Business Environment Flashcards
CHAPTER 2 (33 cards)
Describe environment
Everything which is beyond organisational boundary
3 key models which can be used to asses a company’s environment
a) PESTEL analysis
b) Value Chain
c) Porter’s Five Forces model
Explain PESTEL Analysis
Framework for identifying factors that influence macro environment
P - Political
E - Economic
S - Social/Cultural/Fashion
T - Technology
E - Environmental
L - Legal
Explain Political factors that influence economic environment [PESTEL]
a) Capacity expansion – gov policy et: capital allowance, incentives
b) Demand – gov is a major customer
c) Emerging industries
d) Entry barriers – restrict investments by making it harder
e) Competition – purchasing decision, as a supplier of infrastructure, regulations & controls
Explain social & demographic factors [PESTEL]
Demographic analysis - study of a population based on age, race, sex, education, income, and employment
Significant changes in attitudes towards Health, environment & diversity
Downsizing
Reducing the headcount , making redundancies
Delayering
Removal of layers of middle management
Outsourcing
Contracting out specified operations/services to an external vendor
–> focus on performing core business activities
Offshoring
Migrating some part of organisation activities to another country
- still operated by the organisation itself
- relocate business tasks to location cheaper labour rate
Shared Service Centres @ Internal outsourcing
Centralising operations
–> specialist teams that perform task for the rest of the business
Define sustainability
Meeting the needs of the present without compromising the ability of future generations to meet their needs
Environmental sustainability
Operate wihout harming environment irreversibly
Social sustainability
Positive impact on society
Economic sustainability
Provide return to SH over LT
What is SWOT analysis
A method of environmental analysis which looks at an organisation’s internal strengths & weaknesses as well as external opportunities & threats
Explain 2 ways to use SWOT analysis
1) Resource-based strategy –> extend the use of its strengths
2) Positioning-based strategy –> identify what opportunities available & what to do to exploit it
What does Michael Porter say about competitive advantage?
Can be achieved by the way a firm organises & perform activities to add value
How to measure the ultimate value a firm creates
The amount customers are willing to pay above the cost carrying out the activities
Primary activities in Value Chain
Directly relate to production, sales, marketing, delivery & services
- Inbound logistics
- Operations
- Outbound logistics
- Marketing & sales
- Service
Support activities in Value Chain
- Procurement
- HR management
- Technology development
- Firm infrastructure
Explain value network
Organisation’s value chain is connected to the value chains of suppliers, distributors & customers
–> together generates value for ultimate customer
Explain competitive forces model by Michael Porter
- Pressure of 5 competitive forces, specific to industry/organisation will determine LT SH return
a) Substitute - alternative product/services equally satisify customer needs
b) Potential entrants
c) Buyer power
d) Supplier power
e) Competition & rivalry - inherent level of r&c between existing firms
How to influence government?
- Employ lobbist
- Give Member of Parliament (MP) a NED
- Influence public opinion
Nationalisation
Government take over entire industry for public interest
