• Q1: UNTIL 5:15
Q2: UNTIL 5:50
• *************
TIPS ON DOING PART B:
- WRITE ALL RELATED INFORMATION ABOUT THE ASKED TOPIC
- CITE
- IF THE INFORMATION FOR THAT QUESTION IS TOO LITTLE
→ DEFINE TERMS IN THE QUESTION
→ EXPLAIN, ANSWER THE QUESTION
→ ADD MORE INFO YOU THINK RELEVANT
A. Lecture 2: MACRO- ENVIRONMENTAL ANALYSIS, SWOT, Step, PESTEL, SCENARIO
ANALYSIS
• Include:
+ Social demographic and cultural trends
+ Technical changes
+ Economic conditions
+ Policy, laws and regulations
• Internal Focus:
Managers tend to:
+ frame analysis within established ‘proven’ beliefs and assumptions
+ adopt a passive approach to scanning drawing data and insights from
familiar sources
+ use data to reinforce assumptions and beliefs
+ pay attention on their current offering in their current markets
• External Focus:
Peripheral scanning helps to:
+ identify peripheral treats rather than those from the centre
+ challenges the organizational comfort zone by questioning assumptions,
routines and practices
+ stimulates exploration: discovery of new opportunities
+ stimulates exploitation: leveraging of current opportunities
• Analysis:
1. Scanning: identify early signals of environmental changes and trends
2. Monitoring: detect meaning through ongoing observations of
environmental changes and trends
3. Forecasting: develop projections of anticipated outcomes based on
monitored changes and trends
4. Assessing: determine the timing and importance of environmental
changes, trends and their interactions for organization’s strategies and
their management
5. Megatrends: large scale PESTLE changes, influencing other trends (eg
aging population, rapid growth in Asian economies)
6. Inflexion points: shift in the direction of a trend (eg the significant decline
in urban centre retailing)
, 7. Weak signals: unstructured and fragmented information that appears
‘weird’ in relation to current trends
• EVALUATION:
Strengths/ Valid uses Weakness/ Risks
+ Comprehensive frameworks to + initial framework
analyse environmental trends + importance of factors will differ:
+ identification of key drivers issue specific/ competitive factors
+ helps to think ‘out of the box’ might change over time
+ useful for situations of high + danger of being overwhelmed by
uncertainty detail
+ thorough evaluation and analysis
necessary
• SWOT ANALYSIS:
Internal Strengths Weaknesses
What done well? What done poorly?
Unique resources to Resources deficits that suffering?
build/ maintain Core weaknesses to competitors?
competitive advantage? What competitors try to attack?
Core strengths
compared to
competitors?
External Opportunities Threats
What opportunities What treats impacts the organization
impacts the negatively?
organization? What is your competition doing?
How to turn its core What threats does weaknesses
strengths into expose them to in the short-medium-
opportunities? long term?
• STEP ANALYSIS: of the far environment (Fahey and Narayanan, 1986)
(strategic analysis of the near environment (Kotler, 1980) – CTP –
competitive/ task/ public environment)
Social factors Demographics
Lifestyles
Social values, beliefs, culture
Technological factors Disruptive technologies
Research and development
Technology platform/patent
Economic factors Economic growth/recession
Inflation/ stagflation
Interest ratings and rates
Political factors Political milieu
Democracy/ dictatorship
Regulatory environment
• PESTEL ANALYSIS:
, POLITICAL Government stability
Political stance
Education policy
Taxation policy and trade regulation
ECONOMIC Inflation rates/ interest rates
Budget deficits or surplus
Personal and business saving rates
GDP/ disposable income
SOCIAL Lifestyle changes and social trends
Attitude to employment/ nature of
Employment levels
Education levels
Consumerism and consumer attitudes
DEMOGRAPHIC Population size
Age structure
Geographical distribution
Home ownership/single households
TECHNOLOGICAL Rate of changes and product innovation
Technology transfer policy and up take
Government and industry R&D spend
ENVIRONMENTAL Regulation
Pollution and waste management
Energy issues
Climate change
INFRASTRUCTURE Transport system
Communication system
LEGAL Employment laws/ labour training laws
Equal opportunities
International harmonization
Health and safety
HOW TO DO PESTEL:
Stage 1: Strategic Analysis
Factors Impact Probability Preparedness Overall Importance
P
E
S
T
E
L
Factors: eg economic- increasing disposable income/ increasing interest rates
Impact: Extremely High =10; High =7; Med =4; Low =1; Don’t know =7
Probability: Certain =10; Highly likely =7; Possible =4; Unlikely =1, IDK =7
Overall performance = impact * probability
→ FOCUS ATTENTION on high impact probability and overall importance
scores
, Stage 2: Strategic Actions
Factors Prepared for Resources Responsibility Overall
Effective Action available performance
P
E
S
T
E
L
Prepared for effective action:
Completely prepared =10; Well =7; General approach =5; Not well =3; very
limited awareness =1; Don’t know =7
→ ATTENTION FOCUS on low preparation scores
Actions: who is responsible for the change? Will effective action be taken?
