Business Policy & Strategy Chapter Two

1. Business Policy & StrategyChapter Two The Field of Action: Environment of a Business System Murdick, Moor, Babson & Tomlinson Sixth Edition, 2000

2. Business System • Inputs are transformed into outputs • Inputs include raw materials • Transformation involves labor, land, equipment • Outputs must be delivered to the customer

3. STAKEHOLDERS • Customers • Shareholders • General public/community • Suppliers • Competitors • Government(s) – local, state, country, trade associations • Special interest groups • Employees • Managers

4. Corporations Should Act Morally Responsibly • Holding individuals accountable for specific actions • Following rules established by externally imposed societal norms • Allowing individuals to make decisions that produce in others a feeling of trust, respect, and rationality

5. Monitoring & Forecasting the Remote Environment • Economics Trends • Political & Legal Trends • Social & Demographics Trends • Technology Trends, and sometimes • Physical Environment (weather, climate, earth changes such as El Nino, etc)

6. Monitoring & Forecasting the Immediate Task Environment • Customers & potential customers • Competitors • Labor forces • Suppliers • Creditors • Regulatory agencies at various levels of governments

7. Major Methods of Environmental Forecasting • Cross Impact Analysis – select 25 events and estimate probabilities/time of occurrences, interpret impact on future • Trend Analysis – five year results, regression analysis, statistical forecasting • Delphi Process – group of experts individually assesses the future without face to face (F2F) discussion. The results are combined and returned for another round of estimations until consensus is reached

8. Opportunities & Threats in the External Environment • Immediate examples include: • Unrecognized needs of individuals, firms & companies • New applications of products & services • Sudden growth in demand • Synergy achieved through M/A • New distribution methods (Internet) • New manufacturing process/substitute materials • New or better methods for customer service

9. Threats • Management incompetence is often hidden by high rewards for short-term performance rather than for long-term survival. • US tile makers believed it was a mature market and were overcome by foreign producers/importers.

10. Environmental threats • Competitors • Changes in customer preferences • Dwindling resources • Rising prices and wages • Legislation • Inflation or Recession • International economic & political relationships • Technological breakthroughs

11. Constraints • Legal or pending legislation • Political instability • Lack of natural resources • Well established competitors • Declining GDP • Declining productivity • Cost of capital, equipment, union labor

12. Table 2.1 • Pages 8-9 in Chapter Two provide an extensive list of environmental considerations to elaborate on the social, political, environmental and technological fields.

13. Assignment • For your company analysis, identify all of the stakeholders • Identify a list of opportunities • Identify a list of threats • Review Table 2.1 to determine which of these factors affect your firm