Transcript Slide 1

Environmental Analysis
INTRODUCTION
• An integrated understanding of the external
and internal environment is essential for firms
to understand the present and predict the
future.
INTRODUCTION
Firm’s external environment is divided into
three major areas.
1. General
2. Industry
3. Competitor
General Environment
• It is composed of dimensions in the broader
society that influence an industry and firm
within it.
• PESTEL Analysis is used to analyze General
Environment
Industry Environment
• It is a set of factors that directly influence a
firm and its competitive actions and
competitive response.
• Five Force Model is used to analyze Industry
Environment.
Competitor Analysis
• How to gather and interpret the information
about the competitor is called Competitor
Analysis.
Environment Analysis
• Analysis of General Environment focused on
the future.
• Analysis of Industry Environment is focused
on the factors and conditions influencing a
firm’s profitability within a industry.
• Analysis of Competitors is focused on
predicting the dynamics of competitor’s
actions, response and intension.
Environment Analysis
• Performance improves when the firm
integrates the insights provided by analyses of
all environments.
Components of External Environmental
Analysis
1. Scanning : Identifying early signals of
environment changes and trends
2. Monitoring: Detecting meaning through
ongoing observations of environmental
changes and trends.
Components of External Environmental
Analysis
3. Forecasting : Developing projections of
anticipated outcomes based on monitored
changes and trends
4. Assessing : Determining the timings and
importance of environmental changes and
trends for firm’s strategies and their
management
General Environmental Analysis
• PESTEL analysis is used to analyze General
Environment.
P = Political
E = Economical
S = Sociocultural
T = Technological
E = Environmental
L = Legal
1.Political Factors
Political factors, are how and to what degree
Government intervenes in the economy.
Political stability.
Tax policy
Trade policy
Ex: Tata Nano
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1.Political Factors
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Political factors may also include goods and
services which the government wants to
provide or be provided (merit goods) and
those that the government does not want to
be provided (demerit goods).
Furthermore, governments have great
influence on the health, education,
infrastructure, and of a nation.
1.Political Factors
 Political decisions can impact on many vital
areas for business such as the education of
the workforce, the health of the nation and
the quality of the infrastructure of the
economy such as the road and rail system.
2.Economical Factors
 These factors have major impacts on how
businesses operate and make decisions.
Economic growth
Interest rate
Exchange rate
Inflation rate
Etc ……
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2.Economical Factors
 Ex.
 Interest rate affects on cost of capital
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 Exchange rates affect price of imported goods
Inflation may provoke higher wage demands
3.Sociocultural Factors
Factors include
cultural aspects
health consciousness,
population growth rate,
age distribution,
career attitudes,
emphasis on safety.
3.Sociocultural Factors
 Social factors include the Trends in social
factors affect the demand for a company's
products and how that company operates.
3.Sociocultural Factors
• The ageing population also has impact on
demand: for example, demand for medicines
has increased whereas demand for toys is
falling
4.Technological Factors
 Technological factors include
R & D,
Automation,
Technological Change
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4.Technological Factors
 They can determine barriers to entry
minimum efficient production level and
influence outsourcing decisions.
 Furthermore, technological shifts can affect
costs, quality, and lead to innovation
4.Technological Factors
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Ex :
MP3 players,
Computer games,
Online gambling
High definition TVs
Online shopping
Computer aided design
5.Environmental Factors
 Environmental factors include ecological and
environmental aspects such as
Weather
climate and climate change
which may especially affect industries such as
tourism, farming, and insurance.
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5.Environmental Factors
• Furthermore, growing awareness of the
potential impacts of climate change is
affecting how companies operate and the
products they offer, both creating new
markets and diminishing or destroying existing
ones
5.Environmental Factors
GLOBAL WARMING
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The general move towards more
environmentally friendly products and
processes is affecting demand patterns and
creating business opportunities.
6.Legal Factors
 Legal factors include
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Consumer Protection law,
Company’s Act,
Minimum Wage Act,
Equal Remuneration Act
 These factors can affect how a company
operates, its costs, and the demand for its
products.
PESTEL Analysis Of Cosmetic Industry
Political Factors:
• 2% reduction in excise duty. ( Free Trade Zone)
• Foreign trade regulation
(Imported cosmetics have to be registered)
PESTEL Analysis Of Cosmetic Industry
Economical Factors :
• Disposable Income
• High Net worth
PESTEL Analysis Of Cosmetic Industry
Socio cultural Factors :
• Income distribution
• Social Mobility
• Life Style Change
PESTEL Analysis Of Cosmetic Industry
Technological Factor :
• Nanotechnology
PESTEL Analysis Of Cosmetic Industry
Environment Factor :
• Waste disposal
PESTEL Analysis Of Cosmetic Industry
Legal Factors :
• The Drugs and Cosmetics Act, 1940
• The Pharmacy Act, 1948
• The Drugs and Magic Remedies (Objectionable
Advertisement) Act, 1954
• The Narcotic Drugs and Psychotropic Substances Act,
1985
• The Medicinal and Toilet Preparations (Excise Duties)
Act, 1956