Environmental Analysis - Business Environment Video Lecture | Business Environment - B Com

hello and welcome to the next of our
full course lectures this lecture is a
short introduction to environmental
analysis so we're really starting to
think about the business looking at the
industry environment looking at all of
the aspects outside of the business that
could affect the strategy that the
business should undertake so this is a
bit of an introductory introductory
lecture then we'll go on in the next
lecture to look at some of the detailed
models and so on that we can look at so
one of the first things that a business
will do is called a SWOT analysis you'll
have heard of this before and this is
where we look at the strengths and
weaknesses opportunities and threats so
what we do is we split this down into
the internal environment first of all
and the internal environment will be
where we'll find our strengths and our
weaknesses so the strengths may be
anything from the key staff that we have
within the organization to strong
research and development or to strong
ability to get things done processes a
process that maybe other businesses do
not have so those could be some of the
strengths that we have within the
business when it comes to weaknesses
well that could be the opposite it could
be a lack of a research and development
it could be a lack of key staff in order
to actually make things happen or it
could be weak processes so all of those
will be internal to the business and
will need to be assessed when we're
deciding what strategy we should
undertake also then looking at the
external environment this is where our
opportunities and our threats come in so
we'll look at the external environment
and we'll see what opportunities there
are out there so what could we take
advantage of to try and undertake a more
a shareholder value for the business
well threats are the right there that
could actually damage the business that
could restrict our ability to provide
shareholder value so what we do with the
SWOT analysis is we match our strengths
to the opportunities out in the
environment so we'll be able to look
internal to the business and say what
are our strengths we'll look external to
the business and look for opportunities
that match up to those strengths things
that we can do better than others we'll
also look at
rats and see whether they match up with
any of our weaknesses if they do we need
to try to avoid those threats we need to
try to get away from them so matching
threats to weaknesses can also help us
to try and deal with threats that may
come up especially if they match with
some particular weaknesses that we have
within the firm so that's one analysis
that we could undertake to think about
the external environment the environment
that the business operates in when we're
looking at all of these areas will have
to undertake some market research we'll
have to try to understand the industry
the market that we're acting in so
things we might consider when we're
looking at market research first of all
market segmentation so how can we set up
a market in terms of is it a geographic
could it be by company size could it be
by product how do we segment that market
what are the size of the segments and
what is the profile so how do we decide
how can we cut target that particular
market segmentation and we'll look at
that in more detail when we look at the
marketing mix we also need to think
about cultural issues now that's
thinking about internal to the firm any
cultural issues that we have and we'll
deal with this when we go on and on to
look at the cultural web how things are
done in an organization so we need to
consider that when we're setting a
corporate strategy and dealing with our
current market environment a key area
will be the capabilities and
competencies that we have within the
organization and we'll take some time
later on in the module to look at
resource auditing to look at what we
have within the organization and how we
can best use those resources to match it
up to the opportunities that we have
external to the organization we'll also
need to do a detailed customer analysis
some of which we'll talk about later in
this session some of which we'll look at
in more detail in later sessions we'll
also look at a competitor analysis
particularly using a model called the
Five Forces model to assess what our
competitors are doing and what we should
actually be doing to try to compete with
them also we'll look at an environmental
analysis looking at the invite
armed and external to our business in
detail all of the different areas that
may affect our business that will be in
our past analysis which we'll look up in
the next session will also then go on to
look at product and industry life cycles
to see how long a product is likely to
last how long an industry is likely to
last and what stage of that product or
industry we're at at a particular time
because that will determine the
marketing mix that we will need at that
time so when we're doing our market
research to determine what the
environment is at the point at this
point in time we need to consider all of
those issues and we're going to look at
those in detail over the next few
lectures do be aware that you could
conduct secondary research now secondary
research is looking at information that
is being prepared by others so this is
secondhand information so sources of
this type of information would be your
own Accounts Department so they have
already prepared the accounts for
example for the last five years well we
can take those accounts and maybe use
them to make projections or to assess
how we've done over a period of time the
marketing department again can provide
us with information may be on our
competitors on the environment on maybe
even on the lifecycle what they feel the
life cycle of the product or industry
we're looking at is external reports
well these could come from the OECD for
example who produce external reports on
different countries or it could come and
date from government bodies those
government bodies who actually produce
reports government statistics and we can
get those and use them for our own
analysis so as I mentioned the OECD the
a World Trade Organization also well
both of those will provide secondary
research research that they have
undertaken that we can then use to
determine what the stage of the industry
life cycle is for example or what the
environment the business environment is
like at a certain time is it in
recession is it a boom what is it well
we can get not from the secondary
sources thinking about then primary
information will this is after secondary
data so what we'll do is we'll use that
second
to say right what information do we
actually need so we'll identify what
data we require and then we go and get
it ourselves so we want data to perform
an analysis on and we'll have to go out
and get this primary data ourselves so
we can do that three observations or we
could do it three market surveys surveys
of customers or potential customers will
give us this type of information we can
then use that information to actually
determine how we proceed with our
corporate strategy one of the million
areas that an organization will need to
understand is its customers particularly
when we're looking at the business
environment that the organization is
operating in so they'll need to
