Macroenvironment: Strategic Management and Competitive Advantage

Topics: Strategic management, Globalization, Harvard Business School Pages: 30 (8913 words) Published: June 28, 2011
Second edition
Global and Transnational Business
Strategy and Management
George Stonehouse, Jim Hamill, David Campbell, Tony Purdie


Learning objectivesAfter studying this chapter students should be able to: * describe the nature of the macroenvironment; * define and distinguish between continuities and discontinuities in the business environment; * explain each of the factors to be analysed in a STEP analysis; * describe why macroenvironmental analysis is more complex for international businesses; . explain how national circumstances can affect global strategy; * describe the stages in carrying out a STEP analysis.|


Strategic planning is made more difficult by the rate of change, complexity and associated uncertainty in the environment. Sanchez and Heene (1997) stated that ‘In dynamic environments, building and leveraging competences requires flexibility in acquiring and deploying new resources effectively in changing circumstances.’ It is evident therefore that successful strategy and associated competence development must be informed by a detailed understanding of the business environment.

In Chapter 4 we examined the importance of industry analysis. In this chapter we look outside of the industry to learn about those forces at work that are outside an organization’s control and with which the business must usually learn to ‘cope’. A thorough macroenvironmental analysis is an ambitious task for a non-internationalized business, but for a global company the task is made all the more complex because of the number of industries, markets and countries in which it may operate.

Change in the business environment

The nature of environmental change

The global business environment may be described as possessing three important characteristics:

* it is dynamic – this describes the rate of change (environmental factors tend to change with increasing dynamism as time passes); * it is complex – the forces at work in the environment are numerous, difficult to understand individually and the relationships between them are increasingly intricate; * it is turbulent – the changes taking place are variable in direction, uneven in magnitude and do not always conform to a recognizable or predictable pattern.

Change in the network of business environments can be regarded as either continuous or discontinuous:

* continuous change is a series of minor developments in technology, the world economy, political alignments and societies which is constantly taking place; * discontinuous change describes major developments in the global business environment which arise almost at random and which may cause major alterations in the way that business is conducted. They tend to be ‘one-off’ occurrences, but they can precipitate significant change in business strategies.

The effects of discontinuities on governments and businesses can bring about changes in the balance of power in society, such is their potential influence. The oil crisis of 1974 brought about a large increase in the price of crude oil in Western economies. The effect of this was recession, very high inflation and numerous business failures. Similarly, the demise of communism in Eastern Europe (an example of a political change) opened up these countries, their markets and their industries to the rest of the world. In Europe, the creation of the Single European Market in 1992 eliminated many of the barriers to trade...
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