Are resources available?
• SCENARIO ANALYSIS:
+ Present a plausible alternative view of how the business environment might
develop in the future
+ Scenarios are based on key drivers for change about which there is high
uncertainty
+ Goal is to develop ‘stories’ to reflect on impacts, and may require extensive
counterfactual reasoning
Strengths/ Valid Uses Weaknesses/ RIsks
+ Builds upon key trends and macro- - Not a forecasting technique
environmental drivers - Not predictive
+ Hypothetical analysis of causal - Educated and well-informed guess
process and decision points of how work
industry path is likely to evolve
+ Good at surfacing deeply held
beliefs and assumptions, identifying
threats, and opportunities for
strategic change
• HOW TO DO A SCENARIO ANALYSIS:
1. Define the scenario scope: industry/ market & time scope
2. Scan the environment and identify key drivers of change:
+ Use PESTEL: to define a short list of relevant high impact probability
factors
+ Assess high impact probability factors in terms of level of uncertainty
over time (is it clear these will develop? Is it uncertain how they will
develop?)
3. Develop ‘scenario stories and narratives’ which capture the possible
futures using Key Prompt Questions (‘What if’ questions)
+ Marketing: what if the market suddenly changes? Market dries up?
Q2: UNTIL 5:50
• *************
TIPS ON DOING PART B:
- WRITE ALL RELATED INFORMATION ABOUT THE ASKED TOPIC
- CITE
- IF THE INFORMATION FOR THAT QUESTION IS TOO LITTLE
→ DEFINE TERMS IN THE QUESTION
→ EXPLAIN, ANSWER THE QUESTION
→ ADD MORE INFO YOU THINK RELEVANT
A. Lecture 2: MACRO- ENVIRONMENTAL ANALYSIS, SWOT, Step, PESTEL, SCENARIO
ANALYSIS
• Include:
+ Social demographic and cultural trends
+ Technical changes
+ Economic conditions
+ Policy, laws and regulations
• Internal Focus:
Managers tend to:
+ frame analysis within established ‘proven’ beliefs and assumptions
+ adopt a passive approach to scanning drawing data and insights from
familiar sources
+ use data to reinforce assumptions and beliefs
+ pay attention on their current offering in their current markets
• External Focus:
Peripheral scanning helps to:
+ identify peripheral treats rather than those from the centre
+ challenges the organizational comfort zone by questioning assumptions,
routines and practices
+ stimulates exploration: discovery of new opportunities
+ stimulates exploitation: leveraging of current opportunities
• Analysis:
1. Scanning: identify early signals of environmental changes and trends
2. Monitoring: detect meaning through ongoing observations of
environmental changes and trends
3. Forecasting: develop projections of anticipated outcomes based on
monitored changes and trends
4. Assessing: determine the timing and importance of environmental
changes, trends and their interactions for organization’s strategies and
their management
5. Megatrends: large scale PESTLE changes, influencing other trends (eg
aging population, rapid growth in Asian economies)
6. Inflexion points: shift in the direction of a trend (eg the significant decline
in urban centre retailing)
, 7. Weak signals: unstructured and fragmented information that appears
‘weird’ in relation to current trends
• EVALUATION:
Strengths/ Valid uses Weakness/ Risks
+ Comprehensive frameworks to + initial framework
analyse environmental trends + importance of factors will differ:
+ identification of key drivers issue specific/ competitive factors
+ helps to think ‘out of the box’ might change over time
+ useful for situations of high + danger of being overwhelmed by
uncertainty detail
+ thorough evaluation and analysis
necessary
• SWOT ANALYSIS:
Internal Strengths Weaknesses
What done well? What done poorly?
