Role of Environment on Strategy

8/8/2019 Role of Environment on Strategy

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ROLE OF ENVIRONMENT ONSTRATEGY

Macro and Micro environment


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THE ORGANIZATIONSENVIRONMENT

Business strategies are based on their abilityto capture and convert the impact of externaland internal forces into the desired outcomes

Depending upon the type of industry or theuncertainty in the external environment, therequirements to follow the externalenvironment keep changing.

Three types of environment

1.THE MEGA ENVIRONMENT

2.THE MICRO ENVIRONMENT

3.THE TECHNOLOGICAL ENVIRONMENT


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THE MEGA ENVIRONMENT A business firm is the key institution for the

economic and social development of the societies.

Trade liberalization and globalization has changed theconcept of competition.

Depending on the size of the organization, themarkets the organization serves, the product that itoffers and the impact of the environmental factorswill vary.

Change in the mega environment not only effects thetraditional business organizations but they also impactthe local industries changing the way firms competewith each other.

E.g. ENTRY OF PEPSI AND COCA COLA IN INDIA


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ELEMENTS RESPONSIBLE FOR CHANGESIN MEGA ENVIRONMENT

DEMOGRAPHICS

Population size

Age structure

Geographic distribution Income distribution

Life styles

Increase in World population

Growth of urban populations

Changes in Indian demographics


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THE POLITICAL AND LEGAL ASPECTS Tariffs

Taxes

Reservations for manufacture of products to specific goods andbarriers to entry into various activities

Subsidies

Regulatory framework

Environmental protection laws

Forced product diversification

Political manifestos

Law and order

Patents laws and patents Political conditions in the foreign country

Antitrust legislation

Import and export regulations

Special local, state and national laws

Legislation on employment


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THE SOCIO-CULTURAL ASPECTS

Different societies, different social attitudes anddifferent cultural values

Socio-cultural system determines how changed isviewed and how technology is absorbed and diffused.They may have effects on:

Cultural and religious implications on productdefinitions

Workforce composition and the implication formanaging increased ethnic and cultural diversity

Change sin attitudes about the quality of work life Shifts in work and career preferences, including an

increase in employment and business involvement ofwomen

Shifts in product and service preference


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THE MICRO ENVIRONMENT

It is the effect of competition within the industry onthe growth and value creation.

During competition there are a number of factors

that are forcing organizations to change Cost sensitivity

Price competition

Product improvements

Acceleration of market development Falling breakeven size

Relationship between Manufacturer and Distributionchannels


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Order qualifying factors

Customer satisfaction

Non price factors

More consumer choice Product life

Importance of design

Consumer power


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THE TECHNOLOGICAL ENVIRONMENT

Importance of technology

INNOVATION

Technology is the outcome of innovation

NATURE OF INNOVATIONS Innovations are self propagating

They proliferate

Creates new business opportunities

Create higher technical competence


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Technological change is

A process by which the technology pool iscontinuously updated and results in:

A new or better product or process A better production system or technique and

Knowledge of whatever sort about such techniques

Technological change is the change in production

functionTYPES OF TECHNOLOGICAL CHANGE

Convergent change

Divergent change


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CHARACTERSTICS OF TECHNOLOGICAL CHANGE

It expands the knowledge industry

Increases requirements of Technical manpower

Is fast paced Increases investments in R&D

New approaches to R&D

Reduces reaction time

Alters organizational relationships

Is a business strategy


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DISRUPTIVE TECHNOLOGIES These are technologies that not only create new

industries but eventually change the world.Disruptive t6echnologies come from outside the mainstream.

The light bulb was not invented by the candleindustry to improve output.

E.g. Telephone, as it has changed the way marketingis carried out

Introduced a radically new approachdirect sellingthrough the telephonethis was started by somemembers of the British insurance industry and wasthen adopted by the industrydirect selling through

the telephone has resulted in the total restructuringof the insurance industr .

Role of Environment on Strategy

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