1. Businesses all fit into an environment

2. 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

3. 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)

4. 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.

5. 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)

6. 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

7. 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

8. “The economy”

9. 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)

10. 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

11. 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.

12. 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

13. 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

14. Checklist : Economic GDP will grow by 3% in 2015
Availability of credit for businesses will slightly grow or remain unchanged in 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

15. 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

16. 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

19. 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

20. 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