Published on January 17, 2008
ENVIRONMENTAL ANALYSIS: ENVIRONMENTAL ANALYSIS SWOT INTERNAL ANALYSIS (S&W) PESTEL FRAMEWORK (O&T) MCKINSEY 7S FRAMEWORK Slide2: SWOT – STEP-1 AN INTERNAL CHECKLIST FOR AN ORGANISATION’S INTERNAL ANALYSIS. INTERNAL ANALYSIS GIVES THE INSIGHTS INTO STRENGTHS AND WEAKNESSES AND PESTEL PROVIDES THE FRAMEWORK FOR OPPORTUNITIES AND THREATS, INTERNAL ANALYSIS+ PESTEL = SWOT Management - 1: Management - 1 Does the firm use Strategic Management concepts? Are company objectives and goals, measurable and well communicated? Do managers at all levels plan effectively? Do managers delegate authority well? Is the organization structure appropriate? Management - 2: Management - 2 Are job descriptions and job specifications clear? Is employee morale high? Are employee turnover and absenteeism low? Are organizational rewards and control mechanisms effective? Marketing - 1: Marketing - 1 Are markets segmented effectively? Is the positioning well among competitors? Has the firm’s market share been increasing? Are present channels of distributions reliable and cost-effective? Does the firm have effective sales functions? Marketing - 2: Marketing - 2 Does the firm conduct necessary market research? Are product quality and customer service good? Are they priced appropriately? Is there effective advertising and promotion strategy? Is the marketing planning in sync with the budgeting? Do the firm’s marketing people have adequate training? Finance - 1: Finance - 1 Where is the firm financially strong and weak as indicated by financial ratio analysis? Can the firm raise needed short term capital? Can the firm raise needed long term capital through debt and/or equity? Does the firm have sufficient working capital? Finance - 2: Finance - 2 Are capital budgeting procedures effective? Are dividend pay out policies reasonable? Does the firm have good relations with its investors and stockholders? Are the firm’s financial managers experienced and trained in line with the firm’s financial policies? Production : Production Are suppliers of raw materials, parts and subassemblies reliable and reasonable? Are facilities, equipment, machinery and offices in good condition? Are inventory-control policies and procedures effective? Are quality-control policies effective? Are facilities, resources and markets strategically located? Does the firm have technological competencies? Slide10: PESTEL FRAMEWORK THE FRAMEWORK PRIMARILY INVOLVES THE FOLLOWING TWO AREAS THE ENVIRONMENTAL FACTORS AFFECTING THE ORGANSIATION 2. THE IMPORTANT FACTORS RELEVANT IN THE PRESENT CONTEXT AND IN THE YEARS TO COME. POLITICAL : POLITICAL GOVERNMENT STABILITY POLITICAL VALUES AND BELIEFS SHAPING POLICIES REGULATIONS TOWARDS TRADE AND GLOBAL BUSINESS TAXATION POLICIES PRIORITIES IN SOCIAL SECTOR Slide12: IDENTIFY FEW KEY ACTIVE POLITICAL FORCES AND HOW THEY ARE SHAPING THE OVERALL ENVIRONMENT IN THE COUNTRY ? Slide13: ECONOMIC FACTORS GNP TRENDS INTEREST RATES/ SAVINGS RATES MONEY SUPPLY INFLATION RATES UNEMPLOYMENT DISPOSABLE INCOME BUSINESS CYCLES TRADE DEFICIT/SURPLUS Slide14: SUPPOSE THE FOREX RESERVES REDUCE TO HALF OF THE PRESENT LEVEL BECAUSE OF FEW DEVELOPMENTS IN THE OUTSIDE WORLD . DISCUSS THE ENVIRONMENTAL EFFECTS IT MAY LEAD TO :: SOCIO-CULTURAL FACTORS: SOCIO-CULTURAL FACTORS POPULATION DEMOGRAPHICS ETHNIC COMPOSITION AGING OF POPULATION REGIONAL CHANGES IN POPLULATION GROWTH/DECLINE SOCIAL MOBILITY LIFESTYLE CHANGES ATTITUDE TO WORK AND LEISURE EDUCATION-SPREAD OR EROSION OF STANDARDS HEALTH AND FITNESS AWARENESS MULTIPLE INCOME FAMILIES Slide16: THERE HAS BEEN A THRUST ON WOMEN LITERACY. DISCUSS THE INFLUENCES YOU SEE IN THE SOCIAL ENVIRONMENT AND THEIR IMPACT ON BUSINESS. TECHNOLOGICAL: TECHNOLOGICAL BIOTECHNOLOGY PROCESS INNOVATION DIGITAL REVOLUTION GOVERNMENT SPENDING ON RESEARCH GOVT AND INDUSTRY FOCUS ON TECHNOLOGICAL EFFORTS NEW DISCOVERIES/DEVELOPMENT SPEED OF TECHNOLOGY TRANSFER RATES OF OBSOLESCENCE Slide18: ENUMERATE FEW OF THE TECHNOLOGICAL ADVANCES IN THE AGRICULTURE AND DISCUSS ITS ROLE IN TAPPING BETTER OPPORTUNITIES IN THE OVERSEAS MARKETS LEGAL: LEGAL MONOPOLIES LEGISLATION/ ANTITRUST REGULATION EMPLOYMENT LAW HEALTH AND SAFETY PRODUCT SAFETY FOOD LAWS ENVIRONMENTAL LAWS Slide20: LIST OUT THREE MAJOR INDUSTRIES WHICH IN YOUR VIEWS POSE DANGER TO ENVIRONMENTAL CONDITIONS.MENTIONING YOUR REASONS SUGGEST HOW THESE INDUSTRIES MAY CORRECT THE SITUATIONS. DISCUSS THE LEGISLATION ON PATENTS IN INDIA AND COMMENT ON ITS IMPACT ON THE BUSINESS. Slide21: PESTEL-AN INDIAN FRAMEWORK PESTLE - Key Economic Variables-1: PESTLE - Key Economic Variables-1 Shift to a service economy in India