Chapter 5: Analysing the macroenvironment

Question 1

What is the difference between, the External, macro, industry and internal environments?

Answer 1

• Internal Environment: Everything within the organisation (Employees, resources, capabilities, competencies etc.)
• Industry environment: All the players within your industry such as competitors, customers, suppliers, distributors, potential competitors etc.
• Macroenvironment: PESTLE forces and factors that influence the organisation and industry but cannot be controlled by the organisation per se
• External environment: Macroenvironment and industry environment

Question 2

What are the different macro-environment factors?

Answer 2

• Political-Legal: Legislation and political stability
• Economic: Economy growth rate, Interest rates, exchange rates & inflation rates
• Socio-cultural: Culture/living conditions/HIV/trends in single parenthood etc.
• Demographic: age, gender, urbanisation, education, affluence & individualistic or collectivistic societies
• Technological
• Environmental
• Global: International competition, wars, shortages of resources etc.

Question 3

Wrt macroenvironmental analysis

What is macroenvironmental turbulence?

Answer 3

• It is the degree of Changeability and Predictability of a macroenvironment
• Changeability= how likely is a market to change? Stable and unstable markets. (Further refined into Complexity(affected by complex external factors) and Novelty (New situations for the organisation)
• Predictability-how well can macroenvironmental change be predicted? (Further refined into rate of change (rapid/slow) and visibility of the future)

Question 4

What are the 9 stages of environmental analysis?

Answer 4

1. Basic characteristics of the environment(Market definition/growth/share)
2. Consider Degree of turbulence(Changeability & Predictability)
3. Background factors influencing environment(PESTLE)
4. Analyse stage of market growth(Industry life cycle)
5. Industry specific success factors
6. Competitive balance of power in industry(Porter’s Forces)
7. Factors influencing cooperation in industry (Look for potential collaborative partners)
8. Factors relating to Immediate competitors
9. Customer analysis (Market & segmentation study)

Question 5

What methods are there for conducting environmental analysis?

Answer 5

• SWOT analysis- static so must be paired with scenario analysis for future predictions
• PESTLE analysis- also static so must be paired with scenario analysis for future predictions
• Issues priority matrix- looks at probability of event happening and the size of impact on the organisation to categorize issues into low, medium & high priority
• Scenario analysis (Planning for a number of possible future outcomes)

Question 6

What are the advantages of macroenvironmental analysis?

Answer 6

• Increased Managerial awareness of environmental issues/trends/changes
• Increased understanding of context within which business operates
• Improves resource allocation decisions
• Allows management to identify and reduce risk