Transcript External Analysis for SME

Businesses all fit into an environment
External Analysis & Strategy
• External environment can be
mapped as four areas:
– Market forces
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Segments & profitability
Demands & trends,
Customer acquisition costs (business)
Switching costs (customer)
Issues affecting market
External Analysis & Strategy
• Industry forces (Porters Five Forces)
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Threat of substitutes (competing products)
Threat of new entrants (high/low barriers to entry ?)
Threat of existing competition (concentration within industry)
Power of suppliers (many = low /few = high)
Power of buyers (many = low /few = high)
External Analysis & Strategy
• Key trends (PEST)
• Political – legislation that is planned/in process/ overseas.
• Economic s – demographics, income distribution, disposable
incomes, tastes, spending patterns.
• Society – Cultural changes affecting society, shifts in values
which will affect buyer behaviour.
• Technological – Impacts on business
– Market maker/market breaker (vinyl/ tape/ DAT/ CD/ downloads)
– Improve operational efficiency
– Opportunities/disruptions.
PEST analysis is usual tool
And might be applied from any of the following standpoints:
(Example Moa Breweries) .
• a company looking at its market - (Moa Brewery and NZ)
• a product looking at its market - (‘Breakfast beer’ in morning market)
• a brand in relation to its market - (Moa as a boutique beer brand)
• a local business unit - (Moa (AK) compared to Moa(WN) ?)
• a strategic option, such as entering a new market or launching a new
product - (Moa into Australia)
• a potential acquisition - (Moa buys Phoenix Organic softdrinks)
• a potential partnership - (Moa and Atomic coffee –licensed cafes chain)
• an investment opportunity - (Moa buys a digital brewery)
PEST variations
( Choose the one that fits your business best)
STEP = PEST in more positive approach.
PESTEL = PEST + Environmental + Legal
PESTELI = PESTEL + Industry analysis
STEEP = PEST + Ethical
SLEPT = PEST + Legal
STEEPLE = PEST + Environmental + Legal + Ethical
STEEPLED = STEEPLE + Demographic
PESTLIED = PEST + Legal + International + Environmental +
Demographic
LONGPEST = Local + National + Global factors + PEST
External Analysis & Strategy
• Macroeconomic forces
– Global market sentiment – boom or bust?
– Interest rates
• affecting capital cost for business
• affecting spending by buyers
• (NZ) affecting exchange rates
– High interest rates/ high exchange rates/ import(+) export(-)
– Low interest rates /low exchange rate/ import (-) export (+)
– Unemployment rate
• affecting general spending level
• ease of hiring &firing
“The economy”
National Economy
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Infrastructure (road/rail/power/ I.T.)
Services (banking/insurance/logistics/utilities)
Education(cost/output/languages/numeracy)
Business (tax/employment & environmental law)
Government Policy (R&D, business support)
Prevailing philosophy (socialism<->capitalism)
Regional Economy
• As for national economy, plus any other factors
• Auckland examples
– Housing cost (attracting staff / effect on spending)
– Traffic gridlock (time & cost problem for deliveries)
– Cosmopolitan city – 40% not born here
How will these factors affect our strategy?
• Depends on sensitivity of the business
– Purchase price
• large (house/car) or small (batteries)
– Product type (income elasticity effect (YED))
• Luxury (tracks & exaggerates income level changes)
– Restaurant meals, overseas travel.
• Necessity (tracks steadily – minor income effect)
– Flour, sugar, domestic travel.
• Inferior (tracks opposite to income)
– Casual labour, shoe repairs.
How will these factors affect our strategy?
• Technology ?
– Threats / opportunities
• Demographics?
– Immigration / aging / households (single persons,
blended families, multiple incomes)
• Legislation?
– What laws appliy now? / what might change?
• Society ?
– Church goers / same sex couples / sustainability
Checklist : Political
• Government has passed legislation which requires further
reductions of CO2, HC and NC emissions for vehicles until
2015
• New political forces, which are against tax reductions, may be
elected in the next years’ elections
• Import restrictions will increase in 2013
• Government is increasing its funding to ‘specific’ industry
• Government is easing regulations for employment
• Increasing tensions between our government and our major
export partner’s government
• Legal & security issues on international data
Checklist : Economic
• GDP will grow by 3% in 2015
• Availability of credit for businesses will slightly grow or remain
unchanged in 2015. Cost of credit will decrease slightly in the
2nd half of the year
• Unemployment is expected to decrease.
• Inflation will remain low – some imported through exchange
rate moves.
• Dollar exchange rates are expected to decrease compared to
euro /AUD /USD
• Disposable income level will decrease
Checklist :Socio-cultural
• Positive attitude towards “green” vehicles
• Number of individuals and companies buying through the
Internet is 67% and 45% respectively and is expected to grow
• Immigration is increasing
• Increasing attitude toward jobs with shorter work hours
• People tend to buy more domestic rather than foreign
products
• People change their eating habits and now tend to eat
healthier food
Checklist: Technological
• New machinery that could reduce production costs by 20% is
in development
• Country’s major telecom company announced its plans to
expand its internet infrastructure and install new optic fiber
cables
• Driverless cars may be introduced in the near future
• “New” type of table will be introduced into the market next
year
• Additive manufacturing
• Cloud computing & SAAS (software as a service)
• Internet & cybersecurity
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political
ecological/environmental issues
current legislation home market
future legislation
international legislation
regulatory bodies and processes
government policies
government term and change
trading policies
funding, grants and initiatives
home market lobbying/pressure
groups
• international pressure groups
• wars and conflicts
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economic
home economy situation
home economy trends
overseas economies and trends
general taxation issues
taxation specific to
product/services
seasonality/weather issues
market and trade cycles
specific industry factors
market routes and distribution
trends
customer/end-user drivers
interest and exchange rates
international trade/monetary
issues
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social
lifestyle trends
demographics
consumer attitudes and opinions
media views
law changes affecting social
factors
brand, company, technology
image
consumer buying patterns
fashion and role models
major events and influences
buying access and trends
ethnic/religious factors
advertising and publicity
ethical issues
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technological
competing technology development
research funding
associated/dependent technologies
replacement technology/solutions
maturity of technology
manufacturing maturity and capacity
information and communications
consumer buying
mechanisms/technology
technology legislation
innovation potential
technology access, licencing, patents
intellectual property issues
global communications