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Strategic Decision Making - Chapter 2 - External Environment

Strategic Decision Making - Chapter 2 - External...

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1 3-1 External Environment Chapter 2 Objectives circle6 What is the external environment? circle6 Key components of general environment circle6 Porter’s five forces model circle6 Organization of external environment: Opportunities and threats circle6 Techniques External factor analysis summary External Environment circle6 “All the relevant factors and influences outside of the company’s boundaries” circle6 Relevant means important enough to have a bearing on the decisions of the company as it makes about its directions circle6 Some factors have low impact and others have high impact Example circle6 Motorola – founded in 1930s as a maker of car radios By 1980s, it had become key supplier of cellular phones 1994 – “the company that everyone loves to love” Malcolm Baldridge Award winner and Six Sigma pioneer In 1996, Motorola released its StarTac – beautiful, sleek and…ANALOG! Despite ample indications for preference for digital technology, Motorola ignored the technology Nokia – more sensitive to market trends General Environment circle6 Demographic segment – Most Crucial circle6 Aging of the population Positive effect on healthcare Negative effects on funeral home industry Preference for cheaper funerals – cremations ($2000) vs. burials ($7000) “Killing” margins in industry Need for company to be proactive Ex: Ski resorts and baby boomers Extreme luxury in cruises etc. Demographics: Other Changes circle6 Graying of baby boomers National Association of Home Builders estimate that people in age group 55-74 will buy 281,000 homes in 2010 – up from 189,000 in 1995 Construction companies scrambling to satisfy niche In 2025, 20% of population will be over 65
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2 The Gray Entrepreneur circle6 For the past 10 years, adults aged 55 to 64 have been most likely to start businesses circle6 People are living longer More likely to pursue business dreams rather than work in their gardens! circle6 Often, they don’t need to work circle6 But developed network of people where starting a business is not too difficult The “unreachables:” 18-34 years old circle6 Most important demographics in advertising – but also most elusive circle6 TV is only a fifth of what this segment spends time with various media Other media include internet, blogs, movies etc. circle6 Top spenders on cars, internet stereo and sneakers circle6 Spends about $13.5b on internet purchases circle6 How do you reach this segment? Advertising to 18-34 year olds circle6 Rise in online spending – 23% up in 2005 circle6 Number of other smaller events aimed at the age group Ex: Online games Car shows etc. Big Opportunity: The Obese circle6 Tim Barry – launched a seat-belt extender for airplanes – very successful circle6 Government stats – 60m Americans now qualify as obese (20% of population) Up from 23m in 1980 circle6 Creation of $49b weight -loss industry Demographics: Obese - Implications circle6 Rav4 – 3 inches wider than previous models circle6
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Strategic Decision Making - Chapter 2 - External...

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