Availability of credit Level of disposable income Propensity of people to spend Interest rates Inflation rates Economies of scale Money market rates PESTLE – Key Economic Variables-2: PESTLE – Key Economic Variables-2 Federal government budget deficits Gross domestic product trend Consumption patterns Unemployment trends Worker productivity levels Value of the Rupee in world markets Stock market trends Foreign countries’ economic conditions PESTLE - Key Economic Variables-3: PESTLE - Key Economic Variables-3 Import/export factors Demand shifts for different categories of goods and services Income differences by region and consumer groups Price fluctuations Exportation of labor and capital from India Monetary policies PESTLE – Key Economic Variables-4 : PESTLE – Key Economic Variables-4 Fiscal policies Tax rates European Economic Community (ECC) policies Organization of Petroleum Exporting Countries (OPEC) Policies Coalitions of Lesser Developed Countries (LDC) policies PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 1 : PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 1 Number of marriages Number of divorces Number of births Number of deaths Immigration and emmigration rates Life expectancy rates PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 2: PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 2 Per capita income Location of retailing, manufacturing, and service businesses Attitudes toward business Life-styles Traffic congestion Inner-city environments PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 3: PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 3 Average disposable income Trust in government Attitudes toward government Attitudes toward work Buying habits Ethical concerns Attitudes towards saving PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 4: PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 4 Sex roles Attitudes toward investing Racial equality Use of birth control Average level of education Government regulation Attitudes toward retirement PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 5: PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 5 Attitudes toward leisure time Attitudes toward product quality Attitudes toward customer service Pollution control Attitudes toward foreign people Energy conservation Social programs PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 6: PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 6 Number of religious places Social responsibility Attitudes toward careers Population changes by race, age, sex, and level of affluence Attitudes toward authority Value placed on leisure time PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 7: PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 7 Population changes by city, county, state, region, and country Regional changes in tastes and preferences Number of women and minority workers Number of high school and college graduates by geographic area PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 8: PESTLE – Key Social, Cultural, Demographic, Environmental Variables – 8 Recycling Waste management Air pollution Water pollution Ozone depletion Endangered species Slide34: MCKINSEY 7 S FRAMEWORK : A TOOL TO EVALUATE AND CONTROL AN ORGANISATION Slide35: Structure Staff Systems Style Skills Shared Values Strategy Supporting organization Centralized The winning formula 7-S FRAME WORK Single noble purpose Slide36: Strategy Skills Shared Values Structure Staff Style Systems 7-S FRAME WORK : The winning formula sets the goals and standards for the organizations and identifies the key skills required The supporting organization provides quidance, motivation and monitoring to see that the right decisions are made Single noble purpose The winning formula Supporting organization Slide37: Strategy Skills Shared Values Structure Staff Style Systems 7-S FRAME WORK : STRATEGY An integrated set of actions to deliver a Superior value to a chosen set of Customers with a cost structure that Allows continuing excellent returns Which customers does the company target? Which products/services does it offer? How can it serve its customers effective? How can the company build a sustainable advantage over competition? What are the strategic priorities for the company? What are the actions required across different functional elements. Slide38: Strategy Skills Shared Values Structure Staff Style Systems 7-S FRAME WORK : SHARED VALUES How do people in the organization describe the way we do things around here? E.g., - How decisions are taken - How important stake holders are dealt with - How thing get down - What preoccupies senior