understanding and analyzing the general environment hcad 5390
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Major Components of an Organization’s External Environment
Industry (or industries) and competitors Market (or markets) and customers General environmental forces
Strategic Benefits of External Environmental Assessment
Align the organization with its environment Strategies more responsive to the environment Information that informs strategic decisions Early warning of environmental changes Identify useful resources in the environment Plot to effect change in the environment
External Environmental Assessment Process
Identify most influential environmental forces Identify critical industry and market issues Select forces and issues for close monitoring Identify information sources on the forces Conduct initial baseline assessment Project trends and pace of change Estimate impact of trends on the organization What strategic decisions in response to trends What decision makers receive environmental reports
External Environmental Analysis
A continuous process which includes
Scanning: Identifying early signals of environmental changes and trends
Monitoring: Detecting meaning through ongoing observations of environmental changes and trends
Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends
Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management
Categories of Environmental Factors
Political/Governmental Legal Profession/Industry Economic (global, national, regional) Sociocultural Demographics Technology
Environmental Factors:Political/Governmental
Specific election results Specific politicians voted in or out of office Political ideological mood of country or region Opportunities for lobbying Political/business leaders positions on industry-related issues Government spending focus and levels Government policies on industry-related issues Governmental regulatory vigor Government role in meeting societal needs Media reports
Environmental Factors: Legal
Existing laws (long established, how are they interpreted and enforced)
New laws (recently enacted, how will they be interpreted and enforced)
Proposed legislation (working their way through the legislature, likely impact on industry and organization)
Environmental Factors: Profession/Industry
Professional associations American Medical Association American Nursing Association American Academy of Procedural Coders
Industry trade associations American Hospital Association Medical Group Management Association Pharmaceutical Research and Manufacturers of America
Environmental Factors: Economic
At global, national and regional levels Interest rates Stock market prices Venture capital deals (IPOs, M&As) Government budget deficit or surplus Inflation rates Consumer income, disposable income, and debt Employment and unemployment levels Tax rates Economic cycle stage (boom vs recession) Global economic metrics Specific effects of economic trends
Environmental Factors: Sociocultural
Characteristics – traditions, lifestyles, values, ideals, aspirations, principles, ethics, attitudes, beliefs, biases, opinions, tastes, political views, and behavioral patterns
People – current customers, prospective customers, influencers of customers, ends users, employees, suppliers, shareholders, bondholders, lenders, government regulators, politicians, media, general public
Environmental Factors: Demographics
Gender Age Income levels Ethnicity Race Geographic place of
residence
Family size and composition
Education Employment status Birth rates Life expectancies
Environmental Factors: Technology
New capabilities, equipment, and systems in: Clinical treatment and procedures (drugs,
medical devices, diagnostic tests, surgical procedures, treatment regimens)
Researching and developing clinical technologies Gathering, recording, and communicating clinical
data (EMR, EHR, CPOE systems) Gathering and disseminating nonclinical data
(cost, quality, satisfaction, patient logistics)
Stages of the Industry Life Cycle
Time
De
ma
nd
Embryonic
Competitive Changes During Industry Evolution
Stages of the Industry Life Cycle
Competitive Changes During Industry Evolution (Continued)
Time
Embryonic
Growth
De
ma
nd
Stages of the Industry Life Cycle
Competitive Changes During Industry Evolution (Continued)
Time
Embryonic
Growth Shakeout
De
ma
nd
Growth in Demand and Capacity
Competitive Changes During Industry Evolution (Continued)
Un
its
Timet1t2
CapacityCapacity
DemandDemand
ExcessCapacity
Stages of the Industry Life Cycle
Time
Embryonic
Growth Shakeout Maturity
Competitive Changes During Industry Evolution (Continued)
De
ma
nd
Stages of the Industry Life Cycle
Competitive Changes During Industry Evolution (Continued)
Time
Embryonic
Growth Shakeout Maturity Decline
De
ma
nd
Strategies in Fragmented Industries
Fragmented industry characteristics:– Localized markets with low entry
barriers (e.g., Mom’s Diner).– Few economies of scale
opportunities exist.– High transportation costs
(e.g., sand) for products.– Focus strategies predominate
(e.g., customer group, region).
Strategies in Fragmented Industries
Competing in fragmented industries requires strategic consolidation by:– Chaining (Wal-Mart)– Franchising (Pearl Vision)– Horizontal mergers– Using the Internet (Lens.com)
Information Sources for External Environmental Assessment
Newspaper clipping services General-purpose and narrow-focus websites Charitable research foundations (Robert Wood Johnson
Foundation, Kaiser Foundation) Think tanks (RAND Corporation) Consulting firms (Deloitte Consulting) Government agencies (CMS) Legal research databases (Lexis-Nexis, Westlaw) Journals, magazines, periodicals Trade and professional associations Published survey results