understand their customers and we look
at this in some more detail later on in
the course but I just want to introduce
this theory of where your customers are
coming from first of all if we're
looking at consumer markets as opposed
to business-to-business selling so we
need to ask ourselves if we have a
consumer market for selling a consumer
good why are people buying it because if
we understand why people are buying it
we can focus in on that and perhaps
persuade them to buy more so there are
several theories around this for example
focusing on the consumer needs so Mendel
owes theory could come into this where
we said that a first of all people will
try to deal with their psychological
needs so that's simply trying to deal
with what they actually need from a
psychological point of view also
thinking about safety needs what do
people need in terms of the base
requirements in life in terms of a
simply a roof over their head light hate
those sorts of things is it a big
product like that or is it perhaps more
of a luxury product which might feed
more into social needs where you're
trying to maybe keep up with others and
that would influence people perhaps to
buy your product also there's theories
such as cognitive dissonance now this
says that people perhaps may even regret
buying your product after they've bought
it so they bought it they immediately
regret it you may not get that custom
again but they may change
to you from another if they regret
buying one of the other brands so
cognitive dissonance means that they
maybe regret another purchase and come
to you your change brand based on that
decision also thinking about simply the
customer or consumer personality are
they buying your product for an image
choice it may be the case where products
are identical and simply by having a
better brand you're able to persuade
people to buy your product simply so
that they can have a better image so
that may also feed into the influence of
others people may be influenced by a
what perhaps celebrities buy or what
others in their social environment buy
we need to understand those things so we
can feed into them and perhaps increase
our sales by focusing on those things
that consumers are interested in we can
take our consumer markets and perhaps
segment segment off into different
segments so what we could do is we could
do it based on psychological needs so
thinking about what consumers are buying
why they're buying it and focusing on
the different reasons or we could simply
do it based on purchasing for example
the volume so we could focus on volume
sales by reducing costs or offering both
discounts or we could change our pack
size to increase or decrease the amount
that we're selling in each and every
purchase unchanged our price accordingly
we could also determine by demographic
so we could look at the sex of our
customers or perhaps the class and we
could focus then in on those particular
segments that are more interested in
buying our products or indeed we could
focus on segments that currently aren't
buying the product and focus on trying
to improve the seals in that area it may
be that we break down our market segment
geographically so we sell better in some
areas than others and again we could
either choose to focus on the good
selling areas or indeed change our focus
to try and increase our seals and a
geographic area that currently isn't
selling well we could also look at the
expectations of our customers
some customers and different segments
will expect different things and by
offering what they
expect you're more likely to increase
the seals of your products lastly for
this session looking at the operating
environment of the entity we need to
think about industrial markets so we're
still thinking about customers we can
have customers in consumer markets where
we're selling direct to those consumers
or we might be involved in
business-to-business seals industrial
markets where our seals are
predominantly made to other businesses
so we need to understand the motivation
of the customers that we have why are
they buying from what from us what are
the needs of the organizations who are
actually purchasing we also could focus
on repeat orders are those businesses
who order from us coming back to order
and get time and time again if they're
not coming back to order again why is
that is it because they don't need those
seals or is it because they're not happy
with perhaps the products that they've
got or indeed the after seals that we're
able to offer we also need to focus on
minimizing our costs we need to think
about what it actually costs us to sell
often because we're selling in bulk in
industrial markets we'll be selling at a
lower price so that means that if it
costs us a lot to actually make the
seals we may well not be wagging the
margin that we expected to make so we
need to try and minimize costs in these
areas we also need to think about
organizational factors for example is
our organization a centralized
organization or is the very bureaucratic
organization if it is well what we can
find is that that can actually tie up
our seals we can't actually do as many
seals as we would otherwise be able to
do because in a bureaucratic centralized
organization we have a lot of red tip a
lot of Hoops to jump through before we
can actually make these seals now
particularly when we're dealing with
business-to-business seals
it's crucial that we make those seals
quickly that we're able to process
things quickly for the other business
because they will more than likely be
under time pressure we may find that we
have reciprocal buying in industrial
markets where we buy something from one
business they
then buy something from us so
back-scratching and if it's not
happening maybe we should be pushing
that as a strategy for actually
increasing our sales in this type of
market we need to make sure our
purchasing procedures are up to scratch
especially in this time of a purchasing
an e-business we need to be able to have
online purchasing perhaps and we look at
that in more detail when we look at that
area of the syllabus also when we're
looking at industrial seals and seals in
a business-to-business environment we
may well be making large volumes though
there's two sides to that we may well
therefore be able to offer bulk
discounts but on the other side we need
to understand that that will put
pressure on our margins and we need to
be careful to maintain the margins when
selling business-to-business
because it's very easy for those margins
to slip and for the costs of the
customer to actually outweigh the
benefits and we'll look at that when we
look at customer profitability later on
in the course we also then need to look
at the economic environment and we look
at that again in more detail in our pest
analysis so again when we're looking at
industrial markets we may break it down
into market segments perhaps by
geographic area or indeed by company
size offering different discounts to
different sizes of companies depending
on how much they're purchasing from us
or indeed by company type depending on
who we're actually selling to so that is
our introductory lecture on the business
environment on the environment that the
entity will be setting its corporate
strategy and we'll go on now to look in
more detail at these areas and look at
some of the models that we can use to
actually analyze the environment the
business operates and