This document discusses various strategic analysis tools and environmental factors that affect businesses. It explains that environmental analysis is used to identify internal and external elements that can impact an organization's performance. This includes assessing opportunities and threats from various factors. PESTLE analysis provides a high-level view of the political, economic, social, technological, legal, and environmental conditions for a business. Porter's Five Forces model also analyzes the competitive landscape including the threat of new entrants, power of suppliers and buyers, threat of substitutes, and industry rivalry. Key success factors within an industry that determine financial success are also discussed.

1. 
Prepared by:-
M.S.SaHiR

2.  “Analysis is the critical starting point of strategic
thinking.” (Kenichi Ohmae)
 Environmental analysis is a strategic tool. It is a
process to identify all the external and internal
elements, which can affect the organization’s
performance. The analysis entails assessing the
level of threat or opportunity the factors might
present. These evaluations are later translated into
the decision-making process. The analysis helps
align strategies with the firm’s environment.
Cont…

3. 
Our market is facing changes every day.
what will happen?
how it will affect us?
what to do about it?
Therefore, forecasting is necessary to
predict direction and the effect of change.
Businesses must constantly analyze the
trade environment and the market.

4. There are many strategic analysis tools
that a firm can use, but some are more
common. The most used detailed analysis of
the environment is the PESTLE analysis. This
is a bird’s eye view of the business conduct.
Managers and strategy builders use this
analysis to find where their market currently.
It also helps foresee where the organization
will be in the future.

5. 
Internal and external factors effecting your
any type of small/large business. Internal
factor may below-
Internal
Communication
Structure
Employee Relationship
Work flow in organization/firm

6. The word „macro‟ means large, global
and can be used to describe the
aggregate of factors that surround the
organization.
The general environment that affects all
business firms in an industry which
includes PEST factor.

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9. 
Changes in technology that affect the
workplace, and the products and services
consumers expect
e.g., Information technologies, entertainment
technologies, product technologies.
• Tax laws, minimum wages, environmental
laws, labor laws, consumer protection,
product liability, etc.

10. 
Attitudes of society towards work, careers,
products, services and consumer activism.
 e.g., concern for quality of life, birth rates, woman in
the work force, low-carb dieting, health
consciousness, respect for intellectual property,
desire for “green retailing”

11. Characteristics of the population
e.g., Age, gender, sex orientation and
social classes.
Domestically - falling birth rates, falling
death rates, increase in minority
populations.
Internationally – birth rates are increasing
in some of the poorest (and most
underserved) populations of the world.

12. General health/wellbeing(happiness) of the
local, regional, national or global economy.
e.g., Interest rates, unemployment rates,
consumer spending, confidence and
savings, energy costs, personal
disposable income, inflation rates,
housing costs

13. The external Environment of an organization
are those outside the company that affect the
company’s ability to functions these are as
below.
1. Customer
2. Government
3. Economy
4. Competition
5. Public Opinion

14. 

15. 
Every firm holds a position or role in the chain of
activities necessary to convert physical, financial
and human resources into more valued goods or
services and markets them.
The basic purpose of industry analysis is to assess
the relative strengths and weaknesses of an
organization relative to other players in the
industry. It tries to highlight the structural realities
of a particular industry and the extent of
competition within that industry.

16. 
 Market size and growth rate
 Scope of competitive rivalry
 Number of rivals
 Buyer needs and requirements
 Production capacity
 Pace of technological change
 Vertical integration
 Product innovation
 Degree of product differentiation
 Economies of scale
 Learning and experience curve effects

17. 
Porters Five Competitive Forces
 The model of the Five Competitive Forces was
developed by Michael E. Porter in the 1980s. Since that
time it has become an important tool for analyzing an
organization's industry structure in strategic
processes. Porter's model is based on the insight that a
corporate strategy should meet the opportunities and
threats in the organization's external environment.
Especially, competitive strategy should be based on an
understanding of industry structures and the way they
change. Porter has identified five competitive forces
that shape every industry and every market. The Five
Competitive Forces are typically described as follows.

18. 
Porter’s Five Force Model:-

19. 
1) Threat of New Entrants
2) Bargaining Power of Suppliers
3) Threat Substitute Products
4) Bargaining Power of Buyers
5) Industry Rivalry
Each of these forces affect costs/prices,
therefore, profitability

20. Firms enter when industries are attractive,
unless they find themselves at an immediate
disadvantage relative to incumbents.
Firms can create “barriers to enter” .
Barriers of entry are desirable for entrenched
firms.

21. 
• Who are you key suppliers?
• Suppliers are a strong competitive force when:
 Only a few suppliers exist.
 Few substitutes .
 Buyers not important customers to suppliers.
 Suppliers provide a product crucial to production
process, and/or significantly affects product
quality.
 It is costly to switch suppliers.
 Forward integration a credible threat.
 They can supply a component at a lower cost.

22.  Product/service which fulfills similar
need
 Price cap
 3 Questions
1) Are they available?
2) Can we switch?
3) Price-performance relationship?

23. What affect buyers’ power?
• Volume/Frequency of purchase
• Portion of buyer’s costs
• Lack of differentiation
• Low switching costs
• Self-source or backwards integration
• Buyers’ knowledge
• Buyers’ profitability

24. What is important here is the number and
capability of your competitors – if you have
many competitors, and they offer equally
attractive products and services, then you’ll
most likely have little power in the situation. If
suppliers and buyers don’t get a good deal
from you, they’ll go elsewhere.
Cont…

25. 
Potential factors:
• Sustainable competitive
advantage through innovation
• Competition between online and offline
companies
• Level of advertising expense
• Powerful competitive strategy
• Firm concentration ratio
• Degree of transparency
Cont…

26.  Answers to three questions pinpoint KSFs
1. On what basis do customers choose between
competing brands of sellers?
2. What resources and competitive capabilities
does a seller need to have to be competitively
successful?
3. What does it take for sellers to achieve a
sustainable competitive advantage?
KSFs consist of major determinants of
financial and competitive success in an
industry

27. 
Distribution-
related
Marketing-
related
Skills-related
Organizational
capability
Other types
Technology-
related
Manufacturing-
related
Scientific research expertise; Product innovation capability; Expertise in a
given technology; Capability to use Internet to conduct various business
activities
Low-cost production efficiency; Quality of manufacture; High use of fixed
assets; Low-cost plant locations; High labor productivity; Low-cost product
design; Flexibility to make a range of products
Strong network of wholesale distributors/dealers; Gaining ample space on
retailer shelves; Having company-owned retail outlets; Low distribution
costs; Fast delivery
Fast, accurate technical assistance; Courteous customer service; Accurate
filling of orders; Breadth of product line; Merchandising skills; Attractive
styling; Customer guarantees; Clever advertising
Superior workforce talent; Quality control know-how; Design expertise;
Expertise in a particular technology; Ability to develop innovative
products; Ability to get new products to market quickly
Superior information systems; Ability to respond quickly to shifting
market conditions; Superior ability to employ Internet to conduct business;
More experience & managerial know-how
Favorable image/reputation with buyers; Overall low-cost; Convenient
locations; Pleasant, courteous employees; Access to financial capital; Patent
protection

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