The Importance Of External Business Environment Commerce Essay

Most firms operate in a very uncertain , volatile and dynamic environment. To remain competitive they need to anticipate changes in their external marketing environment and be prepared to adapt business activities accordingly. Industries need to be prepared and have some outline plans for dealing with different eventualities so that they are less likely to be exposed to loosing business. The external environment of different organizations differ in many ways, but the theme of every organization is to use their current resources and the information or data the have to their advantage and transform it into the required out puts, and this change happens against a background of external influences which are outside the industry and can effect the organization and its activities. The external environment is very complex, dynamic and volatile and unpredictable. But these factors have to be considered for any meaningful analysis of an industry.

key determinants :- Political , Economical , Social , Technology , Environment , Legal

as few determinants overlap for example the political, social, and economical can be said to socio-economic determinants.

swot : analysis strengths weaknesses opportunities and threats

The actual strategies being pursued at any time reflect the organization’s strategy content, and the important issues are. The ability of the organization to add value in meaningful ways which exploit organizational resources to achieve synergy, also at the same time. Satisfy the needs of the organization’s major stake holders. Particularly its share holders and customers.

Strategic management involves devising a complete roadmap for capturing and maintaining competitive advantage by determining the broader concepts of mission, goals, and long and short-term objectives; and by defining and managing the more specific details of analysis, decision-making, actions, roles, responsibilities, and timelines needed to do so. A sustainable society is one that meets current environmental, economic, and community needs without compromising those needs in the future. There are three main categories of issues that affect a “sustainable society”:

1. Environmental issues

2. Economic issues

3. Community issues

Today, companies are expected to practice good business ethics

by fostering a sustainable society.

Environmental issues may be caused by nature or humans.

Environmental issues include the following:

Changes in the climate, such as global warming Natural disasters, such as hurricanes

The alteration of terrain or bodies of water due to natural disasters or development

Deterioration of air quality, both outside (such as fumes from motor vehicles and airplanes) and inside (such as toxins released from paint and varnish)

The release of hazardous materials from activities such as oil spills and the dumping of hazardous waste. The depletion or deterioration of natural resources, such as farmland, water, trees, and minerals. The displacement of wildlife or depletion of their food sources

A company can influence those environmental issues caused by nature through its response and management of the after-effects. For example, a company’s financial or emergency response to a hurricane illustrates a company’s contribution to an environmental issue in a sustainable society. This is also a good example of an environmental issue that crosses over into a “community issue.”but by choosing active practices for oil & gas or other leading industries which use more fuel and other natural energy resources they can take the following steps to be more eco friendly

Use renewable resources, such as bamboo and treated pine timber whenever possible.

Plant trees on company property and in the community. Reduce the number of motor vehicles and airplanes to lower emissions and noise pollution. Use recycled and biodegradable materials in product development. Operate facilities during non-peak utility and travel hours. Design products that are recyclable or biodegradable. Use alternative fuel vehicles whenever possible. Develop alternative energies, fuels, and products. Offer financial incentives to employees who travel to work by bicycle, public transportation, and hybrid or electric motor vehicles. Or Offer employees the opportunity to work from home part of the time. Purchase products from companies that employ sustainable packaging.

Analysis on the external environment of UK mobile industry :

The ideology that defines the boundaries of companies and industries stay unaffected, even if they include diverse implications as technology, boundaries can mainly be focused on the basic service, quality and price. Analysis of the external environment of the UK mobile phone industry ” key determinants of success “.

Economic:

Due to the affluence of various market segments and consumption patterns of different individuals and direction of the economy in which a firm operates. Each firm must consider economic trends in the segments the effect the industry on both national and international level .government plays a major role in the economy and its activities influence both demand and supply side. The social factors that affect the firm involve beliefs, values, and attitudes, opinions of the person’s in the firm’s external environment as developed from the ecological religious and ethnic conditioning. As the attitudes change among people, so does the demand. Entry of women into the labor market has brought about a profound social change.

Technological

uses of technology in UK mobile industry is a big factor, and important. Same the technology represent the main technical issues. Same as GPRS, 3G, MULTIMEDIA and many more technical supports for to enjoy people mobile and its technology. In UK there are approx45 million phones in circulation with an estimated 77% of population having at least one mobile phones. UK users alone dispose 15 million mobile phones annually.

POLITICAL

Political issues helps and improves the legal aspects of UK mobile phone industry is a huge running industry in world. Many companies are the hands of it. Interference of political factor in UK mobile phone industry by the government or judicial have helped the mobile industry to a large amount like the blocking the unwanted sites and making internet browsing safe. The decisions made by the government and political play a key factor in any mobile industry. Political factors define the legal and regulatory issue within the firm and the mangers who formulate the mobile company’s strategy. This factors has an influence on two government functions.

