BE 2601

Management Principles,
Competencies and Skills

Welcome Back!

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Dr Koh Cheng Boon
Lesson 2: Organisational
Environment: External & Internal

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Organisational Environments: External and Internal
Types of environment

Macro environment
• Economy
Organisation inputs • Technology
and outputs • Laws and
Regulations
• Demographics
• Social issues
Organisations as • Natural ecology
open systems
• Environment Environmental
• Organisation analysis
Competitive
environment • Environmental
• Rivals scanning
• Suppliers • Scenario
• Buyers
development
• New entrants
• Substitutes and • Forecasting
complements • Benchmarking

Internal environment
• Culture
• Values
• Climate

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 Open-system Perspective of Organisation

External External
environment Organization
Environment

 Raw materials
 Customers react to
 Human Resources  Transformation process organization’s goods and
 Energy where inputs are services and provide
 Financial resources converted into and good feedback for next cycle
 Information and services that (ideally) of the system
 Equipment Meet market’s needs

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Types of Environment

• Legal, political, technological, social, and natural factors

Macro • Affects all organizations in an environment
Environment

• Suppliers, customers, competitors, and substitute or complimentary

products and services
Competitive • More specific to one organization
Environment

• Values, goals, climate, and culture of the organization compose an

internal environment
Internal • Influence decisions and behaviors of employees in an organization
Environment

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Overview of Environment
Macro Environment
Macro  Economy
Environment  Technology
 Laws and Regulations
 Demographics
 Social Issues
Competitive
 Natural ecology
Environment
Competitive Environment
 Rival
 Suppliers
 Buyers
 New entrants
Internal
Environment
 Substitutes and
complements

Internal Environment
 Culture
 Values
 Climate

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Competitive Environment

Threat of
new
entrants

Rivalry
Bargaining Bargaining
amongst
powers of powers of
existing
suppliers buyers
competitors

Threat of
substitute
products
and services

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Threats of New Entrants
New entrants compete with established companies

Barriers to entry:
 Government policy
 Capital requirements
 Brand identification Restrictive distribution
channel: Strategy
 Cost disadvantages where distribution
 Restrictive distribution channels channels are restricted
 Patents

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Bargaining Power of Buyers

Intermediate Customers
Purchase raw materials or wholesale products
before selling them to final customers

Final Customers
Purchase products in their finished form

Demand lower prices, higher quality, unique product specifications or better service

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 Threats of Substitute Products and Services
Substitutes

 Alternatives products or services

 Can limit industry’s revenue potential

Complements

 Products or services which increase

purchases of other products or services

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Bargaining Power of Suppliers and Buyers

Suppliers

 Provide resources or inputs needed for production

 Can influence price and quality as sole supplier

Buyers

 Face switching costs to change suppliers

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 Internal environment
Competing Values Model of Culture •
•
Culture
Values
• Climate

Similar to CVF in OB
but used different
terms, e.g., Group
instead of Clan,
Rational instead of
Market

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 Environmental analysis

Environmental analysis

• Environmental scanning
• Scenario development
• Forecasting
• Benchmarking

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 Environmental
analysis
Environmental Analysis • Environmental
scanning
• Scenario
Environment Uncertainty = difficult to gather complete information to understand and predict the future development
• Forecasting
• Benchmarking

Environmental scanning

• Who are our current competitors?

• Are there few or many entry barriers to our industry?

Competitive
• What substitute exist for our product or service? Intelligence

• Is the company too dependent on powerful suppliers?

• Is the company too dependent on powerful customers?

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 Environmental
analysis

Scenario development • Environmental

scanning
• Scenario
development
• Forecasting
• Benchmarking
Environment Factors Unattractive Attractive

Competitors

Threats of entry 1. Scenario Development

2. Best-case scenario
Substitute 3. Worst-case scenario
4. Middle-ground alternative
Suppliers

Customers

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 Environmental
analysis
Forecasting • Environmental
scanning
• Scenario
development
 Environment Scanning identifies important influences, • Forecasting
 Scenario development generates alternatives picture of the future, • Benchmarking
 a Forecast is a single prediction about the future.

 Forecast – although designed to help executives to predict the future, their

accuracies vary greatly.

 Because it is based on the past to predict the future, but future is not the same as
the past.

 VUCA Environment = more changes, difficult to predict the future using Forecasting.

 Use Simple Forecast if possible

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 Environmental
analysis
Benchmarking • Environmental
scanning
• Scenario
development
• Forecasting
• Benchmarking

Identifying BEST-in-class performance , then comparing your processes to

the best company

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 Reflection activity

Peer sharing in the teams

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 Reflection 2: Background
Mr. Giam is now very concerned about both the external and internal organisational environment
factors that may affect the company’s growth and sustainability. Hence, he has consulted you as the
consultant to advise them on what are some aspects that they should take note of.

Question 1:

Using the internal environment framework, name one key aspect (in no more than 5 words) which
Mr. Giam should be aware of as a travel tour agency in the hospitality industry.

Question 2:
Internal environment
Explain details of the key aspect (in no more than 95 words).
• Culture
• Values
• Climate

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Class Sharing

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 Case study 1:
Business Endeavours in Savoury Snack
Industry: Old Change Kee

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Have you tried different snacks at different savoury snack retail outlets in Singapore?

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Case Study 1: Business Endeavours in Savoury Snack Industry:
Old Change Kee
Old Chang Kee (Chinese: 老曾记; pinyin: Lǎocéngjì) is an established snack, food and
beverage chain in Singapore specialising in curry puffs and other local snacks. Established in
1956, Old Chang Kee started off as a small stall outside Rex Cinema at McKenzie
Road which still exists. Its current chairman, Han Keen Juan bought over the establishment
which was about to fold up in 1986 and revived the business. The preparation to
go halal began in 2004. On completion of all their documentation process, the Halal
certification application was submitted at the end of October 2004. Old Chang Kee product,
outlets and 2 central kitchens were officially certified Halal by MUIS on 7 January 2005

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Questions
• Question 1: Critically discuss anyone element of the macro environment that will
make an impact on Old Change Kee

• Q2: Describe any ONE element to be evaluated by Old Chang Kee to meet their
competitive environment.

Macro environment
Competitive environment
• Economy • Rivals
• Technology • Suppliers
• Laws and Regulations • Buyers
• Demographics • New entrants
• Social issues • Substitutes and
• Natural ecology (Sustainability complements
& the Natural Environment)

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How are we going to do this?

World Cafe

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 How to do World Café?

10 minutes per
discussion. Two
rounds (Go to the
Host: New inputs from same question)
another team, please use then the next two
different colours round, please go to
different question

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World Café Etiquette

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 Are your ready?

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 How we will conduct this Activity – World Café

Questions 1 2
Teams 1 2 3 4 5 6
Round 1 (15 minutes) 3 1 2 6 4 5
DAR 1 (change Host:
10 minutes)
Round 2 (10 minutes) 4 5 6 1 2 3
DAR 2 (10 minutes) 6 4 5 3 1 2
Round 3 (15 minutes)
Class Sharing

Total: 40 minutes

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Class Sharing
• Question 1: Critically discuss anyone element of the macro environment that will
make an impact on Old Change Kee

• Q2: Describe any ONE element to be evaluated by Old Chang Kee to meet their
competitive environment.

Macro environment
Competitive environment
• Economy • Rivals
• Technology • Suppliers
• Laws and Regulations • Buyers
• Demographics • New entrants
• Social issues • Substitutes and
• Natural ecology (Sustainability complements
& the Natural Environment)

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 Questions?

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