Chapter 3 - Environment and Uncertainty Flashcards
PEST
LoNGPEST
Political Economical Social Technological
&
LoCAL
National
Global
PEST limitations
External environment is more dynamic
Becomes time consuming and costly to update
Should help to identify key opportunities and threats (not just influencing factors)
Bounded rationality implies the Org likely misses something
Environment is influence by internal actions as well
Porter’s 5 forces
Rivalry Consumer power Supplier power Substitutes Entrants
Barriers for new entrants
Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Access to resources Expected retaliation by competitors
Customer power
volume criticality to customer standard or special item customer's own profitability ability to bypass skills of purchasing staff importance of quality to customer
Bargaining of suppliers
number of suppliers new entrants number of customers substitution switching costs differentiated product
Rivalry
market growth market structure capacity cost structure uncertainty exit barriers
5 forces by porter limits
firms rather collaborate than compete
industry vs firm (a firm might perform different than the whole industry)
dynamic industries - R&D can change industries
defining the industry - boarders are not clear
Definition of competitor analysis
Identification and quantification of real strength and weaknesses.
Key competitor analysis questions
objectives strategy assumptions resources and competences response profile
Environment Change Triggers
indirect: 5
direct: 3
indirect
- economic cycle
- regulatory change
- change customer expectations
- technology changes
- changed communication
direct
- new entrants
- intenser competition
- change supply chain
General Driver for Environmental Change
globalisation
natural environment
changing workplace structure
advanced communication technology
Priorisation change drivers
importance vs urgency
low-low: other issues (monitor)
low-high: lower priority (monitor & analyse)
high-low: higher priority (monitor, analyse, contingency)
high-high: major issue (highest priority - analyse in detail and develop a strategy)
Concept for deal with risk
TARA
Transfer, Accept, Reduce, Avoid
Environmental analysis: why it matters
opportunities and threats
a lot of variety and hard to understand
with audits identify influencing factors
need of ongoing environmental scanning
Definition uncertainty
Inability to predict the outcome from an activity due to a lack of information about the required input/output relationship or about the environment within which the activity takes place.
Complexity and Dynamism
Complexity: variety of influences, knowledge, interconnections
Dynamism: changing environments
Impact of uncertainty
planning horizon will be shortened strategies might be conservative emergent strategies might be encouraged increased information needs might follow multiple strategies
Real options (3)
as well occurring as (2)
considerations (3)
follow-on
option to abandon
option to wait
input mix option: used different combinations of input factors
output mix option: select different outputs from same raw material
level uncertainty
duration of option
interest rates
