Environmental Appraisal
Environmental Appraisal
Environmental Appraisal
2nd Year MBA Group 3: Jayshree Bharti (2011MB0013) Moumita Barman (2011MB0014) Megha Thacker (2011MB0016) Veeresh Tripathi (2011MB0017) Akhilesh Kumar Singh (2011MB0018)
Environmental Appraisal is the process of identifying opportunities and threats facing an organization.
Concept of Environment
Environment
literally means the surroundings, external objects, influences or circumstances under which someone or something exists. environment of any organization is the aggregate of all conditions, events and influences that surround and affect it.
The
Characteristics of Environment
Environment
External Environment
Includes
all the factors outside the organization which provide opportunities or pose threats to the organization.
Internal Environment
Refers
to all the factors within an organization which impart strengths or cause weaknesses of a strategic nature.
SWOT Analysis
It is a systematic approach to understanding the environment. Business firms undertake SWOT analysis to understand the external and internal environment. It is also known as WOTS-UP analysis. Through such an analysis, the strengths and weaknesses can be matched with the opportunities and threats operating in the environment so that an effective strategy can be formulated.
Components of Environment
Political
Economic
Social/cultural Technological Legal Environmental
Political Factors
Specific election results Specific politicians voted in or out of office Political ideological mood of country or region Opportunities for lobbying Political/business leaders positions on industryrelated issues Government spending focus and levels Government policies on industry-related issues Governmental regulatory vigor Government role in meeting societal needs Media reports
Economic Factor
At global, national and regional levels Interest rates Stock market prices Venture capital deals (IPOs, M&As) Government budget deficit or surplus Inflation rates Consumer income, disposable income, and debt Employment and unemployment levels Tax rates Economic cycle stage (boom vs recession) Global economic metrics Specific effects of economic trends
Technological Factors
New capabilities, equipment, and systems in: Clinical treatment and procedures (drugs, medical devices, diagnostic tests, surgical procedures, treatment regimens) Researching and developing clinical technologies Gathering, recording, and communicating clinical data (EMR, EHR, CPOE systems) Gathering and disseminating nonclinical data (cost, quality, satisfaction, patient logistics)
Legal Factors
Existing laws (long established, how are they interpreted and enforced) New laws (recently enacted, how will they be interpreted and enforced) Proposed legislation (working their way through the legislature, likely impact on industry and organization)
Environmental Factors
Example:
Global
warming, believed by most people to be due to carbon dioxide and other greenhouse gases produced by industrial activity, cars, and other forms of travel.
Example
Toyota is one of the pioneers. It has developed hybrid petrol / electrical cars that use kinetic energy to charge a battery which is used as a supplement to the normal engine, thus significantly improving petrol consumption and reducing emissions in built-up areas where traffic speeds are slow.
Environmental Scanning
It
is the process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business.
Systematic Approach
Under this approach, information for environmental scanning is collected systematically. Information related to markets and customers, changes in legislation and regulations that have a direct impact on an organization's activities, govt. policy statements pertaining to the organization's business and industry, etc. could be collected continuously to monitor changes and take the relevant factors into account.
Ad hoc Approach
Using
this approach, an organization may conduct special surveys and studies to deal with specific environment issues from time to time. Such studies may be conducted when an organization has to undertake special projects, evaluate existing strategies or devise new strategies.
Processed-form Approach
For
adopting this approach, the organization uses information in a processed form available from different sources both inside and outside the organization.
information publications. Mass media Internal sources External agencies Formal studies
analysis Regression analysis The Delphi technique Benchmarking MIS of the firm QUEST (Quick environmental technique)
scanning
QUEST
Proposed by B. Nanus. It is a four-step process which uses scenario-writing for scanning the environment and identifying strategic options. 1. Strategists make observations about the major events and trends in the industry. 2. Then, they speculate on a wide range of important issues that might affect the future of their organizations by scanning the environment. 3. The QUEST director prepares a report summarizing the major issues and their implications. 4. The report and scenarios are reviewed by the group of strategists who identify feasible strategic options to deal with the evolving environment. The options are ranked and teams are designated to develop strategies.
Environmental Appraisal
Glueck suggested a technique for environmental appraisal i.e. ETOP (Environmental Threat and Opportunity Profile). It involves dividing the environment into different sectors and then analyzing the impact of each sector on the organization. It requires subdividing each environmental sector into sub factors and then the impact of each sub factor on the organization is described in the form of a statement. A summary ETOP may show the major factors for the sake of simplicity.
Environmental
Up arrows indicate favourable impact, down arrows (if used) indicate unfavourable impact, while horizontal arrows indicate a neutral impact.
Threat of New Entrants: 1. New entrants are always a powerful source of competition. 2. The new capacity and product range they bring in throw up new competitive pressure. 3. The bigger the new entrants, the more severe the competitive effect. 4. New entrants also place a limit on prices and affect the profitability of existing players.
Determinants:
1. 2. 3.
4.
5.
Govt. policy Access to distribution Switching costs Brand identity Economies of scale
1.
2. 3.
4. 5.
Substitute products is a latent source of competition in an industry. In many cases they become a major constituent of competition. Substitute products offering a price advantage and/or performance improvement to the consumer. They can drastically alter the competitive character of an industry. Substitutes usually limit the prices and profits in an industry.
Determinants:
1. 2. 3.
Bargaining
Power of Suppliers:
1.
2. 3.
Suppliers exercise considerable bargaining power over companies. The more specialised the offering from the supplier, greater is his clout. The bargaining power of suppliers determines the cost of raw materials and other inputs of the industry and, therefore, industry attractiveness and profitability.
The bargaining power of the buyers influences not only the prices that the producer can charge but also influences in many cases, costs and investments of the producer because powerful buyer usually bargain for better services which involve costs and investment on the part of the producer. 2. Determinants: Buyer volume, Buyer information, Ability to backward integrate, etc.
1.
For any player, the competitors influence prices as well as the costs of competing in the industry, in the production facilities, product development, advertising, sales force, etc. 2. Rivalry Determinants: Industry growth, product differences, brand identity, switching goals, exit barriers, corporate stakes, etc.
1.
Ch2-34