Week 1 Lesson Recap

Sustainable Competitive Advantage &

Changing Environment

: Making sense of the changing

environment
: External environments can be
dynamic, confusing and complex,
Environmental
scanning

Evaluating
external
environments
To reduce uncertainty
Valuable
Rare
Inimitable
Organization
Week 2 : Topics for Discussion
1. What are the characteristics of the
changing external environment?
2. How does the changing external
environment affect organisations?
3. How does the four components of
external general environment affect
businesses?
4. How does the five components that
make up the external specific
environment affect businesses?
5. How is the external environment
linked to corporate culture (internal
environment)?
 Subject Learning Outcomes (SLOs) and
Course Learning Outcomes (CLOs)

• SLO 2: Plan, construct and discuss solutions relevant

to business environments
• CLO 1 Demonstrate essential knowledge necessary
for a career in business related professions
• CLO 2 Synthesise underlying principles and concepts
for making business decisions
• CLO 5 Apply critical thinking to address issues in
business
• The COVID-19 pandemic and the resulting economic
recession have affected most large organizations around the
world.
• The crisis has undermined most of the assumptions of the
traditional planning cycle.
• Existing management operating models are no longer
supporting managers effectively in addressing the challenges
this crisis presents.
• Managers need to make sense of the changes in their
external environments: 1 environmental scanning, 2
interpreting environmental factors and 3 acting on threats
and opportunities (last week’s topic on SWOT analysis)
.
• For organisations to remain sustainable, they
must have a very clear understanding of the
environment (external) in which they operate
and how this environment will impact the
operations and culture (internal environment)
of their organisation.
• What are some characteristics of the external
environment they should look out for?
• Watch the following short video and answer
some of the following questions.
Questions during video viewing

1. VUCA stands for ______, _______, _______ and _______

(insert at 0.58 sec of clip). Correct answer: volatile,
uncertain, complex, ambiguous)
2. 4 steps to counter VUCA includes: (insert end of clip at
2.04)
a. Tunnel vision, ambiguity, misunderstanding & big steps
b. Vision, understanding, clarity & agility
c. Grand ideas, negotiator, clarity and bold steps
What VUCA means today

We live in a VUCA world where rapid and unpredictable

change has become the norm in the environment:
• Volatile. Change is violent and uncontrollable. The rate of
change induces more uncertainties.
• Uncertain. The future is unpredictable and information is
not all always available, making it hard to prepare for.
• Complex. With so much going on, things can often feel
chaotic and confused especially when there are many
factors involved.
• Ambiguous. We lack clarity because it's hard to know what
the root cause of the problem is
Environmental Uncertainty

Managers know what goal they wish to achieve, but

information about alternatives and future events is
incomplete (imperfect world)
Affected by :
- Resource scarcity,
- Environmental change (fast or slow) &
- Complexity (number & intensity of factors)
Makes it difficult to predict future states of affairs
and to understand potential implications for the
organization.
 Rate of Change: How
Fast/How Slow
Punctuated Equilibrium:
Companies go through
long, simple periods of
environmental stability;
followed by short, complex
periods of dynamic,
fundamental
environmental change;
finishing with a return to
environmental stability.
Source:
https://www.google.com.sg/search?q=pictures+of+punctuated+equilibrium&biw=1920&bih=969&tbm=isch&tbo=u&source=univ
&sa=X&ved=0CBoQsARqFQoTCJe_6LbGh8kCFQwIjgodEKkC7g#imgrc=P-Xxa2ZEmxYy3M%3A
In the present crisis, however, elevated uncertainty is globally pervasive,
and events trigger compounding effects.
Refers to the number and intensity of
environmental factors:
Simple: few factors at work
Complex: many environmental factors
The more complex an organisation’s
environment - the more difficult it is
for its managers to make decisions as
they have to deal with more
environmental factors.
 Relationship between environmental change (fast or slow) & environmental complexity
(simple or complex) - scarcity (resources) adds to the environmental uncertainty.

 In general, the greater the environmental uncertainty, the more attention

management must direct towards the external environment
 The greater the environmental uncertainty, the more need there is for flexibility
Why the need to make sense of
the external environment?
 2. How does the changing external
environment affect organisations?
• Challenged traditional and outdated approaches to executive
decision making, management and leadership, and day-to-
day working.
• Generate fear of the unknown, lack of confidence
• Usually they are too sluggish and limited to be effective in a
turbulent environment.
• For example, no strategy will survive fully in-tact from COVID
impact & consequences as unprecedented disruption to the
global economy occurred.
• The choices organisations face will be more complex &
tougher in the post-pandemic environment.
 2. What should organisations do?

• What is needed: flexibility, the capability to act

collectively, quickly, and across the whole
organization as challenges arise.
• They need also to be able to work in teams
over an extended period.
• Some organizations have therefore begun to
experiment with new operating models that
allow managers to work together.
 What else can they do?

