MBA 671 Dr. S. Borna

Objectives  Tracking & Identifying Opportunities in the Macroenvironment  Demographic, Economic, Natural, Technological, Political, & Cultural Developments  Strategic Environmental Issue Management

WHAT DO WE MEAN BY ENVIRONMENT? The environment is the totality of forces that are external and potentially relevant to the particular agent.

Rapid Change of Environmental Forces 1. Economy 2. Technology 3. Governmental Regulation 4. Cultural Environment 5. Political Environment

To Identify Environmental Forces, Ask Two Questions 1. Can I do anything about it? 2. Does it matter relative to my objective?

2. Environmental forces are difficult to control 3. Since environmental forces are diverse, it requires diversity of diverse, it requires diversity of expertise to handle these forces. expertise to handle these forces. Environmental Forces Characteristics: 1. It is difficult to detect and interpret environmental forces

Layers of Product’s Environment Product Intraorganization Environment Task Environment Macro-Environment Global

Economic Environment Income Distribution Subsistence economies Raw-material-exporting economies Industrializing economies Industrial economies Savings, Debt, & Credit Availability Savings, Debt, & Credit Availability

Intraorganizational Environment Other Corporate Departments and Personnel. Other Corporate Departments and Personnel.

Task Environment SuppliersCompany MarketingIntermediaries Market

MACROENVIRONMENT  Cultural Environment  Economic Environment  Technological Environment  Natural Environment

Demographic Environment Worldwide Population Growth Population Age Mix Ethnic Markets Household Patterns Educational Groups Geographical Shifts in Population Shift from Mass Market to Micromarkets

GLOBAL ENVIRONMENT  International Changes

Political- Legal Environment Political- Legal Environment Increased Legislation Increased Legislation Special- Interest Groups Special- Interest Groups

Natural Environment Higher Pollution Levels Higher Pollution Levels Increased Costs of Energy Increased Costs of Energy Shortage of Raw Materials Shortage of Raw Materials Changing Role of Government Changing Role of Government

Accelerating Pace of Change Accelerating Pace of Change Unlimited Opportunities for Innovation Unlimited Opportunities for Innovation Increased Regulation Increased Regulation Issues in the Technological Environment Issues in the Technological Environment Varying R & D Budgets Varying R & D Budgets

Social/Cultural Environment OfOrganizationsOfNature OfOneself OfSociety Of the Universe OfOthers Views That Express Values Views That Express Values

Social/Cultural Environment

Strategic Environmental Issue Management 1. Environmental Scanning 2. Key Environmental Issue Identification Identification 3. Impact Evaluation 4. Formulation of a Response Strategy Strategy

Alternative approaches to environmental Scanning Nature of Scanning Activity: Irregular Irregular Ad-hoc studies Ad-hoc studies Regular Regular Periodically updated studies Periodically updated studies Continuos Continuos Structured data collection and Structured data collection and processing system processing system

Scope of Scanning Specific Events Selected Elements Broad range of environmental components

Impetus for scanning Crisis initiated Problem areas Planning process

Organizational Responsibility Specially designed teams Various staff services Environmental Scanning Unit

Which of these three environmental scanning approaches is suitable for your organization? Answer: Depends on the firm’s potential vulnerability to environmental forces

Key environmental Issue Identification Identification Somehow the system (the firm) must determine: 1. The probability that an issue can materialize into a threat can materialize into a threat or an opportunity; or an opportunity; 2. The degree of impact it can have on the firm. on the firm.

KEY ENVIRONMENTAL ISSUE IDENTIFICATION PROBABILITY HIGHLOW HIGH LOW IMPACT

Few examples: 1. Interstate barriers to bank are lowered lowered 6. Antitrust actions are taken against large banks large banks 9. Government regulation favors non-bank financial institutions non-bank financial institutions 2. Technological breakthroughs occur in information processing in information processing

Impact Evaluation You have to answer the following questions: 1. Does the issue represents a threat or opportunity? or opportunity? 2. How significant will its impact on the performance of the firm? the performance of the firm?

3. What is the likely timing of the impact impact 4. What specific marketing areas will be affected? will be affected?

Formulation of a Response Strategy Strategy Reactive Strategy Proactive Strategy

Response Strategies to Environmental Issues: 1. Opposition (N. Rifle A.) 2. Adaptation (usually compulsory ex. Auto industry ex. Auto industry mandatory fuel mandatory fuel standards) standards) 3. Offensive Strategy Waste Management Inc.: Waste Management Inc.: How to improve waste disposal? How to improve waste disposal?

4. Redeployment Strategy: Example Tobacco Industry and Example Tobacco Industry and diversification diversification 5. Contingency Strategy: If saccharin is band in drugs If saccharin is band in drugs foods, soft drinks, etc. foods, soft drinks, etc. 6. Passive strategy: (do nothing wait and see strategy) wait and see strategy)

Review  Tracking & Identifying Opportunities in the Macroenvironment  Demographic, Economic, Natural, Technological, Political, & Cultural Developments