BUS662 SMALL BUSINESS CONCEPTUAL ISSUES

Learning Outcome: To conduct environmental analysis and thereby analyse requirements of a strategic Chapter 3: Environmental Analysis

Process of… Collecting relevant information Interpreting its impact Determining opportunities Determining threats Analysing factors influencing an organisation

EXTERNAL ENVIRONMENT ANALYSIS PESTLE ANALYSIS PORTER'S 5 FORCES

PESTLE

Analytical tool Identify different macro-environmental factors Assess how factors influence business performance PESTEL Framework

central and local governmental policies POLITICAL ECONOMIC SOCIAL TECHNOLOGICAL LEGAL ENVIRONMENTAL economic conditions (recessions or growth) demographics, culture, values innovation and new discoveries (robots & AI) impact of legal changes (crowdfunding) environmental concerns (Greenpeace, global warming)

Stability of government Trade regulations tariff, import licensing, etc. Examples of POLITICAL Factors

Business cycles Credit accessibility Unemployment rate Currency movements home + foreign countries Examples of ECONOMIC Factors

Population Demographics Aging population Distribution of wealth Changes in lifestyles and trends Educational levels Examples of SOCIAL Factors

New innovations and discoveries Pace of innovations Advances and Obsolescence New technological platforms VHS and DVD Examples of TECH Factors

Recycling Renewable energy sources Environmental protection Environmentalism Examples of ENVI Factors

Immigration and investment laws Trade barriers Regulations Employment, Competition, Health & safety Product standards Examples of LEGAL Factors

Reviews competitive forces in the marketplace Helps judge the attractiveness of any industry Centred on RIVALRY Porter’s Five Forces

RIVALRY Bargaining Power of SUPPLIERS Bargaining Power of BUYERS Threat of NEW ENTRANTS Threat of SUBSTITUTE PRODUCTS

SWOT Analysis INTERNAL + EXTERNAL ENVIRONMENTAL ANALYSIS

An important and reliable audit process on: Internal strengths and weaknesses External opportunities and threats SWOT Analysis

STRENGTHS Helps an organisation achieve its objectives May include: Resources staff, location, infrastructure, capital, goodwill Product or service quality Marketing expertise Access to distribution channels

WEAKNESSES If can’t correct all weaknesses, minimize the impact May include: Lack of expertise, resources, finance, and other strengths Weak brand name Poor reputation amongst customers High cost structure

OPPORTUNITIES Leads to growth or helps in gaining more profits May include: Positive economic, demographic, and market changes increase purchasing power of customers More advanced technology Removal of trade barriers Relaxation of certain government rules

THREATS Negative changes in the macro-environment May include: Increase in number of competitors New regulations Trade barriers Changes in customers’ demands and use of products

Boston Consulting Group Matrix Ansoff Growth Matrix Porter’s generic Pricing Strategies Product Life Cycle Critical Success Factors INTERNAL ENVIRONMENTAL ANALYSIS

CRITICAL SUCCESS FACTORS

Measures how well the plan & objectives are accomplished Usually 8 to 12 CSF, and adjusted as strategic plans change Helps provide focus to fulfill its mission and vision Customized to each organization Critical Success Factors

Have SMART Goals attached to CSF measures Too few = limits the organization’s ability to move to the next level Too many = difficult to focus and identify important indicators Should Target things that affect: Quality Cost Customer Satisfaction Market share and Profit

Analyses the portfolio of products and/or SBUs Takes into consideration: The growth rate of the market (speed) Indicates industry attractiveness The market share relative to competitor (size) Indicates competitive advantage BCG Matrix

Options of growth strategies Helps determine product and market growth strategy Takes into consideration: Existing and New factors Products and Markets Ansoff Growth Matrix

Used to analyse… Pricing structure Method of thinking about price Differentiation vs. Niche marketing Porter’s Generic Strategies

Explains the various stages that each product goes through All products go through the cycle Only differs on duration for each stage Product Life Cycle

The End Questions?