The purpose of having you prepare an environment report for an industry is to give you experience in applying the concepts of this course to an actual business situation. When the environment remains stable, the importance of an environmental analysis is minimal. However, when faced with a dynamic environment, the environment’s analysis and the corresponding report are extremely important. An analysis of the environment is the basis for developing a strategic plan and a marketing plan, which are required components for business loans. A firm that does not constantly monitor its future environment for salient changes is more likely to find itself out of step and, ultimately, out of business.
The environment analysis of the Strategic Business Area (SBA) you prepare is to be written from the perspective of an outside business consultant as an objective report on the aspects of a firm’s environment. The report should provide insights that would enable a management team or others in a firm to evaluate any proposed strategy. The report is not to include any strategy, evaluation or strategy, or response.
Topics and Nature of Report
The basis of your report is concentrating on the Task Environment elements of the Griffin Model and the Five Forces of the Porter Model. As you discover more about the environment, new issues may be discovered about salient aspects of the environment that may lead to different emphases. The first step is to identify five major trends, threats, and opportunities that will exist in the SBA. The second step is to conduct an overview of the different aspects of the environment (General: Economic, Social-Cultural, Political-Legal, Technological, and International; Task: Competition, Customers, Regulators, Unions/Labor, Suppliers, Strategic Allies, and Owners; Porter’s Industry Competitive Model). Jot down things about each factor/dimension that you initially think may be important to the organization. Then conduct more in-depth research in each of the areas.
Throughout the course, material has been presented on each facet of the environment. The Case Guide Analyses and class lectures give information on the General Environment as well as information on task factors. Most of these overheads identify different types of information that one could/should examine and/or include on each of these factors.
It is important for each task factor to identify 1) Who they are and 2) What are their characteristics, orientation, behaviors, etc., which make (or potentially make) them important to a firm doing business in the SBA. The importance is determined by the potential to serve as a stimulus (positive or negative/opportunity, threat or trend) for some type of firm response.
Conclude by outlining your general recommendation(s) about the industry sector.
Strategic Business Area (SBA) Identification
For all firms, the need/demand is the important factor. You are expected to develop an identification of the SBA’s future needs, the technology that will be utilized to satisfy the need, the geographical area, and the client type you will try to satisfy. The Strategic Business Area and the Strategic Segmentation Tree concept are attached at the end of the report. Start your report by describing which of the SBA you will be concentrating on and the future Time Target.
You are expected to develop a customer profile (of the businesses, individuals, or families) for the organization. This will include their demographics/psychographics and other characteristics, buying patterns, or buying behaviors that are relevant. For all SBAs, there must be some consideration of the competitive environment. Even if a firm has a monopoly, consider if there is the threat of substitute products or other competitive forces on the horizon.
Identify the different types of competitors (brand, product, or generic competitors), their strengths or weaknesses, and anything you can determine about their strategies.
Time Target and Life Span
At this stage, you need to estimate the time period you will focus your analysis into the future. Attention: the immediate “future” environment is not of particular help since, by the time the firm develops a response plan, the immediate future will have passed. You need to concentrate your research on assessing the SBA’s potential during the life span period.
Level of Future Turbulence of the SBA
Using tables H-1-1 and H-1-2, assess the level of future turbulence of the SBA. You can assess the level of turbulence by:
a. asking experts in the field, and
b. using reference information on the SBA.
Construct the future level of turbulence by circling the relevant columns for each attribute in Tables H-1-1 and H-1-2. Average the result and come up with a single number of turbulence levels for each of the tables.
Since managers typically find it difficult to fill out complex tables, it is recommended that you “translate” them into a questionnaire format. An example is attached at the end of the report. However, you can also have them fill in the tables directly.
