External Environment Appraisal

Page 1 of 6

External Environment Appraisal

By | August 2010
Page 1 of 6
External environment appraisal

• Introduction and characteristics

• Environmental sectors

o Market

o Technological

o Supplier

o Economic

o Regulatory

o Political

o Socio cultural

• Environmental scanning

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What is environment?

← It is the surroundings, external objects, influences or circumstances under which someone or something exists

← It is the aggregate of all conditions, events and influences that surround and affect it

Characteristics

← Complex

← Dynamic

← Multi-faceted

← Has far reaching effect

External environment sectors…

← Social – how consumers, households and communities behave and their beliefs. For instance, changes in attitude towards health, or a greater number of pensioners in a population

← Legal – the way in which legislation in society affects the business. E.g. changes in employment laws on working hours

← Economic – how the economy affects a business in terms of taxation, government spending, general demand, interest rates, exchange rates etc

← Political – how changes in government policy might affect the business e.g. a decision to subsidise building new houses in an area could be good for a local builder

← Technological – how the rapid pace of change in production processes and product innovation affect a business

Market environment

1. Customer/client factors

2. Product factors

3. Marketing intermediary factors

4. Competition related factors

Technological environment

1. Technological development, Automation introduced

2. Impact of technology

3. R&D activity

4. Rate of technological change

Supplier environment

1. Cost, availability of raw materials, finance, human resource

2. Supply of plant and machinery, spare parts and after sales service

3. Bargaining power...