Management Practices Lecture-7 1

Recap Economic Forces – Availability of credit – Interest rates Social, cultural, demographic and environmental forces – Life expectancy rates – Per capita income 2

Today’s Lecture Political, Govt., & Legal Forces Technological Forces – Revolutionary technological forces – Internet changes the nature of opportunities and threats Competitive Forces – Collection and evaluation of information on competitors 3

Political, Govt., & Legal Forces Political, Governmental, and Legal Factors Represent Key Forces – Federal, state, local, and foreign governments are major regulators, deregulators, subsidizers, employers, and customers of organizations. Political, governmental, and legal factors therefore can represent key opportunities or threats for both small and large organizations – For industries and firms that depend heavily on government contracts or subsidies, political forecasts can be the most important part of an external audit. 4

Political, Govt., & Legal Forces Government Regulations – Key opportunities & key threats Tax rates Lobbying efforts Patent laws 5

Political, Govt., & Legal Forces Increasing Global Interdependence Impact of political variables – Formulation of Strategies – Implementation of Strategies Strategists in a global economy Forecast political climates Legalistic skills Diverse world cultures 6

Political, Govt., & Legal Forces Globalization of Industry – Worldwide trend toward similar consumption patterns – Global buyers & sellers – E-commerce – Instant transmission of money & information across continents 7

Key Political, govt., & legal variables Government regulation/deregulation Tax law changes Special tariffs Political Action Committees (PACs) Voter participation rates Number of patents Changes in patent laws Environmental protection laws Equal employment legislation 8

Key Political, govt., & legal variables Import-export regulations Political conditions in other countries Government budgets World oil, currency, & labor markets Location and severity of terrorist activities 9

Technological Forces Revolutionary technological forces: Profound impact on organizations Internet Semiconductors XML technologies UWB communications 10

Technological Forces Internet changes the nature of opportunities and threats -- Alters life cycle of products Increases speed of distribution Creates new products and services Eases limitations of geographic markets Alters economies of scale Changes entry barriers 11

Technological Forces Altering the life cycles of products by – Increasing the speed of distribution – Creating new products and services – Erasing limitations of traditional – Geographic markets – Changing the historical tradeoff between production standardization and flexibility 12

Competitive Forces Collection and evaluation of information on competitors is essential for successful strategy formulation – Virtually competition in all industries can be described as intense. 13

Competitive Forces Identifying rival firms Strengths Weaknesses Capabilities Opportunities Threats Objectives Strategies 14

Competitive Forces Key Questions About Competitors: Their strengths Their weaknesses Their objectives and strategies Their responses to all external variables (e.g. social, political, demographic, etc.) Their vulnerability to our alternative strategies 15

Competitive Forces Key Questions About Competitors: Our vulnerability to successful strategic counterattack Our product and service positioning relative to competitors Entry and exit of firms in the industry Key factors for our current position in industry Sales and profit rankings of competitors over time Nature of supplier and distributor relationships The threat of substitute products or services 16

Competitive Forces 7 Characteristics of most competitive U.S. firms: 1. Market share matters 2. Understand what business you are in 3. Broke or not, fix it 4. Innovate or evaporate 5. Acquisition is essential to growth 6. People make a difference 7. No substitute for quality 17

Summary Political, Govt., & Legal Forces Technological Forces – Revolutionary technological forces – Internet changes the nature of opportunities and threats Competitive Forces – Collection and evaluation of information on competitors 18

Next Lecture Decision Making Types of Decision Making Models of Decision Making Devil’s Advocacy and Dialectical Inquiry 19