Ch 2 Business Environment

Environmental Analysis

MACRO MICRO

PEST SWOT

Competitive Forces (Michael Porter)

Five Forces Value Chain Generic Strategies

MACRO ENVIRONMENT

PEST-

1. Political & Legal

2. Economic
3. Socio Demographic & Cultural
4. Technological
POLITICAL & LEGAL

POLITICAL LEGAL
Capacity Expansion General Legal Framework
Demand Criminal Law & Company Law
Divestment & Rationalisation Environment Law & Data protection Law
Emerging Industries Employment Law
Entry Barriers Health & Safety Law
Competition Tax Law & Consumer Protection Law
Marketing & Sales Law

ECONOMIC

- National Income
- Unemployment
- Inflation
- Government Policies on tax
o Fiscal
o Monitory
o Balance of payments

SOCIO- DEMOGRAPHIC- CULTURAL

DEMOGRAPHIC- SOCIO CULTURAL

1. Population, Location, Birth& Death Rates Health & Diet
2. Family Cycle-Age - Marital Status -Career Status - Women at Work
Children
3. Buying Patterns Environmentalism (Going green)
4. Social Class- Occupation, Income level, Education
5. Socio Economic Position- Wealth, Life Style

TECHNOLOGICAL

 Delayering
 Downsizing
 Outsourcing
 Flatter Organisations
 Wider Span of Control
 Information as source been appreciated
MICRO ENVIRONMENT

1. SWOT
a) Internal (Strength & Weakness)
b) External (Opportunities & Threats)

2. Competitive Factors
a) Five Forces
i. Threat of New Entrants
ii. Threat of Substitutes
iii. Bargaining Power of Customers/Buyers
iv. Bargaining Power of Suppliers
v. Rivalry Amongst Competitors

b) Value Chain
PRIMARY ACTIVITIES SUPPORT ACTIVTIES
1. Inbound Logistics a) Firm’s Infrastructure
2. Operations b) HR Management
3. Outbound Logistics c) Technology Development
4. Marketing & sales d) Procurement
5. Services
LINKAGES
MARGIN

c) Generic Strategies
 Cost
 Differentiation
 Focus
o Cost Focus
o Differentiation Focus