Supplier function

Customer function

There are the three factors to determine the external environment of the UK mobile phone industry in key determinants of success.

Summary

The development improvement and sustainability of an industry are dependent upon the relevant strategic options becoming available and used to the organizations best advantage within that industry. The methods of analysis used in this report are internationally recognized and provide a sound foundation for market and competitor analysis. The following report looks at and assesses the macro and micro environment of the mobile network industry on a domestic and global scale.

PESTILE ANALYSIS

One variation of PESTLE ANALYSIS has three main elements. The first two are often developed simultaneously with the third done as part of a following review process.

1. EXTERNAL FACTORS- LIST

2. IMPLICATIONS OF EXTERNAL FACTORS- IDENTIFY

3. RELATIVE IMPORTANCE OF IMPLICATION OF EXTERNAL FACTORS-DECIDE

1 LIST EXTERNAL FACTORS

A DESCRIPTIVE LIST OF FACTORS,

Influences or pressure that have identified

Implications and impacts, now or in the

Future, for the organization is compiled for

Each of the PESTLE components:

POLITICAL Global, national, regional, local and community

trends, changes, events etc.

ECONOMIC world, national and local trends, changes,

events etc

SOCIAL Developments in society- culture, behavior,

Expectations, composition etc.

TECHNOLOGICAL Developments: computer hardware, software,

other equipment, material, products and

Processes etc.

LEGAL Word/ EU/ National legislation changes,

Prospects etc.

ENVIRONMENTAL Global/ EU/ national/ local issues, pressure,

Movements etc.

Porters 5 Forces:

The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980.Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes .Porters model is based on the insight that corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.

The Five Competitive Forces are as follows

Bargaining Power of Suppliers The suppliers comprises all sources for inputs that are needed in order to provide goods or services. Supplier bargaining power is likely to be high when:

·€ € The market is dominated by a few large suppliers rather than a fragmented source

of supply,

·€ € There are no substitutes for the particular input,

·€ € The suppliers customers are fragmented, so their bargaining power is low,

·€ € The switching costs from one supplier to another are high,

·€ € There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins. This threat is especially high when

·€ € The buying industry has a higher profitability than the supplying industry,

·€ € Forward integration provides economies of scale for the supplier,

·€ € The buying industry hinders the supplying industry in their development (e.g. reluctance to accept new releases of products),

·€ € The buying industry has low barriers to entry. In such situations, the buying industry often

faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization.

·€ € The product is undifferentiated and can be replaces by substitutes,

·€ € Switching to an alternative product is relatively simple and is not related to high

costs,

·€ € Customers have low margins and are prices sensitive,

·€ € Customers could produce the product themselves,

·€ € The product is not of strategically importance for the customer,

·€ € The customer knows about the production costs of the product

·€ € There is the possibility for the customer integrating backwards.

Bargaining Power of Customers: The bargaining power of customers determines how much customers can impose pressure on margins and volumes. Customers bargaining power is likely to be high when

·€ € They buy large volumes, there is a concentration of buyers,

·€ € The supplying industry comprises a large number of small operators

·€ € The supplying industry operates with high fixed costs,

·€ € High switching costs for customers

·€ € Legislation and government action

Threat of New Entrants: The competition in an industry will be the higher, the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry. The threat of new entries will depend on the extent to which there are barriers to entry.

·€ € Economies of scale (minimum size requirements for profitable operations),

·€ € High initial investments and fixed costs,

·€ € Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets,

·€ € Brand loyalty of customers

·€ € Protected intellectual property like patents, licenses etc,

·€ € Scarcity of important resources, e.g. qualified expert staff

·€ € Access to raw materials is controlled by existing players,

·€ € Distribution channels are controlled by existing players,

·€ € Existing players have close customer relations, e.g. from long-term service

contracts,

Threat of Substitutes A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a

significant proportion of market volume and hence reduce the potential sales volume for

existing players. This category also relates to complementary products. Similarly to the threat of new entrants, the treat of substitutes is determined by factors like

·€ € Brand loyalty of customers,

·€ € Close customer relationships,

·€ € Switching costs for customers,

·€ € The relative price for performance of substitutes,

·€ € Current trends.

Competitive Rivalry between Existing company’s : This force describes the intensity of competition between existing companies in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry.

Competition between existing players is likely to be high when

·€ € There are many players of about the same size,

·€ € Players have similar strategies

·€ € There is not much differentiation between players and their products, hence, there is

much price competition

·€ € Low market growth rates (growth of a particular company is possible only at the expense of a competitor),

·€ € Barriers for exit are high (e.g. expensive and highly specialized equipment).