,
new services, projects or
opportunities
5. TEST OPTIONS
Identify and discuss potential implications
and impacts ofscenarios on the
identified options
6. ACTION PLAN
Define an action plan as a result of these
activities
Bringing it all together
• We have now looked at four key methods that businesses use to scan their environment
• In the coming seminars, we will look at two of them in more detail and you will have a chance to carry them out for yourselves
• End of Lecture