• Food for Thought: Read this blog by Enterprise Singapore

• Enterprise Singapore is a statutory board under the Ministry
of Trade and Industry of the Singapore Government. It was
formed on 1 April 2018 to support Singapore small and
medium enterprise development, upgrade capabilities,
innovate, transform, and internationalise
• Check out how they plan in times of uncertainty amid COVID-
19
• https://www.enterprisesg.gov.sg/blog/planning-in-times-of-
uncertainty-amid-covid-19
 Topic 3
How do the four components of external general
environment affect businesses?
• What exactly constitute the environment?
• What are the various layers in the
environment we should look at?
The Environment of Organisations

 External environment:
consists of external trends &
events that have potential to
affect companies
 a) general b) specific
Internal
Environment  Internal environment: –
The consists of trends & events
Organisation within an organization that
affect the management,
employees & organizational
culture.
 They affect what people think,
feel & do at work.
External Environment

Internal Environment
 Layers of the External
Environment
a) General environment:
 Trends & broad background forces that
affects the organisation indirectly
 Provides the general context for
management decision making
 Comprises political-legal, economic, socio-
cultural technological [PEST: to help you
recall]
 Layers of the External
Environment
b) Specific (task) environment:
 Trends that are unique to the firm’s industry
and directly influences the organisation’s
operations and performance
Includes sectors that conduct day-to-day
transactions with the organisation
Comprise stakeholders such as customers,
suppliers, competitors & industry regulation,
advocacy groups [CSCIA]
Layers of the External
Environment
How to use PEST analysis

• https://youtu.be/UYQItP5_1AQ

Answer the following MCQs after this video clip.

 1. Which of the following is not an example of an economic factor:
a) Holiday resorts on the Gold Coast have been negatively
impacted by the high value of the Australian dollar.
b) Medicine company Blackmores has been positively affected
by consumer interest in healthy lifestyle.
c) Rising interest rates and declining consumer confidence have
had a negative effect on retail spending on fashion
d) The decline in Australia’s unemployment rate to 5% has
increased demand for childcare places.
2. Imagine an American car manufacturer wanted to
export its Ford motorcars to Ethiopia in Africa. The
knowledge that the distribution of income within Ethiopia
is highly unequal and about 70 per cent of the population is
below the poverty line would be a(n) _________
component in the manufacturer’s general environment.
a. technological
b. sociocultural
c. economic
d. political/legal
3. Which of the following is not an example of a
sociocultural factor:
a) The increasing divorce rate in Australia has a
positive effect on Village Roadshow’s theme parks.
b) Ageing of the population creates a skills shortage in
manufacturing industries.
c) Qantas has increased its air fares five times since
the beginning of the year due to rising fuel costs.
d) Westinghouse introduced smaller model
refrigerators because of declining family sizes.
Topic 4. How do the five components
that make up the external specific
environment affect businesses?
 Specific (external)
Environmental Factors

Customers

Competitors

Suppliers

Industry regulation

Advocacy groups
• People and organisations in the environment who
acquire goods or services from the organisation.
• Without its customers, an organisation would not exist.
• Customer management can be:
– reactive: after the event – e.g. listening to and
addressing customer complaints
– proactive: analyse and respond to customer needs
before they occur (before customer complains)
• Other organisations in the same industry or type of
business that provide goods and services to the same set
of customers
• Business success & failure: determined by company doing
a better job of satisfying customer wants & needs
• Organisations need to do competitive analysis:
– determine the nature of competition: monitor and
analyse competitors’ moves, strengths and weaknesses.
• Examples of competitors in the automobile industry:
Holden, Ford, Toyota, Mitsubishi, Nissan, Hyundai and Kia.
• Groups of concerned citizens banding together to try to influence the
business practices of specific industries, businesses and professions; Also
known as lobby groups.
• Techniques to try and influence companies:
- Public communications : relies on voluntary participation by the media and
advertising industry to get an advocacy group’s message out. E.g. World No
Tobacco Day - WHO
- Media advocacy: involves framing issues as public issues – ie: affecting
everyone. Exposing questionable, exploitative or unethical practices and
using media coverage by buying media time that is like to receive extensive
news coverage. E.g. PETA - People for the ethical treatment of animals.
- Product boycotts: is a tactic used by advocacy groups to actively convince
consumers not to purchase a company’s product or service.
 Specific Environment of Toyota

General environment

Customers Suppliers
• Toyota dealers • First tier suppliers
• Individual consumers • Second tier suppliers
• Hertz • Eg engines,
• Avis transmissions,
• Corporate fleet buyers brake systems,
accelerators, tyres
NB: Two thirds of its
production in Japan
Toyota

Competitors Regulators
• General Motors • Auto industry regulators
• Mitsubishi • Trade Practices and
• Nissan Consumer Commissions etc
• Ford in various countries
 Topic 5: Link between Organisational Culture &
External Environment

• Strong organisational cultures are those where the core values are uniformly
held by organisational members
• Strong culture organisations operate with a small but enduring set of
organisational values
• Highly successful organisations typically emphasise values of quality,
performance excellence, innovation, social responsibility, integrity, worker
involvement, customer service, and teamwork
• ***These core values (which form the strengths of organisations) make it
more likely the organisation will identify opportunities and threats in the
external environment and be able to adapt and respond to them in
appropriate ways
Toyota’s work culture reflects its core culture!
Emphasis on quality, reliability and
continuous improvement

• The Toyota way identifies the strengths of Toyota enabling

them to have competitive advantage over their competitors –
the link between the need to have strong corporate culture to
handle the competition prevailing in the external
environment.
 Do you know the principles of the
Toyota Way?
• https://youtu.be/qtspIAPM19o
• Watch this clip to figure out The 14 Principles of the
Toyota Way
 Attempt the following 10 mcqs in Quiz 2 to test your
knowledge and application of this week’s lecture