 What business are you in?

◦ What are its limits?

◦ What are your limits?
◦ Where is the market going?
◦ Where do you want to take your business?
◦ Is the market stable, cyclical, vulnerable?
 Evaluate your business
◦ S W O T analysis

Strengths Weaknesses

Opportunities Threats
 S W O T analysis

Internal
Now
Strengths Weaknesses

Opportunities Threats

External
Future
 P E S T (L E) analysis

Political
Economic
Socio
} Affects all organisations,
not only your business
Technological
Legal
Environmental } and your competitors
 SWOT and PESTLE are a ‘photograph’
 Need a dynamic tool to test the market
◦ Porter’s Five Forces
◦ Examinations of power and influences of
 Competitors
Suppliers
Customers
Substitutes
 Market
Entrants

Buyers Competitive Suppliers

Rivalry

Substitute
Products
Firm’s Strengths/ Weaknesses
Competitive Rivalry
PESTLE (National)
PESTLE (INTERNATIONAL)
Where Next?
New Products

New Markets

New Strategies
Understand Your Market
 Challenges

Combat the Environment Threat Exploit Business

(Intensification of competition, Opportunities
Declining market)

Environment factors have direct impact on Business

Environment Dynamics

Environment Analysis
Environment Diagnosis

Business Dynamics
Environment Analysis: The process by which strategists
monitor the economic, governmental/ legal, marketing/
competitive, supplier/ technological, geographic and social
setting to determine opportunities and threats of their firm.
Environment diagnosis: Managerial decisions made by
analyzing the significance of the data of the environment
analysis.

Business Decision Depends on Internal environment

External environment

Internal External
environment Business environment
Decision

Controllable Beyond the

Factors control
 Political / legal factors
 Economic factors
◦ the microeconomic environment
◦ the macroeconomic environment
 Social / cultural factors
 Technological factors
 PEST analysis
◦ relationship between the four sets of factors
◦ importance of the economic factors
 Value System
 Mission and Objectives
 Management Structure and Nature
 Internal Power Relationships
 Human Resources
 Company Images and Brand Equity
 Physical Assets and Facilities
R & D
 Market Resources
 Financial Factors
 External
Environment

Micro environment Macro environment

Consists of Consists of

[Actors in the company’s Societal forces that effects all

immediate environment] Macro actors in the company’s micro
environment
Economic Factors
l
or a
ct ion
Micro

Po F
Go
Fa Nat
s

liti ac
Co

vt .
s

ca tor
mp
r

lic
te

etit

l– s
b
In

o
Pu rs

Cultural Fa
Customers
National
Factors

Suppliers

Business

Social -
ctors
Marketing Intermediaries
l–
Dem
ogra s ica ors
Environment y t
phi c Ph . fac
Fac ch
tor s Te
Environment

Business Environment
 Suppliers:
Who supplies inputs/raw materials for smooth functioning of company

Top priority for Vender development

Not to depend on one suppliers
Very risky

Lockouts Strikes Production problems

Maintaining stocks/inventories Supply management Scarcity

due to uncertainties Environment
Customers: Major task create and sustain customers

Individual
House holds Do not depend on one customer
Industries
Other commercial establishment Poor Bargaining Very Risky
Government
Other institution

Competitors: Competitors of same products

Compete for discretionary incomes

of the consumer

Desired Generic Product forms Brand competition

competition competition competition
 Market intermedries
Consist of number of firms that helps the company in promoting,
selling and distribution of goods to final buyers.

Market Intermedries

Link between company and the final consumers

Middlemen Physical
distributing Market service Final
(Agents and Intermediaries
Merchants firms Agencies
(storing & (Targeting and (Finance market &
to final Insurance
customers) moving goods promoting
from origin to products) Business
distribution i.e. Risks)
warehouses and
transportation)
 Macro Environment

Economic Condition Economic Policies Economic System

Nature of the economy Economic Policy of Govt. Free economy

Stage of development (Restrictive import policy) Centrally planed economy
Economic resources Incentive to priority sector Mixed economy
Level of income Monitoring and Fiscal policy
Distribution of income
 Close relationship with economic environment

 Communist countries have centrally planned

economic system and policies
 Prohibited the marketing of certain products
 Standardization of products packages
 Media advertisement are not allowed (Libiya)
 Use of children are not allowed in commercial
advertisement
 Restriction of advertisement of certain products
(smoking is injurious to health)
 Changes in Government policies have impact on
business i.e. industrial, tariff policies
Successful strategy should have appropriate economic
environment

Customs, traditions, taboos, tastes and preferences

the buying and consumption habits, language,
believe and values, education have impact on
business

Color Green, favourate colour of Muslims

but in
Malaysia it is associated with illness

Demographic factor: age, sex, composition of

population, family size, religion, language, caste etc.
also influence the business.
 Natural Environment
Geographic and ecological factor are very important in business
 Climate, weather, topography, location
 Difference in geographic condition
 Ecological factors: Pollution, Degradation of forest i.e. use of wooden
boxes, polythine bags

Physical and Technical Environment:

“Advances in the technologies of food processing and preservation,

packaging etc. have facilitative product improvements and introduction
of new products and significantly improved the marketing of products”

International Environment:

Important for industries depending on import or exports and import

competing industries
(Hike in oil prices Increase the cost of production and
prices of certain products such as fertilizers, synthetic fibers etc.)
 Political stability in a democratic policy
 A credible judicial system;
 A steadily growing economy – India has had a slow but steady
growth during the past five decades;
 A single-digit inflation rate;
 A vast expanding market
 A vibrant financial system – a network of banking and financial in
situations;
 A number of active stock exchanges
 A number of active stock exchanges
 A credible institutional framework
 A diverse industrial base
 A large and growing pool of trained manpower
 A large English speaking population. By many, English is regarded
as the official language of global business
 A country with geographic and logistic advantages
 Business environment influences business
management

 Critical environment elements interact

with the critical elements of business
management

 The critical elements of business

management are planning, direction,
organization, control or coordination,
leading and motivation and evaluation