Unique resources to Resources deficits that suffering?
build/ maintain Core weaknesses to competitors?
competitive advantage? What competitors try to attack?
Core strengths
compared to
competitors?
External Opportunities Threats
What opportunities What treats impacts the organization
impacts the negatively?
organization? What is your competition doing?
How to turn its core What threats does weaknesses
strengths into expose them to in the short-medium-
opportunities? long term?
• STEP ANALYSIS: of the far environment (Fahey and Narayanan, 1986)
(strategic analysis of the near environment (Kotler, 1980) – CTP –
competitive/ task/ public environment)
Social factors Demographics
Lifestyles
Social values, beliefs, culture
Technological factors Disruptive technologies
Research and development
Technology platform/patent
Economic factors Economic growth/recession
Inflation/ stagflation
Interest ratings and rates
Political factors Political milieu
Democracy/ dictatorship
Regulatory environment
• PESTEL ANALYSIS:
, POLITICAL Government stability
Political stance
Education policy
Taxation policy and trade regulation
ECONOMIC Inflation rates/ interest rates
Budget deficits or surplus
Personal and business saving rates
GDP/ disposable income
SOCIAL Lifestyle changes and social trends
Attitude to employment/ nature of
Employment levels
Education levels
Consumerism and consumer attitudes
DEMOGRAPHIC Population size
Age structure
Geographical distribution
Home ownership/single households
TECHNOLOGICAL Rate of changes and product innovation
Technology transfer policy and up take
Government and industry R&D spend
ENVIRONMENTAL Regulation
Pollution and waste management
Energy issues
Climate change
INFRASTRUCTURE Transport system
Communication system
LEGAL Employment laws/ labour training laws
Equal opportunities
International harmonization
Health and safety
HOW TO DO PESTEL:
Stage 1: Strategic Analysis
Factors Impact Probability Preparedness Overall Importance
P
E
S
T
E
L
Factors: eg economic- increasing disposable income/ increasing interest rates
Impact: Extremely High =10; High =7; Med =4; Low =1; Don’t know =7
Probability: Certain =10; Highly likely =7; Possible =4; Unlikely =1, IDK =7
Overall performance = impact * probability
→ FOCUS ATTENTION on high impact probability and overall importance
scores
, Stage 2: Strategic Actions
Factors Prepared for Resources Responsibility Overall
Effective Action available performance
P
E
S
T
E
L
Prepared for effective action:
Completely prepared =10; Well =7; General approach =5; Not well =3; very
limited awareness =1; Don’t know =7
→ ATTENTION FOCUS on low preparation scores
Actions: who is responsible for the change? Will effective action be taken?
Are resources available?
• SCENARIO ANALYSIS:
+ Present a plausible alternative view of how the business environment might
develop in the future
+ Scenarios are based on key drivers for change about which there is high
uncertainty
+ Goal is to develop ‘stories’ to reflect on impacts, and may require extensive
counterfactual reasoning
Strengths/ Valid Uses Weaknesses/ RIsks
+ Builds upon key trends and macro- - Not a forecasting technique
environmental drivers - Not predictive
+ Hypothetical analysis of causal - Educated and well-informed guess
process and decision points of how work
industry path is likely to evolve
+ Good at surfacing deeply held
beliefs and assumptions, identifying
threats, and opportunities for
strategic change
• HOW TO DO A SCENARIO ANALYSIS:
1. Define the scenario scope: industry/ market & time scope
2. Scan the environment and identify key drivers of change:
+ Use PESTEL: to define a short list of relevant high impact probability
factors
+ Assess high impact probability factors in terms of level of uncertainty
over time (is it clear these will develop? Is it uncertain how they will
develop?)
3. Develop ‘scenario stories and narratives’ which capture the possible
futures using Key Prompt Questions (‘What if’ questions)
+ Marketing: what if the market suddenly changes? Market dries up?
