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8/8/2019 Role of Environment on Strategy
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ROLE OF ENVIRONMENT ONSTRATEGY
Macro and Micro environment
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THE ORGANIZATIONSENVIRONMENT
Business strategies are based on their abilityto capture and convert the impact of externaland internal forces into the desired outcomes
Depending upon the type of industry or theuncertainty in the external environment, therequirements to follow the externalenvironment keep changing.
Three types of environment
1.THE MEGA ENVIRONMENT
2.THE MICRO ENVIRONMENT
3.THE TECHNOLOGICAL ENVIRONMENT
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THE MEGA ENVIRONMENT A business firm is the key institution for the
economic and social development of the societies.
Trade liberalization and globalization has changed theconcept of competition.
Depending on the size of the organization, themarkets the organization serves, the product that itoffers and the impact of the environmental factorswill vary.
Change in the mega environment not only effects thetraditional business organizations but they also impactthe local industries changing the way firms competewith each other.
E.g. ENTRY OF PEPSI AND COCA COLA IN INDIA
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ELEMENTS RESPONSIBLE FOR CHANGESIN MEGA ENVIRONMENT
DEMOGRAPHICS
Population size
Age structure
Geographic distribution Income distribution
Life styles
Increase in World population
Growth of urban populations
Changes in Indian demographics
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THE POLITICAL AND LEGAL ASPECTS Tariffs
Taxes
Reservations for manufacture of products to specific goods andbarriers to entry into various activities
Subsidies
Regulatory framework
Environmental protection laws
Forced product diversification
Political manifestos
Law and order
Patents laws and patents Political conditions in the foreign country
Antitrust legislation
Import and export regulations
Special local, state and national laws
Legislation on employment
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THE SOCIO-CULTURAL ASPECTS
Different societies, different social attitudes anddifferent cultural values
Socio-cultural system determines how changed isviewed and how technology is absorbed and diffused.They may have effects on:
Cultural and religious implications on productdefinitions
Workforce composition and the implication formanaging increased ethnic and cultural diversity
Change sin attitudes about the quality of work life Shifts in work and career preferences, including an
increase in employment and business involvement ofwomen
Shifts in product and service preference
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THE MICRO ENVIRONMENT
It is the effect of competition within the industry onthe growth and value creation.
During competition there are a number of factors
that are forcing organizations to change Cost sensitivity
Price competition
Product improvements
Acceleration of market development Falling breakeven size
Relationship between Manufacturer and Distributionchannels
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Order qualifying factors
Customer satisfaction
Non price factors
More consumer choice Product life
Importance of design
Consumer power
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THE TECHNOLOGICAL ENVIRONMENT
Importance of technology
INNOVATION
Technology is the outcome of innovation
NATURE OF INNOVATIONS Innovations are self propagating
They proliferate
Creates new business opportunities
Create higher technical competence
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Technological change is
A process by which the technology pool iscontinuously updated and results in:
A new or better product or process A better production system or technique and
Knowledge of whatever sort about such techniques
Technological change is the change in production
functionTYPES OF TECHNOLOGICAL CHANGE
Convergent change
Divergent change
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CHARACTERSTICS OF TECHNOLOGICAL CHANGE
It expands the knowledge industry
Increases requirements of Technical manpower
Is fast paced Increases investments in R&D
New approaches to R&D
Reduces reaction time
Alters organizational relationships
Is a business strategy
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DISRUPTIVE TECHNOLOGIES These are technologies that not only create new
industries but eventually change the world.Disruptive t6echnologies come from outside the mainstream.
The light bulb was not invented by the candleindustry to improve output.
E.g. Telephone, as it has changed the way marketingis carried out
Introduced a radically new approachdirect sellingthrough the telephonethis was started by somemembers of the British insurance industry and wasthen adopted by the industrydirect selling through
the telephone has resulted in the total restructuringof the insurance industr .