Strategic Management - External Factors

Topics: Strategic management, Management, Porter five forces analysis Pages: 15 (4180 words) Published: May 14, 2013

1. Discuss the importance for an organization to monitor its external environment? Select two appropriate environmental assessment models and indicate, using examples, how these might be applied in the process of developing a competitive strategy.

Industries are the circles in the supply chain diagram. Each industry is a set of firms that operate in the same space in a supply chain competing to control some of the space and so capture value. Industries have structure, history/trajectories and competitive dynamics that set the contexts for new entrants. Industries also operate within the macro environment –where most analysis starts. In business terminology, the environment consists of all the external forces that impinge on the industry, its markets and its firms. Needless to say, there are a lot of potentially relevant factors.

The Micro-Environment
This environment influences the organization directly. It includes suppliers that deal directly or indirectly , consumers and customers and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this contexts, micro describes the relationship between firms and driving forces that control this relationship. It more a local relationship, and the firm may exercise the degree of influences. Eg : our external customers, agents and distributers, suppliers, our competitors etc The Macro-Environment

This includes all factors that can be influence an organization, but that are out of their direct control. A company does not generally influenced any lay (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threats of substitute products and new entrants. The wider environment is also ever changing, and marketer needs to compensate for changes in cultures, politics, economics and technology. Eg : Political(and legal forces), economic forces, socio-cultural forces and technological forces – known as PEST Factors.

i. Political Factors
The political arena has a huge influence upon the regulations of businesses and the spending power of consumers and other businesses. This is very important to us in order to analyze the market itself by knowing the stability of political environment. Other than that, we must know the government’s policy either it will influence law/tax to our business. From the political environment, we will knowabout the government’s policy on the economy and their point of view on cultures and religion. ii. Economic Factors

From the economic factors, we will know the interest rates on such countries, the level of inflations for employments (per capita) and we will know either it is worth or not in order to invest in such countries based on their long term prospects – GDP per capita and so on. iii. Socio-cultural Factors

The importance for business to monitor their external environment under socio-cultural factors can be best answer as per following : ▪ What is dominant religion?
▪ What are attitudes towards foreign products and services. ▪ Does languages impact upon the diffusion of products onto markets? ▪ What are the roles of men and women within society?
▪ How long the population living? Are the older generations healthy? ▪ Do the population has a strong/weak on opinion on green issues? iv. Technological Factors
Last but not least, the importance to monitor external environment under the technological forces can be best define as to get the true information either the technology provided are up-to-date or can allow the products and services to be made more cheaply and to a better standard of quality. Monitoring the technology will lead us to offer consumers and business more innovative products and services such as...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Strategic Management External Assessment Essay
  • Strategic Management Essay
  • Strategic Management Essay
  • Essay on Strategic management
  • Essay on Strategic Management
  • Strategic Management Essay
  • Strategic Management Essay
  • Strategic management Essay

Become a StudyMode Member

Sign Up - It's Free