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Business Environment.ppt
- 1. Business Environment : AnIntroduction
- 2. An Overview Business Environment ExternalInternal Macro Micro Structure Resources Culture
- 3.
- 4. Macro Environment: PEST (PESTEL/ PESTLE) Framework Politico-legal Factors Economic Factors Socio Cultural Factors Technological Factors
- 5. Politico-legal Factors This isthe most important influence on the regulation of any business. How stable is the political environment? Influence the Government Policy / Law on your business Government’s position on Marketing Ethics Government’s policy on the economy Government’s view on culture under religion
- 6. Political Factors -Contd. Political System is responsible for Law Making. Immediate laws which affect any business in general are Central Excise, Sales Tax/ VAT, Corporate Income Tax, Personal Income Tax & Service Tax Environmental Protection Law Controls if any on Marketing Strategies Like Marketing / Advertising of Cigarettes, Tobacco, Alcohol etc.
- 7. Political Factors -Contd.. Control on Pricing like sugar, drugs etc. Government Policies on the Economy Role of Public Sector Role of Private Sector Role of Joint Sector
- 8. Economic Factors Economic System EconomicStructure Economic Planning Economic Policies Economic Regulations Economic Functioning Economic Growth & Development
- 9. Economic Factors -Contd. Avenues for Capital Creation Size of the Capital Market Role of the Regulator Type of the Instruments Nature of the Investors Business Cycles
- 10. Socio-Cultural Factors Demographics Distribution ofIncome Caste and Gender Bias Social Mobility Life Style Changes Consumerism Educational Levels Religion and Traditions Language
- 11. Socio-Cultural Factors -Contd. Demographics & Distribution of Income Division of population - Male / Female Age Group of the Population Disposable Family Income Disposable Income in the hands of the different Age Groups Education Level of the Age Groups
- 12. Social Cultural Factors- Contd. Life Style Changes & Consumerism Attitude to living Different Age Groups In tune with available disposable income Thrust on taking care of present needs by spending than saving for the future. Joint living and nuclear families Availability of various media tools Reach of the media to the population
- 13. Advantage of Technology Interms of Economies of Scale New Discoveries & Innovations Speed & Cost of Technology Transfer Rate of Obsolescence Technological Factors
- 14. Other Factors Judicial System InsuranceSystem Banking System Regulatory System Infra Structure Communication Transportation
- 15. COMPONENTS OF MICRO ENVIRONMENT Customers Suppliers: of material and funds Competitors Publics Intermediaries
- 16. Micro Environment: Five-Forces Analysis Thefive forces are environmental forces that impact on a company’s ability to compete in a given market. The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.
- 17. Threat of New Entrants Threat of New Entrants Porter’sFive Forces Model of Competition
- 18. Threat of NewEntrants Barriers to Entry Expected Retaliation Government Policy Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale
- 19. Bargaining Power ofSuppliers Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases Suppliers are likely to be powerful if: Supplier industry is dominated by a few firms Suppliers’ products have few substitutes Buyer is not an important customer to supplier Suppliers’ product is an important input to buyers’ product Suppliers’ products are differentiated Suppliers’ products have high switching costs Supplier poses credible threat of forward integration
- 20. Bargaining Power of Buyers Threat of New Entrants Threatof New Entrants Bargaining Power of Suppliers Porter’s Five Forces Model of Competition
- 21. Bargaining Power ofBuyers Buyers compete with the supplying industry by: * Bargaining down prices * Forcing higher quality * Playing firms off of each other Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to seller’s sales Purchase accounts for a significant fraction of supplier’s sales Products are undifferentiated Buyers face few switching costs Buyers’ industry earns low profits Buyer presents a credible threat of backward integration Product unimportant to quality Buyer has full information
- 22. Threat of Substitute Products Threat of New Entrants Bargaining Powerof Buyers Bargaining Power of Suppliers Porter’s Five Forces Model of Competition
- 23. Threat of SubstituteProducts Products with similar function limit the prices firms can charge Keys to evaluate substitute products: Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery
- 24. Threat of Substitute Products Threat of New Entrants Threatof New Entrants Rivalry Among Competing Firms in Industry Bargaining Power of Buyers Bargaining Power of Suppliers Porter’s Five Forces Model of Competition
- 25. Rivalry Among ExistingCompetitors Intense rivalry often plays out in the following ways: Jockeying for strategic position Using price competition Staging advertising battles Making new product introductions Increasing consumer warranties or service Occurs when a firm is pressured or sees an opportunity Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors
- 26. Cutthroat competition ismore likely to occur when: Rivalry Among Existing Competitors Numerous or equally balanced competitors Slow growth industry High fixed costs Lack of differentiation or switching costs High storage costs Capacity added in large increments High strategic stakes High exit barriers Diverse competitors
- 27. The Five Forcesare Unique to Your Industry Five-Forces Analysis is a framework for analyzing a particular industry. Yet, the five forces affect all the other businesses in that industry.
- 28. Competitor Analysis The follow-upto Industry Analysis is effective analysis of a firm’s Competitors Competitive Environment Industry Environment
- 29. Competitor Analysis Assumptions What assumptionsdo our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Future Objectives How do our goals compare to our competitors’ goals? Capabilities How do our capabilities compare to our competitors? Response What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition?
- 30. Future Objectives How doour goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? What Drives the competitor? Competitor Analysis
- 31. What is thecompetitor doing? What can the competitor do? Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competitive structure? Competitor Analysis
- 32. What does thecompetitor believe about itself and the industry? Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we assuming stable competitive conditions? What assumptions do our competitors hold about the industry and themselves? Assumptions Competitor Analysis
- 33. What are thecompetitor’s capabilities? Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Assumptions What are my competitors’ strengths and weaknesses? How do our capabilities compare to our competitors? Capabilities Competitor Analysis
- 34. Future Objectives How doour goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Assumptions Response What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition? Capabilities What are my competitors’ strengths and weaknesses? How do our capabilities compare to our competitors? Competitor Analysis
- 35. Internal Environment Structure: Chainof command Culture: Beliefs, Expectations and Values Resources: Assets, Skills, Competencies, Knowledge
- 36. ETOP & SWOTAnalysis ETOP Environmental Threat and Opportunity Profile Derived after environmental scanning SWOT Strengths Weaknesses Opportunities Threats
- 37. The purpose ofETOP and SWOT Analysis It is an easy-to-use tool for developing an overview of a company’s strategic situation It forms a basis for matching your company’s strategy to its situation
- 38. ETOP is thestarting point It provides the “raw material” to do more extensive internal and external analysis. SWOT follows. It provides an overview of the strategic situation.
- 39. Opportunities An OPPORTUNITY isa chance for firm growth or progress due to a favorable juncture of circumstances in the business environment. Possible Opportunities: Emerging customer needs Quality Improvements Expanding global markets Vertical Integration
- 40. Threats A THREAT isa factor in your company’s external environment that poses a danger to its well- being. Possible Threats: New entry by competitors Changing demographics/shifting demand Emergence of cheaper technologies Regulatory requirements
- 41. Opportunities and Threatsform a basis for EXTERNAL analysis By examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification. By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.