BUS 1220 Week 4

1. BUS 1220Week 4 Environmental Scanning

2. Environmental Scanning • Environmental scanning: • The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the organization to avoid strategic surprise and ensure the long-term health of the firm.

3. External Environment – 4 Analytical Tools: Model 1: Macro/Societal environment (PEST): • General forces that do not directly touch on the short-run activities but often influence its long-run decisions. Model 2: Task Environment (5 forces + 1): • The collective strength of these forces in the task environment determines the ultimate profit potential in the industry. The corporation must assess the importance to its success of each of the six forces. Model 3: Issues Priority Matrix • Used to help managers decide which environmental trends should be merel scanned (low priority) and which should be monitored as strategic factors (high priority) Model 4: Industry analysis (Group Map) • An in-depth examination of key factors within a corporation’s task environment.

4. What Environmental Forces Should Be Scanned? Societal Environment (PEST) Task Environment (Industry) Shareholders Suppliers Governments Special- Employees/ Interest Labour Unions Groups Customers Competitors Creditors Trade Associations Communities Social-cultural Forces Political-Legal Forces Economic Forces Technological Forces Internal Environment Structures Culture Resources

5. 1: Macro/Societal Environment • PEST forces: • Political-legal forces • Allocate power, provide laws and regulations • Economic forces • Regulate the exchange of materials, money, energy, and information • Social-cultural forces • Regulate values, mores, and customs • Technological forces • Generate problem-solving inventions

6. Model 1: PESTMacro/Societal Environment: Important Variables Political-legal Antitrust regulations Environmental protection laws Tax laws Special incentives Foreign trade regulations Attitudes toward foreign companies Laws on hiring and promotion Stability of government Economic GDP trends Interest rates Money supply Inflation rates Unemployment levels Wage/price controls Devaluation/revaluation Energy availability and cost Disposable and discretionary income Social-cultural Lifestyle changes Career expectations Consumer activism Rate of family formation Growth rate of population Age distribution of population Regional shifts in population Life expectancies Birth rates Technological Total government spending for R&D Total industry spending for R&D Focus of technological efforts Patent protection New products New developments in technology transfer from lab to marketplace Productivity improvements through automation

7. Exercise 1: PEST Analysis of the athletic footware industry • Large Group Discussion • Using the PEST framework, describe the key macro/societal variables that affect the athletic footware industry today: • Political-Legal Forces • Economic Forces • Social-Cultural Forces • Technological Forces

8. 2: Task EnvironmentForces Driving Industry Competition MODEL 2: 5 Forces + 1 Michael Porter’s Forces Driving Industry Competition Relative Power Of Unions, Governments, etc. Other Stakeholders

9. Model 2: Forces Driving Industry Competition • Based on the model: • Strong Force: a threat, because it is likely to reduce profits • Weak Force: an opportunity, because it may allow the company to earn greater profits

10. Exercise 2: Porter’s 5 Forces +1 Analysis • Large Group Discussion • Using Porter’s 5 + 1 forces framework, assess the importance of each of the forces to the success of the athletic footware manufacturer Brooks today: • Threat of New Entrants • Bargaining Power of Buyers • Threat of Substitutes • Bargaining Power of Suppliers • Rivalry among Existing Firms • Relative Power of Other Stakeholders • Brooks Running - Men's & Women's Running Shoes and Apparel

11. Model 3: Issues Priority MatrixUsed to help managers decide which environmental trends should be merely scanned (low priority) and which should be monitored as strategic factors (high priority) Probable Impact on Corporation High Medium Low High Probability Of Medium Occurrence Low

12. Exercise 3: Issues Priority Matrix • Small Group Exercise Choose several issues from the PEST and 5-Forces analysis (Ex 1&2) Assess the probability (low to high) of those issues actually occurring Assess the likely impact (low to high) of each issue Plot the issues on an Issues Priority Matrix (make your own!) Probable Impact on Corporation High Medium Low High Probability Of Medium Occurrence Low

13. Model 4: Industry Analysis • Industry A group of firms producing a similar product or service, such as soft drinks or financial services. • Strategic Groups • A set of business units or firms that pursue similar strategies with similar resources.

14. Model 4: Industry Analysis (Group Map)

15. Exercise 4: (Hand In)Industry Analysis (Group Map) Identify key companies in the global athletic footware industry Plot companies on the group map Draw a circle around groups of companies that are closest to one another: this is a strategic group. The size of the circle should reflect the relative market share of that group of companies Give each strategic group an appropriate name

16. Exercise 4: Industry Analysis Group Map • Place companies in the global athletic footware industry on the matrix • Draw a circle around companies that are grouped together • Develop an appropriate name for each strategic group PRICE Number of Models Names: ___________________________ ___________________________