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Management Practices

Lecture-6

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Recap

• The Organizational Environment– External Environment• Importance of External Assessment• How to conduct external audit• Key External Factors

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Key External Factors

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Today’s Lecture

• Economic Forces– Availability of credit– Interest rates

• Social, cultural, demographic and environmental forces– Life expectancy rates– Per capita income

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Economic ForcesMonitor Key Economic Variables– Availability of credit– Level of disposable income : The amount of money that

households have available for spending and saving after income taxes have been accounted for.

– Interest rates: Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets.

– Inflation rates: inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

– Federal government budget deficits• a deficit is an excess of expenditures over revenue in a given time

period• The Federal government budget deficits is the difference between

government revenues (e.g., tax) and spending

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Monitor Key Economic Variables

–Consumption patterns–Unemployment trends–Worker productivity levels: Workforce

productivity is the amount of goods and services that a worker produces in a given amount of time. factors affecting labor productivity:• Individual attitudinal• Motivational and behavioral factors• Technological factors

– Stock market trends

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Monitor Key Economic Variables

– Foreign countries’ economic conditions– Income differences by region/customer– Tax rates– OPEC policies

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Social, Cultural, Demographic & Environmental Forces

1.Social, cultural, demographic, and environmental changes have a major impact on virtually all products, services, markets, and customers.

2.Social, cultural, demographic, and environmental trends are shaping the way people live, work, produce, and consume.

3. New trends are creating a different type of consumer and, consequently, a need for different products, services, and strategies.

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Social, Cultural, Demographic & Environmental Forces

Major impact on:– Products– Services–Markets– customers

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Social, Cultural, Demographic & Environmental Forces

Trends for the 2000’s –– More educated consumers– Population aging– Minorities more influential– Local rather than federal solutions– Fixation with youth decreasing– Hispanics increase to 15% by 2021– African Americans increase to 14% by 2021

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Social, Cultural, Demographic & Environmental Forces

Key variables –• Number of special-interest groups• Number of marriages• Number of divorces• Number of births• Number of deaths• Immigration & emigration rates

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Social, Cultural, Demographic & Environmental Forces

• Life expectancy rates• Per capita income• Attitudes toward business• Average disposable income• Buying habits• Attitudes toward saving

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Social, Cultural, Demographic & Environmental Forces

• Racial equality• Average level of education• Government regulation• Attitudes toward customer service• Attitudes toward product quality• Energy conservation• Social responsibility

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Social, Cultural, Demographic & Environmental Forces

• Value placed on leisure time• Recycling• Waste management• Air & water pollution• Ozone depletion• Endangered species

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Summary

• Economic Forces– Availability of credit– Interest rates

• Social, cultural, demographic and environmental forces– Life expectancy rates– Per capita income

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Next Lecture

• Political, Govt., & Legal Forces• Technological Forces– Revolutionary technological forces– Internet changes the nature of opportunities and

threats• Competitive Forces– Collection and evaluation of information on

competitors