Week 3 - Strategic thinking - The external environment Flashcards
What are external environments in business?
Forces and events outside a company that can influence or affect it.
What defines environmental change?
The rate at which a company’s general and specific environments change.
What is a stable environment?
An environment with slow, gradual change (e.g., funeral industry).
What is a dynamic environment?
An environment with rapid change (e.g., lumber industry).
What does Punctuated Equilibrium Theory state?
Long periods of stability are interrupted by short, revolutionary changes (e.g., post-9/11 airline industry).
What is environmental complexity?
The number and intensity of external factors affecting an organization.
What is a simple environment?
An environment with few external factors (e.g., recreational boating industry).
What is a complex environment?
An environment with many external factors (e.g., LTL delivery companies).
What is resource scarcity?
The abundance or shortage of critical resources (e.g., Beyond Meat shortages).
When is uncertainty low?
In stable, simple environments with plentiful resources.
When is uncertainty high?
In dynamic, complex environments with scarce resources.
What does the general environment include?
Economy, technology, sociocultural trends, and political/legal factors.
How does the economy affect organizations?
Economic growth supports businesses; downturns hinder growth.
What are business confidence indices used for?
Forecasting economic trends.
What is the technological component of the general environment?
Innovations and tools transforming inputs into outputs.
Why must companies adapt to technology?
To avoid becoming obsolete (e.g., shift to electric vehicles).
What is the sociocultural component?
Demographic and behavioral trends that influence demand.
What does the political/legal component cover?
Laws and regulations affecting business operations.
What does the specific environment include?
Customers, competitors, suppliers, industry regulation, and advocacy groups.
What is reactive monitoring?
Responding to complaints after they occur (e.g., IKEA).
What is proactive monitoring?
Anticipating and addressing customer needs in advance (e.g., Spotify analytics).
What is competitive analysis?
Identifying competitors’ strengths and weaknesses.
What is supplier dependence?
A company’s reliance on key suppliers.
What is buyer dependence?
When suppliers rely heavily on major buyers.
What is opportunistic vs. relationship behavior?
Transactional vs. collaborative supplier relationships.
What is industry regulation?
Rules specific to industries that businesses must comply with.
What are advocacy groups?
Groups that influence businesses through campaigns or media.
What are the three steps in making sense of changing environments?
Environmental scanning, interpreting factors, and acting on them.
What is environmental scanning?
Identifying key external trends (e.g., Amazon exploring new markets).
What is interpreting environmental factors?
Classifying changes as threats or opportunities.
What is the final step after interpreting environmental factors?
Acting by developing strategies to respond to changes.
What is a key takeaway about external environments?
They are dynamic and require continuous monitoring.
Why is proactive adaptation important?
It ensures long-term success by responding to change.
What industry illustrates resilience in a volatile environment?
The airline industry (e.g., post-deregulation, 9/11, COVID-19).
