industry analysis
Strategic
Management
Analysing the external environment (part 1)
What’s going on out there now and in the future?
Environmental influences in the broadest sense
Macro/general environment:
PESTEL
Environmental influences related to the dynamics of the industry under question
Competitive environment:
Porter’s Five Forces (Porter, 1980)
Example PESTEL
The automobile industry
Political
– Climate change agenda
– Fuel prices
– Expansion of EU
Economic
–
–
–
–
Changes in disposable income
Exchange rates
Taxation
Economic growth around the world
Social
– Demographic changes
– Attitudes to environmental issues
Are these issues.... local/global certain/uncertain simple/complex ?
Who do they affect....
Customers
Suppliers
Competitors ?
Do these issues represent opportunities or threats or both?
1
Example PESTEL
The automobile industry
Social (cont.)
– The ethical consumer
– Aging population
Environmental
– Increased awareness of environmental issues concerning waste and carbon footprint
Technological
– Demand for alternative fuels
– Advances in manufacturing
– The driverless car
Legal
Don’t memorise this.
Its just for illustration
– Employment law
– Environmental regulations
PESTEL – is it that simple?
How do you judge certainty?
How do I know I’ve thought of everything?
What is most/least important?
Does the organization have the power to control any of the PESTEL issues?
• The issues aren’t separate – they are interconnected, but how?
•
•
•
•
What am I looking for in the PESTEL?
Current/future trends that look like
opportunities
Current/future trends that look like
threats
2
What does a pestel tell me?
Opportunities
Threats
Increasing markets
Declining markets
New ways of improving efficiency
Increasing costs
Obsolesense caused by new technology
Remember..
You decide.
PESTEL issues affect all organizations within a
particular
Management
Analysing the external environment (part 1)
What’s going on out there now and in the future?
Environmental influences in the broadest sense
Macro/general environment:
PESTEL
Environmental influences related to the dynamics of the industry under question
Competitive environment:
Porter’s Five Forces (Porter, 1980)
Example PESTEL
The automobile industry
Political
– Climate change agenda
– Fuel prices
– Expansion of EU
Economic
–
–
–
–
Changes in disposable income
Exchange rates
Taxation
Economic growth around the world
Social
– Demographic changes
– Attitudes to environmental issues
Are these issues.... local/global certain/uncertain simple/complex ?
Who do they affect....
Customers
Suppliers
Competitors ?
Do these issues represent opportunities or threats or both?
1
Example PESTEL
The automobile industry
Social (cont.)
– The ethical consumer
– Aging population
Environmental
– Increased awareness of environmental issues concerning waste and carbon footprint
Technological
– Demand for alternative fuels
– Advances in manufacturing
– The driverless car
Legal
Don’t memorise this.
Its just for illustration
– Employment law
– Environmental regulations
PESTEL – is it that simple?
How do you judge certainty?
How do I know I’ve thought of everything?
What is most/least important?
Does the organization have the power to control any of the PESTEL issues?
• The issues aren’t separate – they are interconnected, but how?
•
•
•
•
What am I looking for in the PESTEL?
Current/future trends that look like
opportunities
Current/future trends that look like
threats
2
What does a pestel tell me?
Opportunities
Threats
Increasing markets
Declining markets
New ways of improving efficiency
Increasing costs
Obsolesense caused by new technology
Remember..
You decide.
PESTEL issues affect all organizations within a
particular
References: Carter, C., Clegg, S. & Kornberger, M. (2008). A very short, fairly interesting and reasonably cheap book about studying strategy Haberburg, A. & Rieple, A. (2008) Strategic Management: Theory and Application, OUP Johnson, R., Scholes, G See Henry (2008) p82 for summary of criticisms of Porter’s Five Forces Mintzberg, H Ofek. E. & Wathieu, L. (2010). Are you ignoring trends that could shape your business? Harvard Business Review Porter, M. (2008). The five competitive forces that shape strategy. Harvard Business Review Porter, M. (2001). Strategy and the internet. Harvard Business Review. Mar 2001. 1-18 7