Summary advanced management lecture 2
Chapter 2 & 3
Chapter 2 The environment > external analysis
The environment is what give organisations their means of survival. It creates opportunities and it
presents threats. For example, the rise of the Chinese economy has created opportunities for Western
mobile phone manufacturers, at the same time as producing threats in terms of new competitors such
as ZTE and Huawei.
The future can never be predicted perfectly, it is clearly important that entrepreneurs and
managers try to analyse their environments as carefully as they can in order to anticipate and,
if possible, influence environmental change.
Frameworks for analysing changing and complex environments:
(1) The macro-environment: the highest level layer that consists of broad environmental factors
that impact to a greater or lesser extend on almost all organisations.
(2) Industry, or sector: the next layer within this broad general environment and is made up of
organisations producing the same sorts of products or services.
(3) Competitors and markets: the most immediately layer surrounding organisations.
Macro-environment – PESTEL and scenarios
PESTEL provides a wide overview and scenarios build on this in order to consider how the macro-
environment might change. This could be overwhelming in the amount of issues, so it is important to
focus on what is likely matter most > the key drivers for change.
The PESTEL framework
Categorises environmental factors into key types and highlights sic environmental factors in particular:
political, economic, social, technological, ecological and legal. This range of factor underlines that the
environment is not just about economic forces, there is an important non-market environment. Often
are those six factors interconnected.
Politics: highlights the role of the state and other political forces. The state is often important
as a direct economic actor, for instance as potential customer, supplier or owner of groups or
concerned media. But there are also influences from various political movements, campaign
groups or concerned media.
o Defence companies: state is often the owner and key customer, which are also
exposed to political campaigning against the arms trade. (wapenhandel)
o Food companies: mostly privately owned and operate in private-sector markets but
are still exposed to great political pressures from campaigners for fair trade, labour
rights and healthy eating.
Economics: refers to macro-economic factors such as exchange rates, business cycles and
differential economic growth rates around the world. It is important for a business to
understand how its markets are affected by the prosperity (welvaart) of the economy as a
whole. Managers should have a view on how changing exchange rates may affect viability in
export markets and vulnerability (kwetsbaarheid) to imports.
Social influences: include changing cultures and demographics. For example, the ageing
populations in many Western societies create opportunities and threats for both private and
public sectors. Changing cultural attitudes can also raise strategic challenges.
Chapter 2 & 3
Chapter 2 The environment > external analysis
The environment is what give organisations their means of survival. It creates opportunities and it
presents threats. For example, the rise of the Chinese economy has created opportunities for Western
mobile phone manufacturers, at the same time as producing threats in terms of new competitors such
as ZTE and Huawei.
The future can never be predicted perfectly, it is clearly important that entrepreneurs and
managers try to analyse their environments as carefully as they can in order to anticipate and,
if possible, influence environmental change.
Frameworks for analysing changing and complex environments:
(1) The macro-environment: the highest level layer that consists of broad environmental factors
that impact to a greater or lesser extend on almost all organisations.
(2) Industry, or sector: the next layer within this broad general environment and is made up of
organisations producing the same sorts of products or services.
(3) Competitors and markets: the most immediately layer surrounding organisations.
Macro-environment – PESTEL and scenarios
PESTEL provides a wide overview and scenarios build on this in order to consider how the macro-
environment might change. This could be overwhelming in the amount of issues, so it is important to
focus on what is likely matter most > the key drivers for change.
The PESTEL framework
Categorises environmental factors into key types and highlights sic environmental factors in particular:
political, economic, social, technological, ecological and legal. This range of factor underlines that the
environment is not just about economic forces, there is an important non-market environment. Often
are those six factors interconnected.
Politics: highlights the role of the state and other political forces. The state is often important
as a direct economic actor, for instance as potential customer, supplier or owner of groups or
concerned media. But there are also influences from various political movements, campaign
groups or concerned media.
o Defence companies: state is often the owner and key customer, which are also
exposed to political campaigning against the arms trade. (wapenhandel)
o Food companies: mostly privately owned and operate in private-sector markets but
are still exposed to great political pressures from campaigners for fair trade, labour
rights and healthy eating.
Economics: refers to macro-economic factors such as exchange rates, business cycles and
differential economic growth rates around the world. It is important for a business to
understand how its markets are affected by the prosperity (welvaart) of the economy as a
whole. Managers should have a view on how changing exchange rates may affect viability in
export markets and vulnerability (kwetsbaarheid) to imports.
Social influences: include changing cultures and demographics. For example, the ageing
populations in many Western societies create opportunities and threats for both private and
public sectors. Changing cultural attitudes can also raise strategic challenges.
