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Environmental Analysis

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Presentation on theme: "Environmental Analysis"— Presentation transcript:

1 Environmental Analysis

2 INTRODUCTION An integrated understanding of the external and internal environment is essential for firms to understand the present and predict the future.

3 INTRODUCTION Firm’s external environment is divided into three major areas. General Industry Competitor

4 General Environment It is composed of dimensions in the broader society that influence an industry and firm within it. PESTEL Analysis is used to analyze General Environment

5 Industry Environment It is a set of factors that directly influence a firm and its competitive actions and competitive response. Five Force Model is used to analyze Industry Environment.

6 Competitor Analysis How to gather and interpret the information about the competitor is called Competitor Analysis.

7 Environment Analysis Analysis of General Environment focused on the future. Analysis of Industry Environment is focused on the factors and conditions influencing a firm’s profitability within a industry. Analysis of Competitors is focused on predicting the dynamics of competitor’s actions, response and intension.

8 Environment Analysis Performance improves when the firm integrates the insights provided by analyses of all environments.

9 Components of External Environmental Analysis
Scanning : Identifying early signals of environment changes and trends Monitoring: Detecting meaning through ongoing observations of environmental changes and trends.

10 Components of External Environmental Analysis
Forecasting : Developing projections of anticipated outcomes based on monitored changes and trends Assessing : Determining the timings and importance of environmental changes and trends for firm’s strategies and their management

11 General Environmental Analysis
PESTEL analysis is used to analyze General Environment. P = Political E = Economical S = Sociocultural T = Technological E = Environmental L = Legal

12 1.Political Factors Political factors, are how and to what degree Government intervenes in the economy. Political stability. Tax policy Trade policy Ex: Tata Nano

13 1.Political Factors Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods). Furthermore, governments have great influence on the health, education, infrastructure, and of a nation.

14 1.Political Factors Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system.

15 2.Economical Factors These factors have major impacts on how businesses operate and make decisions. Economic growth Interest rate Exchange rate Inflation rate Etc ……

16 2.Economical Factors Ex. Interest rate affects on cost of capital Exchange rates affect price of imported goods Inflation may provoke higher wage demands

17 3.Sociocultural Factors
Factors include cultural aspects health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety.

18 3.Sociocultural Factors
Social factors include the Trends in social factors affect the demand for a company's products and how that company operates.

19 3.Sociocultural Factors
The ageing population also has impact on demand: for example, demand for medicines has increased whereas demand for toys is falling

20 4.Technological Factors
Technological factors include R & D, Automation, Technological Change

21 4.Technological Factors
They can determine barriers to entry minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation

22 4.Technological Factors
Ex : MP3 players, Computer games, Online gambling High definition TVs Online shopping Computer aided design

23 5.Environmental Factors
Environmental factors include ecological and environmental aspects such as Weather climate and climate change which may especially affect industries such as tourism, farming, and insurance.

24 5.Environmental Factors
Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones

25 5.Environmental Factors
GLOBAL WARMING The general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.

26 6.Legal Factors Legal factors include
Consumer Protection law, Company’s Act, Minimum Wage Act, Equal Remuneration Act These factors can affect how a company operates, its costs, and the demand for its products.

27 PESTEL Analysis Of Cosmetic Industry
Political Factors: 2% reduction in excise duty. ( Free Trade Zone) Foreign trade regulation (Imported cosmetics have to be registered)

28 PESTEL Analysis Of Cosmetic Industry
Economical Factors : Disposable Income High Net worth

29 PESTEL Analysis Of Cosmetic Industry
Socio cultural Factors : Income distribution Social Mobility Life Style Change

30 PESTEL Analysis Of Cosmetic Industry
Technological Factor : Nanotechnology

31 PESTEL Analysis Of Cosmetic Industry
Environment Factor : Waste disposal

32 PESTEL Analysis Of Cosmetic Industry
Legal Factors : The Drugs and Cosmetics Act, 1940 The Pharmacy Act, 1948 The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 The Narcotic Drugs and Psychotropic Substances Act, 1985 The Medicinal and Toilet Preparations (Excise Duties) Act, 1956

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