ORGANIZATIONAL ENVIRONMENT ANALYSIS
The study of the organisational environment to pinpoint environmental factor that can significantly influence organisational operations.
It is important to fully understand how the environment is structured to carry out such analysis.
There are three clear levels:
-The macro-environment
-The industry (or sector) environment
-The competitive/market environment.
PESTLE ANALYSIS
Is much more than just a checklist of items. It is relatively easy to pull together a long list of factor from the macro-environment that may influence the future of any business. However, such a list is not helpful or indeed useful when attempting to gain a richer understanding of the dynamics at play. More examination and determination of the key drivers of change is required. "The challenge is to reduce long lists to shorter ones, to develop a good understanding of how each influence might play out in the future, and the way in which this would affect the firm"
Judgement and common sense is essential to make best use of the resources available in carrying out such an analysis, and to ensure that all involved are alert to their own subconscious biases (perjuicios) or "blind spots"
PORTER FIVE FORCES
The main purpose of this model is to analyse industry attractiveness in order to forecast industry profitability.
1. Rivalry between existing players.
-Market size/growth rate
-Number of competitors
-Rate of industrial growth
-Level of fixed costs
-Degree of difference
-Diversity of competition
-Barriers to exit
2. The bargaining (negociación) power of buyers
-Importance of the product
-Percentage of buyers costs
-Degree of standardisation
-Few switching costs (costos de cambio)
-Low profits
3. The bargaining (negociación) power of suppliers (proveedores)
4. The threat of new entrants into the business
-Economies of scale
-Product differentiation
-Capital required
-Switching costs
-Access to distribution
-Governmet policy
5. The threat of substitute products.
-Propensity to substitute
-Better performance
THE STAKEHOLDER ANALYSIS
External stakeholders include creditors, cutomers, unions, local communities, government, suppliers, competitors, public interest groups. All of these have important interests. The ability to manage the needs and expectations of the group of people most heavily associated with the industry is a necessity.
The purpose of stakeholder analysis is to
determine the assumptions the various stakeholder groups make about an industry. Some will support the industry and as a result create opportunities, while others will resist and present threats. The task is to determine each stakeholders assumptions both supporting and resisting, and to place each on a grid, evaluating the importance of each assumption on the strategy and the extent of certainty it. A scale of 0 to 10 can be used for both criteria, with 0 representing low importance and low certainty and 10 representing high importance and high certainty.
KEY SUCCESS FACTORS
Are defined by Grant as "the factors that are important in determining a firm's ability to surveve and prosper"
Asking two questions:
1.What do customers want? --> looking closely at customers of the industry.
Seeing the customers not like a source of bargaining power (fuente de negociación) or a threat to profitability but more like the fundamental reason for the existence of the industry and the central source of profits. Anticipate their needs, establish the basis of how they select one supplier's offerings in preference to that of another.
2. What does the firm need to do to survive competition? -->Takes a look at the basis for competition within the industry, the nature of its intensity and its key elements. If competition is intense and even if the product is highly differentiated and is consumers choose on a range of value benefits, such as design and quality rather than on price, low cost may still be a prerequisite to the survival of the business.
To complete the situation analysis an internal analysis needs to be completed with a view to establishing an understanding the internal strengths and weaknesses of the business. This will enable the completion of the SWOT.
In attempting to identify the key strategic issues facing the business, it is important to seek out the relationship between the elements, as noted earlier. A useful question to pose is "what are the implications?"
---> Demographic trends
---> Information technology developments (providing means to make considerable productivity gains in the sector and we have limited resources and no plans in the pipeline?)
