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Strategic Management- Analysing a company's external envirnoment

Strategic Management- Analysing a company's external envirnoment

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Published by Mangan
mba vtu 3rd sem notes module 3
mba vtu 3rd sem notes module 3

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Published by: Mangan on Dec 14, 2009
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11/28/2012

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Analyzing a company's external environment The strategically relevant components of a company's externalenvironment
A company' macro environment includes all relevant factorsand influence outside the company's boundaries that have abearing on the decisions the company makes about itsstrategy, objectives and business.
 These macro environment factors are
In the outer ring:
 –
societal values and lifestyles e.g McDonalds not using beef in India
 –
population demographics e.g. Insurance companies designingproducts for young population in India
 –
legislation and regulations e.g. No FDI in sectors like retail
 –
general economic conditions e.g. cost cutting by companies
 –
 Technology e.g. companies using video-conferencing
 
 The immediate industry and competitive environment factors like:
 –
rival firms e.g. Bajaj planning low-rpriced car
 –
new entrants e.g. ITC entering FMCG sector
 –
Buyers e.g. reduction in sales of Pepsi and Coke after pesticide controversy
 –
substitute products e.g. bikes replacing scooters
 –
Suppliers e.g. arm twisting by Microsoft to include Internet Explorer
 The shaping impact of outer ring influences is normally low but theyprovide strategically relevant trends and developments to justify awatchful eye. (exceptions are cigarette producers effected byantismoking ordinances and growing cultural stigma attached tosmoking, health care companies effected by changingdemographics of aging population and longer life expectancy,companies effected by internet technology applications)
 
 Thinking strategically about a company's industryand competitive environment
Industries differ widely in their economic features,competitive character and profit outlook. (e.g.economic factors and competitive character isdifferent for trucking industry, retail, fast food,softaware development)
An industry's economic traits and competitiveconditions and how they are expected to changedetermine whether its future profit prospects willbe poor, average or excellent.

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