Lecture 3 - Context of Strategy (External Macro Environment & Strategic Purpose)

Question 1

What does PESTEL stand for?

Answer 1

Political
Economic
Social
Technological
Environmental
Legal

Question 2

The PESTEL analysis helps to identify…

Answer 2

…key drivers of change, opportunities and threats

Question 3

The key drivers of change can be used to…

Answer 3

…construct scenarios of alternative possible futures

Question 4

Key Success Factors (KSFs) are…

Answer 4

…environmental issues that can affect an organisation’s ability to achieve its aims

Question 5

Economic factors:

Answer 5

1) Exchange rates
2) Business cycles
3) Differential economic growth rates around the world,

Question 6

Social influences

Answer 6

Changing cultures and demographics

E.g. ageing population

Question 7

Legal factors

Answer 7

Legislative and regulatory constraints

Question 8

Megatrends

Answer 8

Large scale social, economic, political, ecological, technological changes typically slow to form but which influence many other activities and views, possibly over decades

Typically shapes other trends

Question 9

Inflexion points

Answer 9

When trends shift in direction, e.g. economic growth

Question 10

Weak signals

Answer 10

Advanced signs of future trends

Particularly helpful in identifying inflexion points

Question 11

Weak signals are typically…

Answer 11

…unstructured, fragmented bits of information

Question 12

Scenario analyses

Answer 12

Carried out to allow for different possibilities and help prevent managers from closing their minds to alternatives

Question 13

Scenarios offer…

Answer 13

Plausible alternatives of how business environment might develop in future

Question 14

Scenario analyses typically build upon

Answer 14

PESTEL analyses

Question 15

Critical strategic question:

Answer 15

BUSINESS DEFINITION

Whats kind of business are we, or want to be?

Question 16

3 influences on strategic purpose:

Answer 16

Governance structure

Social responsibility and ethics

Stakeholder expectations

Question 17

Business mission should be defined by: (4)

Answer 17

Customers needs served (WHAT)

Customer groups (WHO)

Technologies utilised (HOW)

Employees are bonded (HOW)

Question 18

Mission statement

Answer 18

Aims to provide employees and external stakeholders with clarity about the overriding purpose of the organisation

What business are we in?
How do we make a difference?
Why do we do this?

Question 19

Strategic context: External environment

Answer 19

Environment in which firm operates

Environmental constraints that may limit what an organisation might do

Question 20

Strategic context: Internal environment

Answer 20

Organisation’s CAPABILITIES which will determine what organisation can do and how these capabilities are fitted to the external environment and the strategies are employed

Question 21

Changing views of the environment - CONTESTED ASSUMPTIONS

Answer 21

Environment is STATIC (unchanging and predictable)

Environment is SIMPLE
homogenous, perfect information, compete on price

Question 22

Changing views of the environment - CURRENT ASSUMPTIONS

Answer 22

Environment is DYNAMIC (speed of change, predictability of change)

Environment is COMPLEX (Heterogeneous, imperfect information, compete on 4Ps)

Question 23

Why analyse the environment?

Answer 23

Identify KSF (Key success factors)

Establish opportunities and threats

Question 24

How can we understand the environment?

Answer 24

PESTLE analysis

Scenario planning

SWOT analysis

Question 25

PESTLE analyses the…

Answer 25

Macro-environment

Question 26

PESTLE identifies…

Answer 26

Opportunities and threats

Question 27

Scenario planning:

Answer 27

Internally consistent view of what future might turn out to be

Can be defined as method for imagining possible futures

Not a forecast in sense that one can extrapolate using past data –> but a tool of analysis to help the organisation recognise the signals.

Helps managers to recognise change objectively –> overcoming biases and imperfect reasoning