SHR 247(4Fall.BB) - Chapter 3 The organizational...

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The organizational Environment Chapter 3
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Importance of Environmental Analysis “those who fail to understand their environment will fall foul of it” (Boxall and Purcell, 2003) “strategy is less a function of grandiose predictions than it is a result of being able to respond rapidly to real changes as they occur. That’s why strategy has to be dynamic and anticipatory” (Jack Welch, 2001)
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Organizational Environment ‘wide range of forces that can affect organizational performance’ differ by Industry geographical location Market size Can you think of more?
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Exhibit 2.1 Layers of the business environment
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Why is it important? Why do firms need to pay attention to the external environment? Constantly changing  uncertainty Social Trends Technology New Competitors Can you think of more?
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Know thy enemy and know thyself, find naught in fear for 100 battles. Know thyself but not thy enemy, find level of loss and victory. Know thy enemy but not thyself, wallow in defeat every time.
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Macro/ General Environment
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Elements of the macro/general environment PEST mode (Also known as PESTEL and STEP) Political/legal Economic Socio-cultural Technological
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PESTEL
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Political/Legal Employment Law Taxation Environmental Regulations Trade Regulations Monopoly laws EU/US laws and directives Business-government relationship
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Economic Interest Rates and Inflation Consumer confidence Business Cycles Economic growth Unemployment Levels Disposable Income Overall health of economic system Recession may allow for shake-out/opportunity
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Socio-Cultural Population Demographics Values in society Lifestyles Tastes and preferences Levels of education Acceptable business behavior? ‘Licence to operate’?
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Technology New discoveries New product potential New communications technology Alternative means of providing goods/services Government expenditure on research Impact of the internet?
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Key Aspects of PEST Analysis Not just a list of influences Need to understand key drivers of change Drivers of change have differential impact on industries, markets, and organizations Focus is on future impact of environmental factors Combined effect of some of the factors likely to be most important
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The Industry (Task) Environment
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Porter’s 5 Forces Model immediate industry environment specific to industry strength of competitive pressure level of profitability in the industry Helps answer the question: How attractive is the industry?
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analyze key forces
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SHR 247(4Fall.BB) - Chapter 3 The organizational...

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