Strategic management

1. Strategic Management
Environmental Analysis

2. The Micro and Macro Environments
Internal
Environment
• Every enterprise possesses certain Strengths and Weaknesses within its
internal environment, be it in the areas of R&D, Technology, Mfg, Engg,
Infrastructure, Marketing, Distribution, Human Resources, and so on. These
variables are within the firm’s control.
•At the same time, every enterprise operates in an external business
environment which poses certain Opportunities and Threats in terms of
Economic, Political, Legal, Social and other such factors, which are outside
the firm’s control.
Dr. B. K. Mukherjee 2
Technology
Structure
Attitudes Processes
External
Env.
FIT
R&D
Mktg.
HR
(S&W)
O&T
Economic
Political
Legal
Social
Demographic
Geographic
Technical
Mfg..

3. Environmental Analysis
THE EXTERNAL (MACRO) ENVIRONMENT
All managers, whether they operate in a business, a Govt. agency, a
church/religious orgn., a charitable foundation or a university, must
Dr. B. K. Mukherjee 3
identify
evaluate
react to
the forces external to the enterprise that may affect its
operations, i.e, pose OPPORTUNITIES and THREATS.
Hence, forecasting and anticipating changes is important. Environments
may be classified as:
1. ECONOMIC ENV: is of the greatest importance to all types of organized
enterprise. In addition to such things as Inflation, Budgetary deficit,
Monetary Policy, Bank Rate, Compulsory Reserve Ratio, etc.it includes
a) Capital, in most cases, is a scarce resource. All kinds of operations
are dependent on the availability and prices of the required capital items
(Machinery/Buildings/Inventories of goods/Office eqpmt./Tools/Cash,
etc.) Many of these items may be controlled by the Govt.
b) Labour : Availability (qualified personnel), Quality (trained and willing
workers) and Price (USA v/s Europe v/s Asia) of labour is important.

4. Environmental Analysis (contd.2)
c) Price levels : Inflation not only upsets businesses but also has highly
disturbing influences on every kind of orgn. through its effects on
costs of labour, material and other items.
d) Productivity : is extremely important in addition to availability and price.
In USA, prody. Is particularly strong in farming. Japan and China
have very high levels of prody. in manufacturing businesses.
Productivity is partly dependent on the state of technology.
e) Entrepreneurship : An Entrepreneur is usually regarded as one who
- sees a business opportunity;
- obtains the needed resources;
- knows how to put together an operation successfully; and
- has the willingness to take a personal risk of success or failure.
2. TECHNOLOGICAL ENVIRONMENT : “Technology” may be regarded
as the sum total of the knowledge we have of ways of doing things,
including inventions, innovations and techniques.
Business must of necessity keep abreast of latest technology to
survive in today’s competitive environment. Staffing and Leadership
in an organization also vary with the level of technology.
Dr. B. K. Mukherjee 4

5. Environmental Analysis (contd.3)
3. LEGAL ENV : Complex of laws, regulations and court decisions –
Managers are expected to know the legal implications and
requirements applicable to their actions. Hence, need for expert legal
advice at all times. Laws may also create Opportunities and Threats.
PRIOR TO 1991, industries were regulated under Industrial Dev.&
Regulation Act, 1951. Later, licensing system was abolished and
MRTPA came into the picture. This was then replaced by the
Consumer Protection Act, 1986 which provided
i) right to choice,
ii) right to safety,
iii) right to information,
iv) right to be heard, and
v) right to privacy – resale price maintenance not allowed.
TRADE RELATED INTELLECTUAL PROPERTY RIGHTS (TRIPR) :
covers intellectual properties, copyrights, patents, trademarks, etc.
which are assuming increasing importance, especially in the post-
WTO regime.
Dr. B. K. Mukherjee 5

6. Environmental Analysis (contd.4)
a) Patents Act : Patent is an exclusive document or legal protection
given for an invention of a product or process. All categories except a
few will get a Patent whose life is 14 years, but for Pharma and Agro-based
industries it is 4 years. This may be an Opportunity for some
and Threat for others.
b) Copyrights Act : Legal protection is given for a work of creative art
or literature, commercial exploitation of which is prevented. Its life
lasts to 60 years after the death of its creator.
c) Trade & Merchandise Act : Trademark is a legal protection for
brand (logo, letter, name, slogan, etc), commercial exploitation of
which is prevented. There is no life of trademarks. Sometimes, a
product gets associated with its trademark, rather than its generic
name – ultimate proof of success (eg.,Dalda, Xerox, Tempo).
4. LABOUR ENV : The labour climate, militancy and attitude varies from
region to region (eg, Mumbai, Gujarat, Punjab, Tamilnadu, W.Bengal,
Kerala, Kashmir, Goa). Also, labour laws play a role, eg. (a) number
of members in a trade union, (b) political leaders heading a trade
union.
Dr. B. K. Mukherjee 6

7. Environmental Analysis (contd.5)
5. SOCIO-CULTURAL/DEMOGRAPHIC ENV :
a) Cultural perceptions/Social norms : National holidays, level of
corruption, advertising standards, public morals, etc.
b) Language connotations : differ from country to country, eg:
Chevrolet – ‘NOVA’ (No-va = “Does not go” in Spanish);
GM – “Body by Fisher” (connotation of Dead body in some languages);
PEPSI – “Come alive” (“Rise from the Dead”, in Chinese).
c) Demographic factors : i) earlier joint families, now nuclear families;
ii) More and more working women;
iii) move toward metro-centric lifestyle, etc.
6. COMPETITIVE ENV : governed by the Porter’s Five-forces Model, i.e,
threats from present rivals, suppliers, consumers, new entrants and
substitutes.
7. ECOLOGICAL ENV : Environmental Safety awareness and conformity,
Greenhouse Gas emissions, Ozone depletion, Env. Management
Systems, Environmental Laws, etc.
Dr. B. K. Mukherjee 7

8. Environmental Analysis (contd.6)
8. ETHICAL ENV :
 ‘Ethics’ are sets of generally accepted and practiced standards of
personal conduct. Often ethical standards are enacted into laws, but
not all can be codified.
 Ethical standards vary with people’s culture and sense of values and
from nation to nation or from society to society (Eg, election donations,
payoffs, profiteering, etc.).
9. CORPORATE SOCIAL RESPONSIBILITY:
 In recent years, there has been an increasing growth of strong social
beliefs pertaining to a better quality of life, for an environment cleansed
of water and air pollution, decent housing, safe streets, efficient
transportation and better health, educational and cultural facilities.
 A society, awakened and vocal with respect to the urgency of social
problems, is asking the managers of all kinds of organizations,
particularly those at the top, what they are doing to discharge their
social responsibilities and why they are not doing more (eg, Mithi River
Development Project in Mumbai).
Dr. B. K. Mukherjee 8