7 - Analysing the strategic position of a business (2) (Porter's five…
7 - Analysing the strategic position of a business (2)
The impact of the social and technological environment on strategic and functional decision-making
Urbanisation and migration
Two important aspects
of the UK population are
longer life expectancy
. These changes impact the
types of goods and services demanded
overall workforce structure.
Migration is the movement of people between countries.
A positive is it has caused an
increase in the labour force
adds to the skills available
particularly in the health sector. It also
in the economy.
Urbanisation is the movement of people form the countryside to towns and cities.
This has happened as a
result of the Industrial Revolution
and is now happening on a large scale in emerging nations.
Changes in consumer lifestyle and buying behaviour
more leisure time
allows for a
wider variety of opportunities
advances in technology
make communication and life altogether much
vast amount of information
at their fingertips on a whole range of issues including
in general. Some of the
resulting changes in lifestyle
growing awareness of issues
surrounding health ranging from smoking dangers, sugar and salt consumption to the benefits of a healthy diet and exercise.
taken due to
more leisure time
Organic and fair-trade produce
: although affected by the recession, this sector
represents a large market.
Ready meals and eating out
The growth of online businesses
The growth of online shopping has had a
big impact on supermarkets
, which were once
competing for prime out-of-town retail space
longer opening hours
These things are now
For a business to achieve its
in this internet age, it has to have a
highly respected internet presence.
This is likely to involve the following...
Content that is
Technological changes relate to innovation in services provided, products manufactured or processes of production.
shortened lead times
(CAM) has made
productions more efficient.
Technology has provided
greater information about consumers
and their buying habits.
: become cleaner, quieter and safer, especially in manufacturing.
: due to CAD and CAM (CADCAM).
: hackers able to
access confidential material and customer information
= need for
systems adding further to
Pace of change:
businesses must keep moving forward to stay ahead of competition.
The social environment including corporate social responsibility
Corporate social responsibility is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits to all stakeholders.
Reasons for and against CSR
The 'right thing to do'.
Customer and employee engagement
Prevent government intervention
: taking action means a business can offset the need for gov. intervention and regulation.
: CSR reporting could lead to a competitive advantage for a company that took it seriously.
: arising from using less packaging or less energy.
State of the economy
: low growth/recession = not possible to take a socially aware approach.
: others might not be willing to pay more for environmentally aware business products.
: socially responsible policies have a cost and some argue the business should focus on profit.
The difference between stakeholder and shareholder concepts
Shareholder concept proposed by Milton Freedman
and it states that it's the
responsibility of business
basic rules of society.
awareness of CSR
has encouraged businesses to take the
interests of all stakeholders
Carroll's corporate social responsibility pyramid
Link to the diagram:
The pyramid of corporate social responsibility is the pyramid proposed by Carroll to illustrate the four layers of corporate responsibility: economic, legal, ethical and philanthropic.
It is sometimes claimed that the basis of what we consider to be
is rooted in the
four types of responsibility depicted
: responsibility to
ensure business practices are legal
to employees, consumers and the environment.
extends beyond the letter of the law
to do what is '
' in terms of, for example waste.
: responsibility to be
provide a return
to shareholders, to
useful products and services to
: responsibility to be
good corporate citizens
improve the lives
of others in society.
The pressures for socially responsible behaviour
growing concerns for CSR
over the past two decades has added to businesses pressures to
act in a responsible manner
. Other pressures include...
: more likely to act in a socially responsible way if there is a
well-organised and effective system
strong and well-enforced
state regulation makes
impact on businesses
, making CSR more likely as businesses aim to
avoid negative publicity.
: actions of groups such as
draw unwanted attention
to a business's activities and in
consumers are more aware
a business that
isn't acting responsibly.
Porter's five forces
Porter's five forces model is an analytical tool that provides a framework for analysing the nature of competition within an industry.
Link to the model:
It's not just existing firms that may pose a threat; this may also come from
new entrants to the industry
. Although it should be possible for a firm to
enter any market,
in practice there may be
significant barriers to entry...
: these give the holder a
which may make it
for a new entrant to access a market.
Cost of entry
Economies of scale
: whether a
how quickly a new entrant
from economies would act as a barrier to entry.
Access to suppliers
Link to table:
Link to table:
Likely to be
high in the following situations...
Low levels of product differentiation
Slow market growth
Many firms of similar size
High exit costs
ability to achieve profitability
affected by the threat of substitutes
, giving consumers the
ability to choose
an alternative product.
is one from
to the one produced by a particular business.
How the five forces shape competitive strategy
calls for the development of a product or service which offers unique attributes that are valued and perceived to be different from competitors by customers
Cost leadership strategy
aims to gain a competitive advantage by having the lowest costs in the industry.
Financial methods of assessing an investment
It's important that a business
estimates the benefits of an investment
financial terms in order to identify the best option
different appraisal techniques
allow an organisation to
assess the effects
an investment will have on its
. This is achieved by
evaluating the costs and benefits
of the investment over its
useful or expected life span.
Link to example:
Factors influencing investment decisions
Corporate image and objectives
The value of sensitive analysis
Sensitive analysis is an analytical tool (a 'what if' tool) that enables the impact of a change in a variable on a given project or investment to be examined.