Environmental

Forces
and
Environmental
Scanning
 The environment in which a
business operates is a major
consideration in
determining an organizations
design or structure.
Uncertainty, procurement, and
competition are the
considerations linked with, and
be aligned with the limitations of
the external environment.
Environmental
Scanning
Seeking for and
sorting through data
about the
Components of the
External business
Environment:
General and Specific
 External Business
Environment
-refers to the factors/elements
outside the organization which may
affect either positively or
negatively, the organization's
performance
Systematic Monitoring on
the major external forces
influencing the
organization is necessary
to improve the
management companies
 The General Business
Environment
includes:
Economic
Socio cultural
Politico-legal
Demographic
Technological
World and Ecological
Situations
 Economic
Situations
Inflation
Rates of Interest
Changing options in Stock
Market
People's spending habits
 Inflation
-a continual increase in
theprice of goods and services
-increases profits as well as the
cost of doing business and implies
higher demand for products at
higher prices and a tight
employment market with rising
wages.
Rates of Interest
-affects business by
forcing an alteration in its
financing and its accounts
receivables strategies, according
to Forbes.When interest rates rise,
credit becomes more expensive.
When rates fall, credit becomes
easier for the business and
its customers to obtain.
Changing
Options in
Stock Markets
-Thestock market affects individual
businesses by influencing
consumer spending and providing
the chance for stronger returns on
capital costs.
Peoples Spending
Habits
-Consumer spending makes up
more than 70 percent of the
economy, and it usually drives
growth during economic
recoveries.
 Socio-cultural
Situations
Changing values and
Preferences
Customs
Changing of
Values and
Preferences
-What was popular and fashionable 20
years ago may not be popular today or
10 years down the road. Different styles
and priorities can undermine long
successful products and services.
 Politico-legal
Situations
National or Local Laws
International laws
Rules and Regulations
National, Local and
International laws
-A large number of laws affect
businesses,
defining illegality and misconduct
or setting financial and operational
codes for a business to follow. The
many business laws can be divided
into several primary groups,
depending on what aspect of the
business they affect.
Labor laws are regulations that
pertain directly to how businesses
treat employees. These laws include
minimum wage regulations, wage
garnishment rules and worker
protection rules, such as the Migrant
and Seasonal Agricultural Worker
Protection Act. Labor laws also
includes older laws, such as Child
Labor Protection acts and
Occupational Safety and Health rules.
States also have laws for employee
insurance and benefit programs.
 Demographic Situations
Gender
Age
Educational level
Income
Number of family members
Geographic origin
Changes in demographics are
also a significant factor in the
business world. As populations
age, for example, markets for popular
music and fashions may shrink while
markets for luxury goods and health
products may increase. Additionally,
changes in the proportion of genders
and different racial, religious and ethnic
groups within a society may also have a
significant impact on the way a
company does business.
Age
-A company's products
and services are more likely to
appeal to certain age groups.
Younger people under 35 are often
the first consumers to purchase
high-tech products like cell phones,
electronic books and video games.
Income
-A company's products usually
appeal to certain income
groups. For example, premium
products such as high-end womens
clothing usually appeal to women with
higher incomes. Conversely, people
with comparatively lower incomes are
more sensitive to price and, therefore,
may prefer purchasing discount
products.
Geographic Origin
Those who meet buyers'
needs and requirements in
certain geographic regions can
earn higher sales and profits. For
example, people often prefer
certain food and drink flavors in
certain markets.
 Technological
Situations
Electronic Gadgets
Advanced Technology
Use of Gadgets
and Advanced
Technology
-Companies make use
of gadgets such as computers,
robotics, microprocessors, etc.
these have revolutionized business
management; e-commerce,
teleconferencing and sophisticated
info system.
-Technological hardware
and software make team
collaboration easier. For
instance, businesses are
able to cut costs by outsourcing
tasks to virtual workers. Computers
and the Internet are technological
changes that greatly impact how
business is conducted, regardless
of whether there's an actual
physical business location or not
 World and
Ecological
Situations
Global competitors and markets
Nature and changing natural
environment
 The increase in Global
Competitors and Market
Direct competition exists where
organizations produce similar
products that appeal to the same
group of consumers. For example
when two supermarkets offer the
same range of chocolate bars for
sale.
Indirect competition exists when
different firms make or sell items
which although not in head to head
competition still compete for the
same in the customers pocket.
