2005 John Wiley & Sons

Environmental Analysis and

Strategic Uncertainty

Environmental Analysis and Strategic Uncertainty

PPT 6-1

Environmental Analysis

Technology

2005 John Wiley & Sons

To what extent are existing technologies maturing?

What technological developments or trends are affecting or
could affect the industry?
Sustaining innovations help incumbent companies sell better
products for more money to their best customers. Whereas,
disruptive technologies appeal to customers who are
unattractive to incumbents, usually because they are not in the
high-volume, high-margin sweet spot of the market.
Using technology:
1.
2.
3.
4.

Use technology to create an immediate, tangible benefit for the

consumer.
Make the technology easy to use.
Execution matters: prototype, test and refine.
Recognize that customer response to technology varies.

Environmental Analysis and Strategic Uncertainty

Figure 6.1

PPT 6-2

Environmental Analysis
Government

2005 John Wiley & Sons

What changes in regulation are possible? What will

their impact be?
What tax or other incentives are being developed that
might affect strategy?
In the global economy, possible political hot spots
need to be understood and tracked.

Economics

What are the economic prospects and inflation outlets

for the countries in which the firm operates? How will
they affect strategy?
How will exchange rates affect strategy?

Environmental Analysis and Strategic Uncertainty

PPT 6-3

Environmental Analysis
Culture

2005 John Wiley & Sons

What are the current or emerging trends in lifestyles,

fashions, and other components of culture? Why?
What are their implications?
Current and Emerging Trends:

Tribing
Cocooning
Fantasy Adventure
Pleasure Revenge
Small Indulgences
Down-aging
Being Alive
99 Lives

Environmental Analysis and Strategic Uncertainty

Figure 6.1

PPT 6-4

Environmental Analysis

2005 John Wiley & Sons

Demographics
What demographic trends will affect the
market size of the industry or its submarkets?
What demographic trends represent
opportunities or threats?
Powerful, predictable underlying force.
Examples: Aging Population; Growing Teen
Market; Ethnic Population Shifts; Nontraditional Family Structures; Regional Shifts
in Population

Environmental Analysis and Strategic Uncertainty

PPT 6-5

Environmental Analysis

2005 John Wiley & Sons

General External Analysis Questions

What are the significant trends and future
events?
What threats and opportunities do you see?
What are the key areas of uncertainty as to
trends or events that have the potential to
impact strategy? Evaluate these strategic
uncertainties in terms of their impact.

Environmental Analysis and Strategic Uncertainty

Figure 6.1

PPT 6-6

Strategic Uncertainties
Impact:
The extent to which it involves trends or events that
will impact existing or potential businesses.
The importance of the involved businesses.
The number of involved businesses.
2005 John Wiley & Sons

Immediacy:
The probability that the involved trends or events will
occur.
The time frame of the trends or events.
The reaction time likely to be available, compared
with the time required to develop and implement
appropriate strategy.

Environmental Analysis and Strategic Uncertainty

PPT 6-7

Strategic Uncertainties Categories

Immediacy
Immediacy
High
High

Monitor and
analyze;contingent
strategies
considered

Low
Low

Impact

2005 John Wiley & Sons

High
High

Low
Low

Environmental Analysis and Strategic Uncertainty

Analyze Indepth; develop

strategy

Monitor and
analyze

Monitor

Figure 6.2

PPT 6-8

Scenario Analysis

Scenarios

2005 John Wiley & Sons

What strategic uncertainties are worth being

the basis of a scenario analysis?
Two Types:
1. Strategy Developing Scenarios
2. Decision-Driven Scenarios

Environmental Analysis and Strategic Uncertainty

PPT 6-9

Scenario Analysis

2005 John Wiley & Sons

Identify
Identify
Scenarios
Scenarios
Relate Scenarios
Scenarios
Relate
toExisting
Existing or
or
to
ProposedStrategies
Strategies
Proposed

Environmental Analysis and Strategic Uncertainty

Estimate
Estimate
Scenario
Scenario
Probabilities
Probabilities

Figure 6.3

PPT 6-10

 2005 John Wiley & Sons

Key Learnings

Environmental analysis of changes in technology, demographics,

culture, the economy, and governmental actions should detect and
analyze current and potential trends and events that will create
opportunities or threats to an organization.

