Creating environmentally aware organization

How do managers become environmentally aware?

There are three important processes through which managers forecasts the are scanning, monitoring, and gathering competitive intelligence.

Environmental scanning:

Environmental scanning involves examining of a firm’s external environment to predict environmental changes and detect the changes already underway.

• A company' macro environment includes all relevant factors and influence outside the company's boundaries that have a bearing on the decisions the company makes about its strategy, objectives and business.

• These macro environment factors are

In the outer ring:

– societal values and lifestyles e.g McDonalds not using beef in India

– population demographics e.g. Insurance companies designing products for young population in India

– legislation and regulations e.g. No FDI in sectors like retail

– general economic conditions e.g. cost cutting by companies

– Technology e.g. companies using video-conferencing

The immediate industry and competitive environment factors like:

– rival firms e.g. Bajaj planning low-rpriced car

– new entrants e.g. ITC entering FMCG sector

– Buyers e.g. reduction in sales of Pepsi and Coke after pesticide controversy

– substitute products e.g. bikes replacing scooters

– Suppliers e.g. arm twisting by Microsoft to include Internet Explorer

• The shaping impact of outer ring influences is normally low but they provide strategically relevant trends and developments to justify a watchful eye. (exceptions are cigarette producers effected by antismoking ordinances and growing cultural stigma attached to smoking, health care companies effected by changing demographics of aging population and longer life expectancy, companies effected by internet technology applications)

Thinking strategically about a company's industry and competitive environment

• Industries differ widely in their economic features, competitive character and profit outlook. (e.g. economic factors and competitive character is different for trucking industry, retail, fast food, softaware development)

An industry's economic traits and competitive conditions and how they are expected to change determine whether its future profit prospects will be poor, average or excellent

The following are the seven critical questions that help in understanding a company's competitive environment.

1. What are the dominant economic features of the industry in which the company operates? E.g. high investment in realty

2. What kinds of competitive forces are industry members facing, and how strong is each force? E.g. FMCG

3. What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability? E.g. airline industry

4. What market position do industry rivals occupy - who is strongly positioned and who is not? E.g. FMCG, passenger cars

5. What strategic moves are rivals likely to make next? E.g. cars

6. What are the key factors for future competitive success? E.g. software

7. Does the outlook for the industry present the company with sufficiently attractive prospects for profitability? E.g. cellphones

What are the industry's dominant economic features?

• Analyzing a company's industry and competitive environment begins with identifying the industry's dominant economic features.

• An industry's dominant economic features are defined by the following factors

– Overall size and market growth rate

– Geographic boundaries of the market (local to worldwide)

– Number and size of competitors

– What buyers are looking for and the attributes that cause them to choose one seller over another

– Pace of technology change and/or product innovations

– Whether sellers' products are virtually identical or highly differentiated

– Extent to which costs are effected by scale economics

– Learning curve effects