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Environmental Analysis

Environmental Analysis. Managers must understand how the environment affects their organization It is difficult to predict how certain events will affect both the environment and the organization which creates uncertainty. Environmental Scanning.

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Environmental Analysis

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  1. Environmental Analysis • Managers must understand how the environment affects their organization • It is difficult to predict how certain events will affect both the environment and the organization which creates uncertainty

  2. Environmental Scanning • Searching and sorting through information about the environment • Commonly asked questions • Who are our current competitors • Are there few or many entry barriers to our industry? • What substitutes exist for our product or service? • Is the company too dependent on powerful suppliers? • Is the company too dependent on powerful customers?

  3. The Competitive Environment • A smaller environment that includes the specific organizations with which the organization interacts • Includes: • rivalry among current competitors • threat of new entrants • threat of substitutes • power of suppliers • power of customers

  4. Rivalry Among Current Competitors • Step one: Identify the competition • Small domestic firms • Strong regional competitors • Companies exploring new markets • Overseas firms • New entries to the market • Step two: How do they compete? Return

  5. RTE Breakfast • Price • Different outlets • Mass Merchandisers • WalMart • Costco • Sams Club

  6. Threat of New Entrants • New entrants into an industry compete with established companies • By creating barriers to entry (conditions that prevent new companies from entering an industry) the threat of new entrants is less serious • Barriers to entry include government policy, capital requirements, brand identification, cost disadvantages, and distribution channels Return

  7. RTE: Barriers to Entry • Brand identification • Product proliferation • Shelf space based upon historic sales volume

  8. Threat of Substitute Products Return

  9. Power of Suppliers • Suppliers provide the resources needed for production • Organization are at a disadvantage if they become overly dependent on any powerful supplier • Switching costs are fixed costs buyers face if they change suppliers • Supply chain management is the process of managing the entire network of facilities and people that obtain raw materials from outside the organization, transform them into products, and distribute them to customers Return

  10. Power of Customers • Customers purchase the products or services an organization offers • Final consumers are those individuals that purchase products in their finished form • Intermediate consumers are individuals who purchase raw materials or wholesale products before selling them to final customers • Customers can demand lower prices, higher quality, unique product specifications, or better service • Customers are powerful if they make large purchases or if they can easily find alternative places to buy Return

  11. Environmental Scanning

  12. Environmental Uncertainty • Managers do not have enough information about the environment to understand or predict the future Return

  13. Independent Action Return

  14. Cooperative Action Return

  15. Strong Cultures Return

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