Impact analysis involves assessing systematically the impact and

immediacy of the trends and events that underlie each strategy
uncertainty.

Scenario analysis, a vehicle to explore different assumptions about

the future, involves the creation of two to three plausible scenarios,
the development of strategies appropriate to each, the assessment
of scenario probabilities, and the evaluation of the resulting
strategies across the scenarios.

Environmental Analysis and Strategic Uncertainty

PPT 6-11

 2005 John Wiley & Sons

By MYNIPPON Team (with contribution from Kurt Hahn of Pacific Edge)The

population curve in Japan reveals a sharp decline in birth rates over the last
three decades, particularly compared to other G7 countries. This topic is of
major concern for policy makers today who face impending tax revenue
shortfalls to support social programs for senior citizens in the coming years.
The changing age profile also impacts the trends in the fashion
industrybecause of the complex relationship between age and fashion
style. While we have not studied the correlation in different
countries/cultures, we do have anecdotal evidence to say that Japanese
women are far more likely to dress in a style that would be considered more
appropriate for someone younger than them. It seems that the West,
especially the United States, has gotten more serious in how it
dresses. Women in their 20s dress like serious adults while Japanese
women in the same age bracket dress like teenagers(Wardrobe for work at
home moms). It is not uncommon in Japan (especially in such Tokyo
neighborhoods as Jiyugaoka, Omotesando, and Ginza areas popular with
women 30s and up) ladies in their late-30s/early 40s wearingBurberry Blue
label knit tops (which was originally targeted to late-teens/early 20s) or cute
hair accessories (popular among teenagers in New York). These examples
provide ample proof that market segmentation for the fashion industry in
Japan can be tricky there are no clear bands and most companies have
learned to work with a model that allows for a significant overlap.
Population distribution in Japan by age

Customer Characteristics

2005 John Wiley & Sons

Demographic
Psychographic
Geographic
Behavioristic

Demographics

2005 John Wiley & Sons

Demographics statistics that describe a

population in terms of personal
characteristics such as age, gender,
income, ethnic background, education,
religion, occupation, and lifestyle.

 2005 John Wiley & Sons

Psychographics
Psychographics studies of consumers
based on social and psychological
characteristics such as attitudes, interests,
and opinions.
Consumers attitudes and values are often
represented by how they choose to spend
their time and money.

 2005 John Wiley & Sons

Psychographic Trends
Women in the
workforce

Urban
population

Home and
family
activities

Travel

Work at home

Home
computer use

Casual dress
for home and
office

Value of time Large clothing

over money
sizes

 2005 John Wiley & Sons

Geographics
Statistics about where people live
Region of the country, size of the city or
county, the density of the population
(urban, suburban, or rural), even climate
Location of where people live has an
influence on their buying habits.

 2005 John Wiley & Sons

Behavioristics
Behavioristics statistics about
consumers based on their knowledge,
attitudes, use, or response to a product.
- marketers look at the purchase occasion
for a product, product benefits, or usage
level and commitment.

 2005 John Wiley & Sons

Behavioristics
Purchase occasion instance when a
customer might use a product. Ex. afterfive
Product benefits the benefits that
consumers desire in a fashion product or
service. Ex. Stain-resistance.
Usage level and commitment identified
by how often they use the product and
their loyalty to purchasing it.

Marketing Strategies

2005 John Wiley & Sons

Three strategies that fashion marketers

use to increase their business:
1. increase the number of customers
2. increase the average transaction
3. increase the frequency of repurchase