Bài giảng Principles of Management - Chapter 2 The External and Internal Environment

chapter 2The External and Internal EnvironmentMcGraw-Hill/IrwinPrinciples of Management © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.Learning ObjectivesIdentify the major components of an organization’s task environment.Explain how each component in the task environment impacts the organization.Identify the major components of an organization’s general environment.Explain how each component in the general environment impacts the organization.Discuss the nature of change in the external environment.Outline the main components of the internal environment of an organization and articulate their implications for managerial implications.The Environment of ManagersGeneral EnvironmentTask EnvironmentInternal EnvironmentThe ManagerSWOTStrengthsWeaknessesOpportunitiesThreatsTask EnvironmentBargaining Power of SuppliersThreat of EntryThreat of SubstitutesBargaining Power of BuyersIntensity of RivalryPorter’s Competitive Forces ModelThreat of EntryBarriers to entry – factors that might make it costly for potential competitors to enter an industry and compete with firms already in the industryEconomies of scale – cost reduction associated with large outputBrand loyalty – the preference of consumers for the products of established companiesWal-Mart in India?Government policy does not allow foreign retailers to setup shops in India yet, however, Wal-Mart has declared its intentions to enter Indian market as soon as the policy changes.Economies of scales and growth – Wal-Mart’s annual sales $285 billion with only 10 country presenceBrand loyalty – Given the price points, consumers are at least price-loyalSource: Adapted from: Power of BuyersBuyers are most powerful when:They are few in number and purchase large quantitiesThey can choose between equivalent products from many different firmsThey can switch easily between the offerings of different firmsBuyers are least powerful when:They are plentiful and purchase in small quantitiesThey have little choiceThey cannot switch easily between the offerings of different firmsSwitching CostsBargaining Power of SuppliersFirm has greater power over suppliers when:The firm purchases in large quantitiesIt can choose between multiple suppliersThe costs of switching between suppliers is lowThe firm is not dependant on any single supplier for important inputsSupplier’s Bargaining Power With Wal-MartWal-Mart has significant influence over its suppliersMargins for suppliers are very low to practically nonexistentWal-Mart nonetheless has suppliers eager to supplyProducts that are sourced from India: apparel, fine jewelry, home textiles, and house wareItems for which sourcing is on the rise from India: office supplies, seasonal handicrafts, food, shoes, and leather goods.With Wal-Mart’s anticipated entry into the Indian market, the suppliers are already expanding their operationsSource: Adapted from: Threat of Substitutes The goods or services of different businesses or industries that can satisfy similar customer needsThe existence of substitutes is a strong competitive threat because it limits the price that companies in one store can changeIf there are few substitutes, firms have the opportunity to raise pricesThe Intensity of RivalryThe nature of the productThe intensity of rivalry depends on how close the product is to a commodity (a product that is difficult to differentiate from those produced by rivals).Demand and supply conditionsIf demand is growing the industry will appear favorable.Demand trends are influenced by economic growth & rising income levelsQuestion Based on Michael Porter’s Five-force analysis, would you say that the retail industry is a profitable industry? In India? In the USA? Explain.Barriers to ExitThe fixed costs of closing down capacityAn unwillingness to reduce capacity due to a belief that demand will soon reboundGovernment regulationsAdjustment ProcessesHigh barriers to entryLow barriers to entryExcess demandExcess demand will persistSignificant opportunityExcess demand will not persistTransitory opportunityHigh barriers to exitLow barriers to exitExcess supply (capacity)Excess capacity will persistSignificant threatExcess capacity will not persist Transitory threatQuestion Indian retail industry is characterized by many small to medium-sized companies which describes a _____ industry. If Wal-Mart were to enter and take the lion’s share and create a situation where the industry is dominated by a few large companies, it would refer to a ______ industry.fragmented; consolidatedtangible; intangibleintangible; tangibleconsolidated; fragmentedThe Sixth ForceBargaining Power of SuppliersThreat of EntryThreat of SubstitutesBargaining Power of BuyersIntensity of RivalryComplementsAvailabilityPriceThe General EnvironmentTechnological ForcesSociocultural ForcesDemographic ForcesMacroeconomic ForcesPolitical & Legal ForcesInternational ForcesPolitical and Legal Issues Affecting Restaurant IndustryAt national level, the front burner issues for the restaurant industry are:Minimum wage increaseImmigration reformSmall business health plansFrivolous obesity lawsuitsHealth and safety regulationsSource: China vs. IndiaChinaAge structure:0-14 years: 20.8%15-64 years: 71.4% 65 years and over: 7.7%Median Age: 32.7 yearsTotal Population: 1.3 BillionLife expectancy: 72.58 yearsLanguage: Standard Chinese or MandarinIndiaAge structure0-14 years: 30.8% 15-64 years: 64.3% 65 years and over: 4.9%Median Age: 24.9 yearsTotal Population: 1.09 BillionLife expectancy: 64.71 yearsLanguage: Hindi, English plus 14 other official languagesSource: vs. LandlinesWith all the technological developments, top three reasons why people say they will keep their telephone landlines:Like the safety of them – 26% Net access use – 20%Unattractive wireless pricing – 12%Source: Vs. Discontinuous ChangeIncremental change – Changes that do not alter the basic nature of competition in the task environment.Discontinuous change – Changes that fundamentally transforms the nature of competition in the task environment.Punctuated Equilibrium – A view of industry evolution asserting that long periods of equilibrium are punctuated by periods of rapid change when industry structure is revolutionized by innovation.Environmental UncertaintyThe environment is not only constantly changing, the nature of change is frequently difficult to predictManagement tries to deal with this by:Collecting Information Marketing ResearchCompetitive IntelligenceExerting controlThe Internal EnvironmentEmployeesResourcesOrganization of the firmCultureThe basic pattern of values and assumptions shared by employees within an organization.Important because it influences what a manager can and cannot do and what is encouraged or discouraged by the organizationHuman CapitalKnowledgeSkillsCapabilitiesResourcesTangible resources – physical assetsIntangible resources – non physical assetsUniquely Strong ResourcesOwned by the FirmInimitableNonsubstitutableRareValuableUniquely StrongResources