Chapter Five

Environmental Analysis
and Strategic Uncertainty
© 2007 John Wiley & Sons

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Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-1

 Environmental Analysis
• Technology Trends
– To what extent are existing technologies maturing?
– What technological developments or trends are affecting or
could affect the industry?
• Government/Economic Trends
– What changes in regulation are possible? What will their
impact be?
– What are the political risks of operating in governmental
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jurisdiction?
– What are the economic prospects and inflation outlets for the
countries in which the firm operates? How will they affect
strategy?

Chapter 5 - Environmental Analysis and Strategic Uncertainty Figure 5.1 PPT 5-2
 Environmental Analysis
• Consumer Trends

– What are the current or emerging trends in

lifestyles, fashions, and other components of
culture? Why? What are their implications?
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– What demographic trends will affect the market

size of the industry or its submarkets? What
demographic trends represent opportunities or
threats?

Chapter 5 - Environmental Analysis and Strategic Uncertainty Figure 5.1 PPT 5-3
 Environmental Analysis

• Innovations

– Transformational—changes what people buy—

changes the assets and competencies needed

– Substantial—significant change as in a new

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generation offering

– Incremental—makes the offering more attractive or

less costly

Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-4

 Environmental Analysis

• Being Green

– Motivation

– Practical functional benefits to customers and firms

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– Attack global warming

– Generate respect from customers/employees

Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-5

 Environmental Analysis

• General External Analysis Questions

– What are the significant trends and future events?
– What threats and opportunities do you see?
– What are the key areas of uncertainty as to trends
or events that have the potential to impact strategy?
• Evaluate these strategic uncertainties in terms of their
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impact and immediacy.

• Scenarios
– What strategic uncertainties are worth being the
basis of a scenario analysis?

Chapter 5 - Environmental Analysis and Strategic Uncertainty Figure 5.1 PPT 5-6
 Strategic Uncertainties Categories
Immediacy
Low High

Monitor and
High Analyze In-
analyze;
depth; develop
contingent
strategy
Impact

strategies
considered
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Low

Monitor Monitor and

analyze

Chapter 5 - Environmental Analysis and Strategic Uncertainty Figure 5.2 PPT 5-7
 Scenario Analysis

Identify
Scenarios

Relate Scenarios
to Existing or
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Proposed Strategies
Estimate
Scenario
Probabilities

Chapter 5 - Environmental Analysis and Strategic Uncertainty Figure 5.3 PPT 5-8
 Key Learnings

• Environmental analysis of changes in technology, demographics,

culture, the economy, and governmental actions can detect
opportunities or threats to an organization.

• The green movement provides opportunities to connect to

customers and employees.

• Impact analysis involves assessing the impact and immediacy of

© 2007 John Wiley & Sons

the trends and events that underlie each strategy uncertainty.

• Scenario analysis, a vehicle to explore different assumptions about

the future, involves the creation of two to three plausible scenarios,
the development of strategies appropriate to each, the assessment
of scenario probabilities, and the evaluation of the resulting
strategies across the scenarios.

Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-9

 Ancillary Slides
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Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-10

 “We are watching the dinosaurs die, but
we don’t know what will take their place.”
- Lester Thurow,
MIT Economist
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Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-11

 “There is something in the wind.”
-William Shakespeare
The Comedy of Errors
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Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-12

 “A poorly observed fact is more
treacherous than a faulty train of
reasoning.”
-Paul Valéry
French philosopher
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Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-13

 “A decision is the action an
executive must take when he has
information so incomplete that the
answer does not suggest itself.”
- Admiral Arthur W. Radford
© 2007 John Wiley & Sons

Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-14

 “It’s easy to make decisions when
there are no bad options.”
- Robert Half
© 2007 John Wiley & Sons

Chapter 5 - Environmental Analysis and Strategic Uncertainty PPT 5-15