Chapter 3: Managing business environment

lOMoARcPSD|36041561 CHAPTER 3 Managing Business Environment
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ü Contrast the actions of managers according to
the omnipotent and symbolic views.
ü Describe the external environment.
ü Describe the internal environment.
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3.1. The Managers’ View
ü Omnipotent View of Management - the view
that managers are directly responsible for an
organization’s success or failure.
ü Symbolic view of Management - the view that
much of an organization’s success or failure is
due to external forces outside managers’ control.
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Outside to industry to internal Non program decision Pest analysis
Exhibit 3-2 Components of External Environment
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3.2. External Environment
A. The General Environment/Macro-Environment
vIs the broad environmental context in which a firm’s industry is situated.
vIncludes strategically relevant components over which
the firm has no direct control. ü General economic conditions
ü Immediate industry and competitive environment
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3.2. External Environment
A. The General/Macro-Environment 3.2.1. Political-Legal
ü Government type and stability
ü Freedom of the press, rule of law and levels of bureaucracy and corruption
ü Regulation and de-regulation trends
ü Social and employment legislation
ü Tax policy, and trade and tariff controls
ü Environmental & consumer-protection legislation
ü Likely changes in the political environment
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3.2. External Environment
A. The General Environment 3.2.2. Economic ü Stage of a business cycle
ü Current and projected economic growth, inflation and interest rates
ü Unemployment and supply of labor, labor costs
ü Levels of disposable income and income distribution ü Impact of globalization
ü Likely impact of technological or other changes on the economy
ü Likely changes in the economic environment
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3.2. External Environment
A. The General Environment 3.2.3. Sociocutural sociaocultural
ü Cultural aspects, health consciousness, population growth rate, age distribution.
ü Organizational culture, attitudes to work, management style, staff attitudes.
ü Education, occupations, earning capacity, living standards. ü Ethical issues, diversity, immigration/emigration, ethnic/religious factors.
ü Media views, law changes affecting social factors, trends, advertisements, publicity.
ü Demographics: age, gender, race, family size.
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3.2. External Environment
A. The General Environment 3.2.4. Technological ü Maturity of technology, competing technological
developments, research funding, technology legislation. ü Information technology, internet, global and local communications.
ü Technology access, licensing, patents, potential innovation,
replacement technology/solutions, inventions, research,
intellectual property issues, advances in manufacturing. ü Transportation, energy uses/sources/fuels,
associated/dependent technologies, rates of obsolescence, waste removal/recycling.
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3.2. External Environment
A. The General Environment 3.2.5. Demographic ü Population growth rate ü Age distribution. ü Gender ü Race ü Family size.
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3.2. External Environment
A. The General Environment 3.2.6. Global
ü Economic recession/integration ü War, terrorism ü Tensions between countries ü Emerging Economies ü MNC expansions
ü Global advancements in technologies and telecommunications
ü Global Marketing & Distribution Channels
ü International Strategic Alliances
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Key aspects of PESTLE Analysis
ü Don’t just list environmental factors; derive implications for the industry
ü Focus on the key drivers of change
ü Focus is on future impact of environmental factors
ü Consider the combined effect of environmental factors
ü Environmental factors would be different from country to country
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v The PESTEL Analysis essentially provides the basis for
identifying many of the Opportunities and Threats for the SWOT Analysis.
v Whereas, Strengths and Weaknesses are considered
INTERNAL to the organisation, Opportunities and Threats are EXTERNAL.
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3.2. External Environment
B. The Industry/Task Environment
ü To identify the main structural features of an industry
that influence competition and – therefore – profitability
=> understand how an industry structure drives the level
of competiton within the industry, which determines the level of its profitability
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Using the Five-Forces model Analysis
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Switching cost : Cost to switch brand
Switch cost low: More competitive, easy change
Cola vs Pepsi: Product from cpmpetitor Sub:
exit barrier: hard to get out, same rival, competition, can be: Capital requirement, legislation
Ex: Banking: legislation: few bankruptcy
in this sector because wide effect, gov
will try to maintain, prevent from failing
=> Try to sale => Try to sell = campain, discount,... En ba high = low comp
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Common Weapons for Competing with Rivals
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Tell how strong bargaining power,... etc
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Ch ra competitive prssure, các yu t,... suy ra kt lun trong ngành, th trng,... có vl vs doanh ngip ko
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3.2. External Environment
The External Environment Analysis (Macro-environment
+ Industry analysis) provides the basis for identifying
many of the Opportunities and Threats for the SWOT Analysis.
