Chapter 3 Literature Review

3.1 Macro Environment

External environment can be analyzed by scanning general and task environment, these

two levels of environments affect all aspects of company operations. In this section I will

examine some of the marketing and management techniques used by multinational organisations

to discover the multifaceted and indecisive exterior environment over the short, medium and

long period in their industry life cycle.

Fig. 3.1: The affect of environment on business organizations

Source: Sheffield Hallam University resources

3.1 Marco-environment analysis

The analysis is divided in the following sections. See fig. 3.2, and is done by using PESTEL , porters

competitive forces model, and industry life cycle tools.

Fig 3.2: External Environmental Analysis

Analysis of macro/general environment

Analysis of task environment
Analysis of competitor environment

The External
Environment
Strategic Intent
Strategic Mission

3.1.1 General environment analysis PESTEL

General environment can be analyzed by using PESTEL technique. It identifies the most

important factors of the organisation and provides a check list of possible environmental

influences.

Fig. 3.3: Organization General Environment

Adapted from Strategic planning 6th ed, John Wily and sons
 The PESTEL framework primarily involves the two areas to consider, they include the

environmental factors affecting the organization and the important factors which are relevant in

the present context and in the years to come. It is used to identify few key active political,

technological, global, economic, demographic, and socio-cultural forces and how they are

shaping the overall environment in the country and around the globe.

3.1.2 Analysis of Task Environment

Certain groups are found in environment that directly or indirectly affect or are affected

by the organizations operations, Task environment consists of those elements or groups that

directly affect the corporation and, in turn, are affected by it. The task environment is the

industry within which that firm operates.

Fig. 3.4: Organization Task Environment

Analysis of Societal Environment

Economic, Sociocultural, Technological, Political-Legal Factors

Market
Analysis

Community Competitor
Analysis Analysis

Supplier
Analysis
Selection of
Interest Group Strategic Factors Governmental
Analysis Analysis
Opportunities
Threats
Table 3.1: Elements of Task Environments
Customers They are the people who buy products and services. Segmented into business, home
and corporate. Organization should monitor customers changing want / need as it is
critical to business success.

Competitors They are organizations that produce similar good and services. Intensity of rivalry.
Company decides who the competitors are, anticipating competitors move, and
determining competitors strengths and weaknesses.

Suppliers They are the one who support in inputs such as labor, raw materials. Companies that
provide material ,human ,financial, information to other companies

Government They can be ones customer as well as the organization who may impose rules and
regulations that can impact on the organization

Adapted from http://www.csupomona.edu/~wcweber/301/301slide/ch03301/tsld006.htm

3.1.3 Industry environment-Porters five forces

Assess the six forces --

Threat of new entrants
Rivalry among existing firms
Threat of substitute products
 Bargaining power of buyers
Bargaining power of suppliers
Relative power of other stakeholders

3.1.4 Industry Life Cycle

The
TheIndustry
IndustryLife
LifeCycle
Cycle
Industry Sales

Introduction Growth Maturity Decline

Time
Drivers of industry evolution :
demand growth
creation and diffusion of knowledge
 Evolution
Evolutionof
ofIndustry
IndustryStructure
Structureover
overthe
theLife
LifeCycle
Cycle

INTRODUCTION GROWTH MATURITY DECLINE

DEMAND Affluent buyers Increasing Mass market Knowledgeable,
penetration replacement customers, resi-
demand dual segments

TECHNOLOGY Rapid product Product and Incremental Well-diffused

innovation process innovation innovation technology

PRODUCTS Wide variety, Standardization Commoditiz- Continued

rapid design change ation commoditization

MANUFACT- Short-runs, skill Capacity shortage, Deskilling Overcapacity

URING intensive mass-production

TRADE -----Production shifts from advanced to developing countries-----

COMPETITION Technology- Entry & exit Shakeout & Price wars,

consolidation exit

KSFs Product innovation Process techno- Cost efficiency Overhead red-

logy. Design for uction, ration-
alization, low
cost sourcing

3.2 Micro-environment
3.2.1 Tangible Resources
Tangible Resources

Financial Resources
Financial The firms borrowing capacity

Resources The firms ability to generate internal
funds
The firms formal reporting structure and
Organizational
its formal planning, controlling,
Resources and coordinating systems
Physical Resources Sophistication and location of a firms
plant and equipment
Physical Access to raw materials
Resources
Technological Resources Stock of technology, such as
patents, trade-marks, copyrights, and trade
secrets
Technological Resources

Sources: Adapted from J. B. Barney, 1991, Firm resources and sustained competitive advantage.
Journal of Management, 17: 101; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, UK:
Blackwell Business, 100-102.

3.2.2 Intangible Resources

Intangible Resources
HumanResources
Human Resources Knowledge
Trust
Managerial capabilities
Organizational routines

InnovationResources
Innovative Resources Ideas
Scientific capabilities
Capacity to innovate

ReputationalResources
Reputational Resources Reputation with customers
Brand name
Perceptions of product quality,
durability, and reliability
Reputation with suppliers

Sources: Adapted from R. Hall, 1992, The strategic analysis of intangible resources, Strategic
Management Journal, 136-139;
R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, UK: Blackwell Business, 100-102.

3.2.3 value chain

3.2.4 capabilities, core
competency, competitive
advantages