CANS 406 Lecture Notes - Lecture 5: Newly Industrialized Country, Swot Analysis, Environment Variable
22 May 2018
School
Department
Course
Professor
External environment analysis
Jan 18th
Risk vs uncertainty
• Risk: present when future events occur with measurable probability
o Variation in potential outcomes to which an associated probability can be assigned
• In statistical terms, distribution of variable is known
▪ But not value from distribution which will be realized
• In poker terms: know probability of being dealt the ace of spades, but don't know if
next card will be the ace of spades
• Uncertainty: present when likelihood of future events is indefinite or incalculable
o Lack of knowledge concerning distribution of the variable
• Not only do you not know next card, but don't know how many cards are in deck, how
a are aces of spades…
o Levels of uncertainty:
• Single "clear enough" view of future
▪ Forecast, commitment
▪ Shapers try to disrupt, create chaos
• Limited number of alternative futures of which one will occur
▪ Game tree, decision tree, influence other players
▪ Shapers try to influence outcome that it favours
▪ Adapters try to hedge
• Wider range of alternative futures, probabilities less clear
▪ Scenarios, try to shape outcome
▪ Shapers try to shift industry in "right" direction
• True ambiguity: range of possible future outcomes not known
▪ Scenarios and risk management (real options, phases)
▪ Shapers try to create order out of chaos
▪ Adapters try to experiment
Analysis: enabling the right decision
• Hard to identify all environment factors, but what he wants to do is identify major factors, and
figure out how eleets ca … strateg?
• Analysis supports the decision making process
o Shouldn't hinder decision-making but make it stronger
• Key objectives of analysis
o Ensure key facts are being brought forward
o Ensure right issues and opportunities are being addressed
o Create a level knowledge playing field for strategic planning participants
o Select correct strategies to achieve vision
o Create buy-in
External environmental analysis
• General environment
o Focused on elements in broader society that can indirectly influence an industry and firms
within the industry
• Industry environment
o Focused on factors and conditions influencing firm's profitability within an industry
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• Competitor environment
o Focused on predicting the dynamics of competitors' actions, responses and intentions
•
• General environment: seven segments/dimensions
o Demographic segment
• Populatio size, age structure, ethic i…
o Economic segment
• Inflation rates, interest rates, personal savings rate, GDP
o Political/legal segment
• Antitrust laws, taxation laws, educational philosophies and policies
o Sociocultural segment
• Women in workforce, workforce diversity, shifts in work and career preferences
o Technological segment
• Product innovations, applications of knowledge, focus of private and government-
supported R&D expenditures, new communication technologies
o Global segment
• Important political events, critical global markets, newly industrialized countries,
different cultural and institutional attributes
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o Sustainable physical environment segment
• Energy consumption, practices used to develop energy sources, renewable energy
efforts, availability of water as a resource, producing environmentally friendly
products, reacting to natural/man-made disasters
• Strategies firm can use is using this analysis process
o 4 components:
• Scanning
▪ Identifying early signals of environmental changes and trends
• Monitoring
▪ Detecting meaning through ongoing observations of environmental changes and
trends
• Forecasting
▪ Developing projections of anticipated outcomes based on monitored changes
and trends
• Assessing
▪ Determining the timing and importance of environmental changes and trends
for firms' strategies and their management
• SWOT Analysis:
o Main objective: view of our current state
• Great planning starts at knowing where we are today
• But not enough to make real strategic decisions
o Strengths, weaknesses, opportunities, threats
o External components
• Opportunity
▪ Condition in general environment that, if exploited effectively, helps a firm
achieve strategic competitiveness
• Threat
▪ Condition in general environment that may hinder a firm's efforts to achieve
strategic competitiveness
o Internal: strengths and weaknesses
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Risk vs uncertainty: risk: present when future events occur with measurable probability, variation in potential outcomes to which an associated probability can be assigned. In statistical terms, distribution of variable is known: but not value from distribution which will be realized. Limited number of alternative futures of which one will occur: game tree, decision tree, influence other players. Shapers try to influence outcome that it favours: adapters try to hedge, wider range of alternative futures, probabilities less clear. Shapers try to shift industry in right direction: true ambiguity: range of possible future outcomes not known. Shapers try to create order out of chaos: adapters try to experiment. External environmental analysis: general environment, focused on elements in broader society that can indirectly influence an industry and firms within the industry. Strategies firm can use is using this analysis process: 4 components: Identifying early signals of environmental changes and trends: monitoring, detecting meaning through ongoing observations of environmental changes and trends.
