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BU111 Midterm exam review.docx

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Wilfrid Laurier University
Leanne Hagarty

BU111 Midterm exam review 10/18/2012 8:06:00 PM The relationship between the firm and its external environment Course Model: Before change is implemented, a business must go through the course model Critical success factors influence and are inter-related to the internal (HR: employee commitment) and external environment (PEST) Critical Success Factors: Critical Factors Influencing Every Quality Company C: (meeting) customer needs Brand equity: loyal customer base Anticipating, meet/deliver and understand trends (customer needs) Positive multiplier effect (advertising) Creates RECURRING revenue F: (achieving) financial performance (Y) Every other success factor leads to this I: (encourage) innovation/creativity Cutting costs through efficient distribution network (behind the scenes innovation) * LINKS to financial performance E: (gaining) employee commitment and loyalty Personal + company goals Productivity increases Q: (building) quality products and services Product advantage: how product meets customer needs better (perfect quality- more cost- isnt always most advantageous for all customer needs) C: (creating distinctive) comparative advantage (incentives) Customers: o distinct and different (other than price)- TOYS R US o maintain profit margin Employees o Rewards systems for employees (rather work for google than wal mart) Why are they important? How do they connect? Diamond E Model: (Managers go through process as a strategy to make changes) Identifying key variables to be considered in strategic analysis Strategy needs to be implemented based on realistic observation of internal variables: Management preferences: consider they can be biased Organization: consider structure of organization (who takes care of what- centralized, decentralized) Resources: consider human (people, skills) resources, capital (assets/finances), cash flow and equity The Strategy-Environment Linkage is based on the principal logic! Principal logic examines the importance of consistency between variables. Try to attain alignment: get all people making good choices, reinforcing each others choices and pursuing a common proposition and way of attaining competitive advantage Proctor and Gamble strategy in 2000 (inconsistency) o Costs and failures went up with all the new products (misread available resources, management and organization) Ikea Strategy (consistency) o internal business is matched with external o affordable feel designed furniture **Absolute alignment is not realistic: internal variables dont always perfectly match 10/18/2012 8:06:00 PM External Analysis Process of scanning/evaluating external environment how managers determine opportunities and threats firm faces multiple environments (General: affects everyone PEST Specific: affects industry participants FIVE FORCES) Benefits of External Analysis: anticipate change, needed resources, improve performance Coping with uncertainty of the PEST Challenges of External Analysis Changing environments are always changing The time required for the different environments: EFFORT AND TIME (MONEY) ^^ Trade off and balancing act General Environment External Analysis: PEST *Analyzing effect on external environment using various elements within PEST *What opportunities or threats does the environment possess? Political/legal: Affects uncertainty, risks, costs Government can use elements (laws, regulations, trade agreements, system, etc) to create incentives, constraints or support/bail out when needed Product Labels, Minimum Wages, Taxes, Tariffs (EX. Toyota wanted to sell to Canadians, but taxes would be a downfall, so they became a Canadian manufacturer - which encourages investment, creates Canadian jobs, etc.) Political system: Canada's business friendly, capitalistic approach, stability (** Tax on junk food (13% basic) - if government increased that tax- - junk food manufacturers: threat - health activists: opportunity Affects different shareholders differently) --ASK: What legal protection do I have or laws do I have to consider? Economic Influences costs, potential sales, and financial uncertainty Are the conditions positive or negative Economic growth: GDP and SOL Economic Stability: inflation and unemployment Trade balance, national debt, interest/exchange rates Who is the product aimed towards - Niche market (luxury good that is wanted, not needed- does the economy allow it?) exchange rates make products more or less attractive in international market +interest: more risk , -interest: more likely to borrow EXAMPLE: Canadian vs. American dollar: AS CANADIANS; stronger Canadian dollar, imports more from america imports went on sale for 30% exporting to America: less export business to america for Americans: went from ON SALE to regular price --ASK: Do the economic conditions support my business? Social Affects how we live, work (behavior/attitude, CSR, Ethics), consume (preferences- organic food, etc.) and produce laws and regulations emanate from our attitudes to different situations (environmentally friendly, gay rights, etc) grey area: what is legal? (bribes: social factor OKAY in other countries- cultural sensitivity) averaging out profit and trust --ASK: What demographic and social trends affect my business and how? Technological Affects what we produce/what it can do, affects how we produce and how we sell Demands constant learning and scanning Internet affects buying/selling/communicating customers can comparison shop
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