MGMT 4000 Chapter Notes - Chapter 4: Carbon Footprint, Competitor Analysis, Natural Environment
Chapter 4 – MGMT 4000
Aspects of environmental scanning
• Overreaching term encompassing the monitoring, evaluation, and dissemination of
information relevant to the organizational development of strategy
Identifying external environmental variables
• Natural environment includes physical resources, wildlife, and climate that are an
inherent part of existence on earth
• Societal environment is mankind’s social system that includes general forces that do not
directly touch on the short-run activities of the organization, but that can influence its
long-term decisions
• These factors affect multiple industries and are as follows:
o Economic forces
o Technological forces
o Political-legal forces
o Sociocultural forces
• Task environment includes elements or groups that directly affect a corporation and, in
turn, are affected by it
o Suppliers
o Local communities
o Governments
o Competitors
o Customers
o Creditors
o Etc
• Industry analysis refers to an in-depth examination of key factors within a corporation’s
task environment
Scanning the natural environment
• Side effects such as pollution are considered to be externalities (costs not includes in a
business firm’s accounting system, but felt by others)
• Business must scan natural environment for factors that might previously have been
taken for granted, such as availability of fresh water and clean air
• In a world concerned with climate change, a company can measure and reduce its
carbon footprint (amount of greenhouse gases it is emitting into the air)
Strategic importance of the external environment
Scanning the societal environment (STEEP Analysis)
• Number of possible strategic factors in the societal environment is very high
o Number becomes enormous when we realize that, each country in the world can
be represented by its own unique set of societal factors
STEEP Analysis: Monitoring trends in the societal and natural environments
• S = Societal, T = Technological, E = Economic, E = Ecological, P = Political-legal
o Can also be called PESTEL = political, economic, sociocultural, technological,
ecological, legal
• Sociocultural
o Lifestyle changes
o Career expectations
o Consumer activism
o Rate of family formation
o Growth rate of population
o Age distribution of population
o Life expectancies
o Birthrates
o Pension plans
o Health care
• Technological
o Total government spending for R&D
o Total industry spending for R&D
o Focus of technological efforts
o Patent protection
o New products
o Internet availability
• Economic
o GDP trends
o Interest rates
o Money supply
o Inflation rates
o Unemployment levels
o Wage/price controls
• Ecological
o Environment protection laws
o Global warming impacts
o Non-governmental organizations
o Pollution impacts
• Political-legal
o Antitrust regulations
o Environmental protection laws
o Global warming legislation
o Immigration laws
o Tax laws
o Special incentives
o Foreign trade regulations
o Stability of government
Eight current sociocultural trends are transforming North America and the rest of the world:
1. Increasing environmental awareness
2. Growing health consciousness
3. Expanding seniors market
4. Impact of millennials
5. Declining mass market
6. Changing pace and location of life
7. Changing household composition
8. Increasing diversity of workforce and markets
Technological changes:
• Portable information devices and electronic networking
• Alternative energy sources
• Precision farming
o Computerized management of crops to suit variations in land characteristics will
make farming more efficient and sustainable
• Virtual personal assistant
• Genetically altered organisms
• Smart, mobile robots
Effects of climate change can be grouped into 6 categories of risk:
1. Regulatory risk
2. Supply chain risk
3. Product and technology risk
4. Litigation risk
5. Reputational risk
6. Physical risk
Analysis of STEEP:
• Market analysis
• Community analysis
• Competitor analysis
• Supplier analysis
• Government analysis
• Interest group analysis
• = SELECTION OF STRATEGIC FACTORS (Opportunities and threats)
*willingness to reject unfamiliar as well as negative information is called strategic myopia
Industry analysis: analyzing the task environment
• An industry is a group of firms that produces similar product or service
Document Summary
Aspects of environmental scanning: overreaching term encompassing the monitoring, evaluation, and dissemination of information relevant to the organizational development of strategy. Industry analysis refers to an in-depth examination of key factors within a corporation"s task environment. In a world concerned with climate change, a company can measure and reduce its carbon footprint (amount of greenhouse gases it is emitting into the air) Inflation rates: unemployment levels, wage/price controls, ecological, environment protection laws, global warming impacts, non-governmental organizations, pollution impacts, political-legal, antitrust regulations, environmental protection laws, global warming legislation. Immigration laws: tax laws, special incentives, foreign trade regulations, stability of government. Effects of climate change can be grouped into 6 categories of risk: regulatory risk, supply chain risk, product and technology risk, litigation risk, reputational risk, physical risk. Analysis of steep: market analysis, community analysis, competitor analysis, supplier analysis, government analysis, = selection of strategic factors (opportunities and threats)
