Businesses all fit into an environment

External Analysis & Strategy External environment can be mapped as four areas: Market forces Segments & profitability Demands & trends, Customer acquisition costs (business) Switching costs (customer) Issues affecting market

External Analysis & Strategy Industry forces (Porters Five Forces) Threat of substitutes (competing products) Threat of new entrants (high/low barriers to entry ?) Threat of existing competition (concentration within industry) Power of suppliers (many = low /few = high) Power of buyers (many = low /few = high)

External Analysis & Strategy Key trends (PEST) Political – legislation that is planned/in process/ overseas. Economic s – demographics, income distribution, disposable incomes, tastes, spending patterns. Society – Cultural changes affecting society, shifts in values which will affect buyer behaviour. Technological – Impacts on business Market maker/market breaker (vinyl/ tape/ DAT/ CD/ downloads) Improve operational efficiency Opportunities/disruptions.

PEST analysis is usual tool And might be applied from any of the following standpoints: (Example Moa Breweries) . a company looking at its market - (Moa Brewery and NZ) a product looking at its market - (‘Breakfast beer’ in morning market) a brand in relation to its market - (Moa as a boutique beer brand) a local business unit - (Moa (AK) compared to Moa(WN) ?) a strategic option, such as entering a new market or launching a new product - (Moa into Australia) a potential acquisition - (Moa buys Phoenix Organic softdrinks) a potential partnership - (Moa and Atomic coffee –licensed cafes chain) an investment opportunity - (Moa buys a digital brewery)

PEST variations ( Choose the one that fits your business best) STEP = PEST in more positive approach. PESTEL = PEST + Environmental + Legal PESTELI = PESTEL + Industry analysis STEEP = PEST + Ethical SLEPT = PEST + Legal STEEPLE = PEST + Environmental + Legal + Ethical STEEPLED = STEEPLE + Demographic PESTLIED = PEST + Legal + International + Environmental + Demographic LONGPEST = Local + National + Global factors + PEST

External Analysis & Strategy Macroeconomic forces Global market sentiment – boom or bust? Interest rates affecting capital cost for business affecting spending by buyers (NZ) affecting exchange rates High interest rates/ high exchange rates/ import(+) export(-) Low interest rates /low exchange rate/ import (-) export (+) Unemployment rate affecting general spending level ease of hiring &firing

“The economy”

National Economy Infrastructure (road/rail/power/ I.T.) Services (banking/insurance/logistics/utilities) Education(cost/output/languages/numeracy) Business (tax/employment & environmental law) Government Policy (R&D, business support) Prevailing philosophy (socialism<->capitalism)

Regional Economy As for national economy, plus any other factors Auckland examples Housing cost (attracting staff / effect on spending) Traffic gridlock (time & cost problem for deliveries) Cosmopolitan city – 40% not born here

How will these factors affect our strategy? Depends on sensitivity of the business Purchase price large (house/car) or small (batteries) Product type (income elasticity effect (YED)) Luxury (tracks & exaggerates income level changes) Restaurant meals, overseas travel. Necessity (tracks steadily – minor income effect) Flour, sugar, domestic travel. Inferior (tracks opposite to income) Casual labour, shoe repairs.

How will these factors affect our strategy? Technology ? Threats / opportunities Demographics? Immigration / aging / households (single persons, blended families, multiple incomes) Legislation? What laws appliy now? / what might change? Society ? Church goers / same sex couples / sustainability

Checklist : Political Government has passed legislation which requires further reductions of CO2, HC and NC emissions for vehicles until 2015 New political forces, which are against tax reductions, may be elected in the next years’ elections Import restrictions will increase in 2013 Government is increasing its funding to ‘specific’ industry Government is easing regulations for employment Increasing tensions between our government and our major export partner’s government Legal & security issues on international data

Checklist : Economic GDP will grow by 3% in 2015 Availability of credit for businesses will slightly grow or remain unchanged in 2015. Cost of credit will decrease slightly in the 2nd half of the year Unemployment is expected to decrease. Inflation will remain low – some imported through exchange rate moves. Dollar exchange rates are expected to decrease compared to euro /AUD /USD Disposable income level will decrease

Checklist :Socio-cultural Positive attitude towards “green” vehicles Number of individuals and companies buying through the Internet is 67% and 45% respectively and is expected to grow Immigration is increasing Increasing attitude toward jobs with shorter work hours People tend to buy more domestic rather than foreign products People change their eating habits and now tend to eat healthier food

Checklist: Technological New machinery that could reduce production costs by 20% is in development Country’s major telecom company announced its plans to expand its internet infrastructure and install new optic fiber cables Driverless cars may be introduced in the near future “New” type of table will be introduced into the market next year Additive manufacturing Cloud computing & SAAS (software as a service) Internet & cybersecurity

political ecological/environmental issues current legislation home market future legislation international legislation regulatory bodies and processes government policies government term and change trading policies funding, grants and initiatives home market lobbying/pressure groups international pressure groups wars and conflicts economic home economy situation home economy trends overseas economies and trends general taxation issues taxation specific to product/services seasonality/weather issues market and trade cycles specific industry factors market routes and distribution trends customer/end-user drivers interest and exchange rates international trade/monetary issues

social lifestyle trends demographics consumer attitudes and opinions media views law changes affecting social factors brand, company, technology image consumer buying patterns fashion and role models major events and influences buying access and trends ethnic/religious factors advertising and publicity ethical issues technological competing technology development research funding associated/dependent technologies replacement technology/solutions maturity of technology manufacturing maturity and capacity information and communications consumer buying mechanisms/technology technology legislation innovation potential technology access, licencing, patents intellectual property issues global communications