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3.3 Internal Environment website, bctc
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The Resource-Based View of Strategy (RBV)
ü “...The resource-based view emphasizes the
internal capabilities of the organisation in
formulating strategy to achieve a sustainable
competitive advantage.” A Henry, pp. 126
ü Strategic capability is based on the resources
available to the organisation and the competencies
it develops in order to make use of the resources
(Chief Advocates: Hamel & Prahalad(1990);
Rumelt(1991); Barney(1991); Grant(1991)).
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Definition of Resources and Capability v Resource
ü Is a productive input or competitive asset that is
owned or controlled by a company (e.g., a fleet of oil tankers). v Capability
ü Is the capacity of a firm to perform some activity
proficiently (e.g., superior skills in marketing). It is a
“firm’s capacity to deploy resources for a desired end result”.
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Source: Based on the discussion in Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), pp. 37–43. Phân tích cty dch v
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Source: Based on the discussion in Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), pp. 37–43.
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v THRESHOLD RESOURCES – “needed to play”
Those resources that an organisation needs to have in order
to meet the minimum requirements of its customers
ü For example, an airline needs more than a fleet of planes, it
will also need all the supporting structure, including landing and fly-over rights
v DISTINCTIVE RESOURCES – “needed to win”
“...those resources that criPcally underpin competitive
advantage and that others cannot easily imitate or obtain.”
ü For example, a strong brand name or reputation 47
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VRIO/ VRIN framework: evaluate : ko có trong chng trình Competencies
v THRESHOLD COMPETENCIES – “needed to play”
Those minimum competences an organisation requires in
order to ensure that resources are deployed efficiently
enough to meet minimum customer requirements
ü For example, an airline will need to ensure its operations
conform to minimum safety standards
v DISTINCTIVE (CORE) COMPETENCIES - “needed to win”
“...the linked set of skills, activities and resources that,
together, deliver customer value, differentiate a business
from its competitors and, potentially, can be extended or developed .”
ü For example, a high level of marketing expertise 48
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3.3 Internal Environment
ü Organizational culture
ü A system of shared meanings and common beliefs held
by organizational members that determines, in a large
degree, how they act towards each other.
ü “The way we do things around here.”: Values, symbols, rituals, myths, and practices ü Implications: v Culture is a perception. v Culture is shared. v Culture is descriptive.
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Exhibit 3-5 Organizational Culture
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How Culture Affects Managers
Cultural Constraints on Managers
Ø Whatever managerial actions the organization
recognizes as proper or improper on its behalf
Ø Whatever organizational activities the organization values and encourages
Ø The overall strength or weakness of the organizational culture
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Exhibit 3–6 Managerial Decisions Affected by Culture • Planning
• The degree of risk that plans should contain
• Whether plans should be developed by individuals or teams
• The degree of environmental scanning in which management will engage • Organizing
• How much autonomy should be designed into employees’ jobs
• Whether tasks should be done by individuals or in teams
• The degree to which department managers interact with each other
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Exhibit 3–6 Managerial Decisions Affected by Culture • Leading
• The degree to which managers are concerned with increasing employee job satisfaction
• What leadership styles are appropriate
• Whether all disagreements—even constructive ones—should be eliminated • Controlling
• Whether to impose external controls or to allow employees to control their own actions
• What criteria should be emphasized in employee performance evaluations
• What repercussions will occur from exceeding one’s budget
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Organization Culture Issues v Creating an Ethical Culture
vCreating an Innovative Culture ü High in risk tolerance ü Challenge and involvement ü Low to moderate ü Freedom aggressiveness ü Trust and openness ü Focus on means as well ü Idea time as outcomes ü Playfulness/humor ü Conflict resolution ü Debates ü Risk-taking
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Exhibit 3–7 Creating a More Ethical Culture
• Be a visible role model.
• Communicate ethical expectations.
• Provide ethics training.
• Visibly reward ethical acts and punish unethical ones.
• Provide protective mechanisms so employees
can discuss ethical dilemmas and report
unethical behavior without fear.
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Organization Culture Issues
v Creating a Customer-Responsive Culture
ü Hiring the right type of employees (those with a strong interest in serving customers)
ü Having few rigid rules, procedures, and regulations
ü Using widespread empowerment of employees
ü Having good listening skills in relating to customers’ messages
ü Providing role clarity to employees to reduce
ambiguity and conflict and increase job satisfaction
ü Having conscientious, caring employees willing to take initiative
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Exhibit 3–8 Creating a Customer-Responsive Culture
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