management Those ideas of what is right and desirable (in Corporate and/or individual behavior) which Are typical of the organization and common To most of its members How do people in the organization describe the way in which it is distinctive? Which things get most and least management attention? E.g., - Markets, product lines - Organizational units - Short versus long term issues Slide39: Strategy Shared Values Structure Staff Style Systems 7-S FRAME WORK : SKILLS Capabilities possessed by the organization As a whole as distinct from those of individuals Skills what business activities important to its success is the company distinctively good at performing? What business activities – important to its success – is the company weak at performing? . How are important business activities changing? What important management activities must the company perform much better than it does now? - Non-business system function – e.g., people development, industrial relations, etc. - Special management challenges – e.g., multi-product line management, resource deployment Slide40: Strategy Skills Shared Values 7S FRAME WORK : THE WINNING DORMULA Vision Activities the organization Must be really good at in order To deliver winning value proposition An integrated set of actions To deliver a superior Value (benefits minus Price) to a chosen set Of customers, with a Cost structure that Allows continuing Excellent returns The overriding goal of the organization A clear, compelling statement of what It aspires to become that is demanding but Achievable and reflects a fact-based view Of the future The commonly held beliefs of the Organization – simple terms that say What’s important around here Slide41: Strategy Skills Shared Values Structure Staff Style Systems 7-S FRAME WORK : SYSTEMS The Process and procedures through which things get done from day to day What are the most important management processes that top management uses to run an organization. .E.g., - Annual strategy reviews - Monthly operating reviews - Management by walking around What are the most important systems in the organization? How well are they managed? What variables are monitored and controlled most closely? How relevant, accurate, and reliable is the information generated? Slide42: Strategy Skills Shared Values Structure Staff Style System 7-S FRAME WORK : STYLE The way managers collectively behave with Respect to use of time, attention and symbolic actions How does top management make decisions? Consultation versus solitary Reliance on data versus experience How does management seek to motivate employees? - Orders - Compensation and fringe benefits - Internal competition - Participation How does top management view its own principal role? Monitoring, reviewing Making tough decisions directly Staying on top of internal operations Changing course, setting direction Slide43: Strategy Skills Shared Values Structure Staff Style System 7-S FRAME WORK : STRUCTURE An orderly and predictable system to determine Who reports to whom and how tasks are Divided up and integrated What is the basis structural form of the organization? E.g., Centralized versus decentralized Product versus customer group Geographical coverage . What is the top management Structure? . What is the approach to (corporate) staff? E.g., . Large versus small . How are the key functions organized? E.g., R&D : Project based versus on- going Marketing: Centralized versus per business unit Sales: by customer group or geographic Slide44: Systems SKILL SUPPORT AT McDONALD’S USING ORGANIZATION DESIGN Structure Skills Quality control Staff Style Centralized buying to control content The structure, staff, Systems and style of The organization has To be carefully Designed to support Each Macroskill Necessary for success Hard-nosed, rigid attitude on how to run the business Inspections Franchise expansion based on high grades on prior inspections Many procedures’ mechanisms, aimed building employee enthusiasm, loyalty Procedures for consistent food preparation including a 600 page manual Owner operators $40 million Hamburger University Promotion from within to build experience Slide45: Strategy Skills Shared Values Structure Staff Style System 7-S FRAME WORK : STAFF The people in the organization, considered in Terms of corporate demographics, not individual personalities What Kind of people does the company employ? - Educational background - Average age - Experience profile How fast is the company growing in terms of number of employees? How well does the company manage to retain its employees? How well are employees rewarded? How well trained are employees?