business environmental analysis is the primary step in strategy formulation of a company

1. ENVIRONMENTAL ANALYSIS SHAMEER P H FUS 100603 S2 TECHNOLOGY MANAGEMENT

3. Internal factors (The Internal Environment

4. External Factors( The External Environment)

5. Business Environment presents two challenges to the enterprise

6. The challenge to combat the environmental threats

7. Exploit the business opportunities

10. TYPES OF ENVIRONMENT INTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT BUSINESS DECISION INTERNAL FACTORS EXTERNAL FACTORS

11. INTERNAL ENVIRONMENT Important internal factors are 1) Value System The value system of founders and those at the helm of affairs has important bearing on the choice of business, the mission and objectives of the organization, business policies and practices. 2) Mission and Objectives The business domain of the company , priorities , direction of development, business philosophy, business policy etc. are guided by the mission and objectives of the company

12. INTERNAL ENVIRONMENT 3) Management Structure and Nature The organizational structure, the composition of the Board of Directors, extent of professionalization of management etc. are important factors influencing business decisions. 4) Internal Power Relationship Factors like the amount of support the top management enjoys from lower levels and workers, share holders and Board of Directors have important influence on the decisions and their implementation. The relationship between the members of Board of Directors is also a critical factor.

13. INTERNAL ENVIRONMENT 5) Human Resources The characteristics of the human resources like skill, quality, morale, commitment, attitudes etc. could contribute to the strength and weakness of the organization. The involvement, initiative etc. of the people at different levels may vary from organization to organization. 6) Company Image and Brand Equity The image of the company matters while raising finance, forming joint ventures or other alliances, soliciting market intermediaries, entering purchase or sale contracts , launching new products etc.

14. INTERNAL ENVIRONMENT OTHER FACTORS Physical Assets and Facilities R&D and Technological Capabilities Marketing Resources Financial Factors

15. EXTERNAL ENVIRONMENT Two Types Micro Environment Consists of actors in the company’s immediate environment, that affects the performance of the company. Macro Environment Consists of larger societal forces that affect all the actors in company’s micro environment.

17. Include

18. The suppliers

19. Marketing intermediaries

20. Competitors

21. Customers

22. Publics

23. More intimately linked with the company than macro factors

24. The micro forces need not necessarily affect all the firms in a particular industry in the same way.

26. Source/Sources should be Reliable

27. Uncertainty regarding the supply or other supply constraints compel companies to maintain high inventories causing cost increases.

28. Very risky to depend on a single supplier

30. Different categories of consumers

31. Individuals

32. Households

33. Industries and other commercial establishments

34. Government and other institutions

35. Depending on single customer is too risky

36. Choice of customer should be done by considering

37. Relative profitability

38. dependability

39. stability of demand

40. growth prospectus

42. Desire competition

43. Generic competition

44. Product form competition

46. Include

47. the middlemen and merchants who “help the company find customers or close sales with them”

48. Physical distribution firms which “ assist the company in stocking and moving goods from their origin to their destinations”

49. Marketing service agencies which “assist the company in targeting and promoting its products to the right markets”

50. Financial intermediaries which “finance marketing activities and insure business risks”

52. E.g. Media publics, citizens action publics, local publics

53. Media attack on any company can influence the government decisions affecting the company.

54. Environmental pollution is an issue often taken up by number of local publics

55. Publics are not always threat to the business.

57. the demographic,

58. economic,

59. natural,

60. technological,

61. political and

62. cultural forces

63. Also known as Societal Environment

65. Economic conditions

66. Economic policies

67. Economic systems

68. Economic condition

69. The economic conditions of a country –for example, the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets, etc.- are among the very important determinants of business strategies.

71. Some types or categories of business are favourably affected by government policy, some adversely affected, while it is neutral to some others.

72. E.g. a restrictive import policy may greatly help the import competing industries, while a liberalisation of the import policy may create difficulties for such industries

73. Economic System

74. The scope of the private business depends on the economic system.

76. In many countries regulations to protect consumer interests have become stronger.

77. Some governments specify certain standards for the products to be marketed in the country; some even prohibit the marketing of certain products.

78. Promotional activities are subject to various types of controls.

79. Eg: In India, Advertisement of alcoholic product is prohibited.

81. the buying and consumption habits of people,

82. their language beliefs and values,

83. customs and traditions,

84. tastes and preferences,

85. Education

86. Strategy should be appropriate in the socio-cultural environment.

89. e.g.

90. Preet-> Prestige for overseas market

91. In Japanese, General Motors’ “body by Fisher” means “Corpse by fisher”

92. Colour

93. Blue: feminine and warm in Holland ; but masculine and cold in Sweden

94. Green: favourite in Muslim world; but represents illness in Malaysia

95. Red: popular in communist countries; but represents disaster in Africa

97. Size, growth rate, age composition, sex composition of population, family size, educational levels, economic stratification of the population, language, caste, religion, etc.

98. E.g.

100. Differences in geographical conditions between markets may some times call for changes in the marketing mix. Geographical and Ecological factors also influence the location of certain industries. E.g. industries with high material index tend to be located near the raw material sources.

101. Topographical factors may affect the demand pattern

102. E.g.. In hilly areas with difficult terrain, jeeps may be in a greater demand than cars.

104. E.g. demand for electrical appliances is affected by the extent of electrification and the reliability of power supply.

105. Demand for LPG stoves depend on rate of growth of gas connections

106. differing technological environment of different markets may call for product modifications

107. E.g. Many appliances are designed for 110 V in USA. They should be converted for 240v in India

108. Technological developments may increase or decrease the demand for some existing products

109. E.g. voltage stabilizers help increase in sale of electrical appliances in markets characterised by frequent voltage fluctuations

111. Recession, economic boom, liberalization

112. Major international developments have their spread effects on domestic business.

113. E.g. Oil price hikes increased the cost of production and the prices of certain products such as fertilizers , synthetic fibres. So usually, the demand for natural fibres and manures increased.

115. “demarketing” refers to the process of cutting consumer demand for a product back to the level that can be supplied by the firm.

120. THANK YOU….