For example, a High Street shop
selling CD's may be competing
with a cinema that is also trying to
entice young shoppers to spend
money on leisure activities.
Change in Natural
Environment
Companies in the industrial or
manufacturing industry often work with
different kinds of equipment, machinery
and chemical-producing agents. In
effect, a business' day-to-day
operations can pose an ongoing threat
to the natural environment. To reduce
the likelihood of damage to the
environment, federal and state
regulations require businesses consider
certain natural environmental factors in
 The Specific
Business
Environment
Stakeholders
Customers
Pressure groups
Investors or owners
Employees
Stakeholders
-are parties likely to
Be affected by the
organization's activities.
-The primary stakeholders in a
typical corporation are itsinvestors,
employees and customers.
However, the modern theory of the
idea include additional stakeholders
such as a community, government
or trade association.
Customers
-those who patronize the
organization's product and
services
-the increase on customers
sophistication makes the managers
have crucial decisions to develop
products of higher value and
improved services due to their
patron's demands.
Suppliers
-those who ensure the
continuous flow of needed and
reasonably priced inputs or
materials and goods for the
product and services.
*Inputs include financial and labor supply
Pressure Groups
Special interest group
Influence organization's
decisions or actions
Apressure groupcan be
described as an organized group
that does not put up candidates for
election, but seeks to influence
government policy or legislation.
They can also be described as
interest groups, lobby groups or
protest groups.
Investors or
Owners
Financial support
Influence top, middle and lower
level managerial decisions
Branch out
Offer new products or services
Apply the necessary loans
Employees
These who work for
another or an employer
Executes company strategies
Maintains the company's stability
Alsocalled worker.
 Components of
Internal Business
Environment
 Internal Business
Environment
-Refers to the factor/ elements
within the organization which
may affect, either positively or
negatively, the performance of
the organization.
 Internal Business
Environment is
composed of:
Resources
Research & development
Production
Procurement of supplies
Products and services
 SWOT
Strength
Weakness
Opportunities
Threats
Strengths
What advantages does your organization
have?
What do you do better than anyone else?
What unique or lowest-cost resources can
you draw upon that others can't?
What do people in your market see as your
strengths?
What factors mean that you "get the sale"?
Weaknesses
What could you improve?
What should you avoid?
What are people in your market likely to see
as weaknesses?
What factors lose you sales?
Opportunities
What good opportunities can you spot?
What interesting trends are you aware of?
Changes in technology and markets on both
a broad and narrow scale.
Changes in government policy related to
your field.
Changes in social patterns, population
profiles, lifestyle changes, and so on.
Local events.
Threats
What obstacles do you face?
What are your competitors doing?
Are quality standards or specifications for
your job, products or services changing?
Is changing technology threatening your
position?
Do you have bad debt or cash-flow
problems?
Could any of your weaknesses seriously
threaten your business?
Human,financial, physical,
andknowledge
factorsthatprovidea firm
themeansto perform itsbusiness
purposes.
Research and
Development
refers to the investigative
activities a business conducts to
improve existing products and
procedures or to lead to the
development of new products and
 Production
The processesandmethodsused to
transformtangible inputs (raw
materials, semi-finished goods)
andintangibleinputs (ideas,
information, knowledge) intogoods or
services.
Procurement of Supplies
Theact of obtaining orbuying goods
and services.
Theprocessincludespreparationand
Processing of ademandas well as the
endreceiptandapproval of payment.
 Products and Services
In theProducts and Servicessection of your
business plan, you will clearly describe--
yep--the products and services your
business will provide.
 Components of
Environmental
Scanning: Developing a
Competitive Mindset,
Considering Business
Scenarios, Business
Prediction, and
Benchmarking
Competitive Mindset
Start of environmental
adapting.
Ignorance = regrets
Understand and predict
various changes, opportunity
and threats
 Considering Future
Business Scenarios
Preparation for future
conditions
Realistic consideration or the
worst-case scenarios and best-
case ones
 Business Prediction
Business forecasting
Method of predicting how
variables in the environment
may alter future business
Can be used in decision
making, off shoring, branch-
outs and expanding
 Benchmarking
Gauging the performance of
Organization
Process of measuring one's
own products, services and
practices
Identification of areas of
improvement
Gathering of information of
company's operations
 From this said reasons,
company's best practices could
be maintained, changes may be
conducted, and will ultimately
lead to company's improved
performance.