Project Question Week 4

Environmental Scanning (External Analysis)

Before a firm can begin strategy formulation, it must scan the external environment to
identify possible opportunities and threats.
1) Identify: a) firm’s macro, b) micro external environment and c) industry five forces and
what opportunity emerges from those issue and threat that facing the firm
2) Evaluate how well the company is in responding to the macro and micro external
environment by developing EFE matrix
3) Determine industry and position of the firm compare to its competitor, develop
competitiveness profile matrix (CPM)
4) Based on your answer on point 1 to 3 analyze the external environment situation of the
firm
ANSWERS

1) Macro and Micro Environment Analysis (Remote & Task Environment) component
and opportunity and threat that facing the firm

Table 4. External Environment (Macro) Forces

Describe the issues Opportunities Threat

and changes emerge facing the firm
A. MACRO ENVIRONMENTAL FORCES (REMOTE FORCES)
Politics Change of govern- No tax charge -
ment system (GST-
SST)
Price control - less competitive in
price
Economy Global economic cri- - low rate of currency
sis
Reduction in individ- Offering cheaper price generates low de-
ual disposable income mand on medicine

Employee placement Hiring pharmacist as top low quantity of ex-

in pharmacy field is management pert pharmacist
low
Social Ageing populations create new demand on -
healthcare plan
Well-educated con- Ease the medication un- -
sumer derstanding
Technology Biotech Provide no side effect slow effect product
product
Internet easy marketing spread fake informa-
tion
New drugs be found Provide variance of high import cost
medicine
Legal Law of pricing and avoid misuse of limited power of
marketing crime medicine price control
 Obtaining sale license legally sales the -
medicines
Environmental Global pattern of hu- import new medicine by High import cost
man diseases market research
Climate and air quality High demand on -
affects health medicine-boost sales
B. MICRO ENVIRONMENTAL FORCES (TASK ENVIRONMENT)
Consumer Misuses of drugs - create bad image of
pharmacy
Consumer behaviour Offering cheaper price Generates low profit
demanding for low
price
Competitor large number of com- Provide imported high import cost
petitor selling same medicines with good
products quality
Competitive price promotion and discount Same product offer-
ing from competitors
Brand recognition - less familiar to public
Supplier Lack of stock Add more network of interest and believe
supplier of customer decrease
Late delivery Make earlier order loss of customer
C. INDUSTRY ANALYSIS (FIVE FORCES)
Competition Many competitors in - Customer have multi
Among Rivalry same area choice
Technological ad- - Need to adapt new
vancements in technologies
biotech and generic
drugs
Threat of New High entry barriers Expand the company
Entrants due to costs associ- growth
ated with research & -
development of new
drugs
Government regula- Less competition from -
tion; FDA new entrance
Bargaining Large players control Limited power of
Power of Sup- the sales for pharma- - price control
pliers ceutical industry

Threat of Sub- Demand for generic Offering not branded Sales for branded
stitutes versus brand name product with similar ef- product will drop
drugs increased due fects with cheaper price
to cost
Existence of homeo- less demand on mod-
pathic and herbal - ern drugs
treatments
Bargaining Hospitals & other big less power of price
Power of health care organiza- control
Buyer tions buy in bulk quan- -
tities exerted the pres-
sure on pharmaceutical
companies to keep
prices in check

2) Company response to the macro and micro external environment

Table 5. External Factors Evaluation (EFE Matrix)

 Weighted
External Strategic Rating Score =
Weight Comment
Factors (1-5) Weight x
Rating
Opportunities
Hiring pharmacist as 0.08 3 0.24 Pharmacist important as
top management health consultant
create new demand 0.04 3 0.12 creates new plan for age-
on healthcare plan ing population
import new medicine 0.02 1 0.02 Financial problem lead to
by market research less amount of imported
new medicine
promotion and dis- 0.20 3 0.60 low in pricing for certain
count products attract the cus-
tomer
Add more network of 0.04 1 0.04 Main supplier from HQ
supplier only
Threats
spread fake informa- 0.15 3 0.45 negativity spread on face-
tion book affecting company
reputation
limited power of price 0.05 3 0.15 due to price control by
control government
High import cost 0.02 2 0.04 Increase company cost
Same product offering 0.15 3 0.45 Increase competition
from competitors among rivalry

less familiar to public 0.25 3 0.75 lack of advertising and

marketing
Total 1.0 2.86
Procedure to develop EFE Matrix
List Opportunities and Threats in coloumn External Factors
Weight each factor from 0.0 (Not Important) to 1.0 (Most Important) in Coloumn Weight - based on the
factor probable impact to the enterprise strategic position. The total weights must sum to 1.00
Rate each factor from 1.0 (Poor) to 5.0 (Outstanding) in coloumn Rate - based on the company's respond to
the factor.
5= the response is Outstanding
4= the response is above average
3 = the response is average
2= the response is below average
1= the response is poor

Multiply each facotr's weight times is rating to obtain each facotrs;s weighted score in coloumn Weighted
Score
Use Coloumn Comments for rationale used for each factors to support your choice
Add the individual weighted scores to obtain the total weighted score. This tell how well the company is in
responding to the external environment

3) Firm’s position compare to its competitor

Table 6. Competitor Profile Matrix (CPM)

 Key Success Factor Weight COSWAY Klinik Fatah & Ab-
dullah
Rating Score Rating Score
Price Competitiveness 0.08 3 0.24 2 0.16
Product Quality 0.10 3 0.30 3 0.30
Product Range 0.15 2 0.30 1 0.15
Advertising 0.20 4 0.80 2 0.40
Management 0.05 3 0.15 3 0.15
Financial Position 0.10 4 0.40 3 0.30
Customer Service 0.05 3 0.15 3 0.15
Customer Loyalty 0.19 3 0.57 2 0.38
Global Expansion 0.08 4 0.32 2 0.16
Total 1.00 3.23 2.15

4) Analysis of the external situation of the firm:

PEST analysis shows factors that affect or will have major impact on the way a company or
organisation conducts its business. These factors are political, economical, social, techno-
logical, legal and environmental. Political factor affecting Ehsan pharmacy is change of gov-
ernment system from GST to SST. This issue creates opportunity for the company as no
charge imposed to the item they are selling. Besides, economical factor affecting Ehsan
pharmacy is global economic crisis which become a threat to the company due to low rate
of currency. This issue lead to more money needed to obtain one item of medicine. Next, for
social factor is ageing population. This issue becoming an opportunity for the company to
create a new plan for healthcare. For technological factors, internet creates an opportunity
for the company to market their company’s product. However, it also become a threat for
them by an unsatisfied customers who spread negativity on their facebook page. Moreover,
legal factor affecting Ehsan pharmacy is law of pricing and marketing crime. This issue cre-
ates an opportunity for the company to avoid customer illegal act on misuses of drugs.
However, pricing control become a threat for them as they are not having the power to con-
trol the price. Furthermore, environmental factor is global pattern of human diseases cre -
ates an opportunity for the company to import new medicine by doing market research.
However, it become a threat due to high cost of import.