Chapter 2 - Macro-environment analysis

Question 1

Define the macro-environment.

Answer 1

Broad environmental factors that impact to a greater or lesser extent many organisations, industries and sectors.

Question 2

What is the point with macro-environmental analysis?

Answer 2

To minimize threats and seize opportunities.

Question 3

What are the six factors in the PESTEL model?

Answer 3

Political, economic, social, technological, ecological and legal.

Question 4

What is the market environment?

Answer 4

The environment in which economic actors interact, such as suppliers, customers and competitors.

Question 5

What is the nonmarket environment?

Answer 5

Involves interactions with non-governmental organizations, politicians, government departments, regulators, political activists, campaign groups and the media.

Question 6

When are nonmarket factors particularly important to tend to?

Answer 6

When government or regulators are powerful and affect the market environment heavily. (Defense, healthcare)

When consumer sensitivities are high (food industry)

Where political, business, and media elites are closely interconnected. (In small countries with a strong state).

Question 7

What are the two important steps in the political analysis?

Answer 7

First identifying the importance of political factors, secondly to carry out a political risk analysis.

Question 8

What does a political analysis actually analyze?

Answer 8

The role of the state and the exposure to civil society organizations within the industry.

Question 9

What are the two key dimensions of political risk analysis?

Answer 9

The macro-micro dimension and the internal-external dimension.

Question 10

Explain the macro-micro dimension of political risk.

Answer 10

Macro dimension refers to the risks associated with whole countries. Factors such as; changes in government, education, corruption are relevant.

Micro dimension refers to the specific risk of particular organizations or sectors within a country.

Question 11

Explain the internal-external dimension of political risk, and what type of analysis they require.

Answer 11

The internal dimension of political risk relates to factors originating within countries, which are quite easy to monitor.

The external dimension of political risk relates to factors originating from outside particular countries’ boundaries. Demands careful analysis of economic and political linkages between countries around the world.

Question 12

List a few relevant factors for economic risk analysis

Answer 12

Currency exchange rates
Interest rates
Fluctuating growth rates

Question 13

Why do companies need to analyze economic cyclicality?

Answer 13

To be aware of where they stand in the cycle in an attempt to neither gain over-capacity in downturn nor under-capacity in upturns.

Question 14

What are the four most relevant areas of social risk analysis?

Answer 14

Demographics
Distribution
Geography
Culture

Question 15

Define organizational field.

Answer 15

An organizational field is a community of organizations that interact more frequently with one another than with those outside of the field

Question 16

What tool can be used to analyse networks and organisational fields?

Answer 16

Sociograms.

Question 17

What are sociograms?

Answer 17

The mapping of potentially important social (or economic) connections.

Question 18

What are three concepts that help us understand networks?

Answer 18

Network density

Broker positions

Central hub positions

Question 19

Explain network density

Answer 19

The number of interconnections between members in the network map. Effectiveness increases when density increases.

Question 20

Explain broker positions in social networks

Answer 20

Members that connect otherwise separate groups of organizations, and often associated with innovativeness. Innovation advantage stems from their ability to link valuable information from one group of organizations to the other.

Question 21

Explain central hub position in social networks

Answer 21

Connects many organizations, potentially innovative because they can collect ideas from the whole network.

Question 22

What is the point of sociograms and analysing social networks?

Answer 22

To identify how central hub positions, broker positions and network density affect a particular organization’s power, innovativeness and overall effectiveness.

Question 23

What is a “small world” social network?

Answer 23

A network where the large majority of a network’s members is closely connected.

Question 24

What do small-world social networks imply?

Answer 24

A good deal of protection and effectiveness, and a difficulty for outsider organisations to penetrate the network.

Question 25

Why is it important to carry out a technological analysis when analysing the macro-environment?

Answer 25

In order to identify areas of potential innovative activity.

Question 26

What are the five primary indicators of innovative activity?

Answer 26

Research and development budgets

Patenting activity

Citation analysis

New product announcements

Media coverage

Question 27

What is a technology roadmap?

Answer 27

A projection of the future demand for various services and products along

The identification of the technological alternatives that meet these demands

The selection of the most promising alternative and creating a timeline for its development.

Question 28

What does ecological within the PESTEL stand for?

Answer 28

Specifically green macro-environmental issues.

Question 29

Name three green macro-environmental issues

Answer 29

Pollution, waste and climate change.

Question 30

What are three sorts of challenges within the ecological macro-environment?

Answer 30

Direct pollution

Product stewardship

Sustainable development

Question 31

What is product stewardship?

Answer 31

Taking responsibility for the ecological impact of external suppliers or final end-users. Handling ‘end of life’.

Question 32

What contextual factors are affecting the importance of addressing direct pollution, product stewardship, and sustainable development?

Answer 32

1. Ecological issues become more salient the more certain they are, pressure increases when visibility and emotivity are playing a big role.
2. An organizational field with highly active regulators or campaign groups will clearly give saliency to ecological issues.
3. The personal values of an organization’s leadership will clearly influence the desire to respond to ecological issues. However, the responsiveness relies on the effectiveness on the systems in use for monitoring behaviours consistent with ecological obligations.