Sources of Information
This project is designed to be a research/field project. You will need to talk with people who can provide you some of the needed background information, e.g., people in the industry or people knowledgeable about different aspects of the SBA. Other needed information will be found through secondary sources. The Business Librarian holds sessions on using the library resources and finding various types of business information. You may wish to use on-line services, industry reports, or other published reports. Several local organizations publish reports and information on the business environment in San Diego and other areas. The Economic Development Corporation (EDC), the local Chamber of Commerce, Private Industry Council (PIC), and others will be able to glean a great amount of information as well as direct through electronic media. Many reports are also published in local publications like the San Diego Business Journal, The San Diego Transcript, or the local papers’ business section.
Writing the Report
The writing style should be terse and to the point. Write objectively and avoid using “loaded” or “value-laden” words or terms. While you may feel emotional about an issue, try and keep your writing objective. What a firm “should” or “should not” do. An analysis of the environment, as it will exist, is to be written descriptively, not in a prescriptive manner.
The analysis is to be double-spaced, using a font no smaller than 12 pt. The maximum number of pages to be submitted is 15, including references and any appended material. The report format and style must be consistent throughout the paper. Please use an “accepted” style, such as the Chicago Manual of Style, Writing Research Papers: A Complete Guide, The American Psychological Association (APA) Style, or any other style manual that is accessible to you from the library or other source.
The report is to be organized in a logical sequence. Within each dimension or factor, you may wish to have sub-sections concerning different customer segments or sections concerning demographic characteristics (age, income, education, marital status, ethnic background, etc.), one concerning buying patterns, and perhaps another about what they value of the benefits they are seeking.
Your report should have an appropriate title page. At a minimum, the title page is to include the title of your paper, the course information, your team’s names, and the date. There should be page numbers on each page (not including the title page). Headings and sub-headings should be used to identify different sections and topics. When double-spacing text, it is appropriate to indent the first line of each new paragraph. Each report is expected to have a Bibliography, Sources, or Reference section. You should also list the full names, company affiliations, and titles of the people you interview. Consult a style manual for the appropriate format. There is no need to have a report cover; a report stapled in the upper left corner is preferred.
Remember that I am available to answer questions and be used as a resource; however, I do not read your paper’s drafts. Final projects may be submitted at any time prior to or during the designated time period.
PROJECTS WILL NOT BE ACCEPTED AFTER THE DESIGNATED TIME.
CONCEPT OF STRATEGIC BUSINESS AREA
In strategic decision making in turbulent environments, the commonly used marketing concept of Market Segmentation is replaced by the concept of Strategic Segmentation.
Strategic Segmentation subdivides the environment into Strategic Business Areas (SBAs), which offer distinctive future growth/profitability/turbulence prospects and/or require distinctive success strategies.
The dimensions of an SBA are the following:
1. A NEED which will exist in the environment For example, Need for personal urban transportation
2. A TECHNOLOGY / SOLUTION which will serve this need in the future. Examples:
1) Automobile powered by an internal combustion engine
2) Automobile powered by an electric motor
3) A suburban train powered by a super conductive electric motor
4) Bus powered by electric motor
5) Bus powered by natural gas
3. A GEOGRAPHIC LOCATION in which this need will exist.
1) USA (or east coast of USA)
4) European Union
4. A TYPE OF CUSTOMER which will have the need.
1) Individuals commuting to work
4) Auto rental firms
5. In some instances, a fifth segmentation dimension becomes necessary. This dimension is the CHANNEL OF DISTRIBUTION through which the need is served. Examples:
1) Direct from manufacturer to customer
2) Through intermediate distributors
3) Through retail stores
AN SBA IS A COMBINATION OF NEED/TECHNOLOGY/LOCATION/CUSTOMER TYPE
The distinctive characteristics of an SBA which are important in strategic decision making are:
1. GROWTH/PROFITABILITY, which the SBA will offer to successful competitors.
2. Level of TURBULENCE AND UNCERTAINTY which competitors will encounter in the SBA.
3. STRATEGIES which are going to be successful in the SBA.
4. ORGANIZATIONAL CAPABILITY which the competitors will need to have in order to succeed in the SBA.
5. STRATEGIC INVESTMENT which a firm will have to make into the SBA in order to succeed.
In today’s and future environments, a need is likely to be served by more than one technology, exists in different geographic settings, and is possessed by more than one customer type.
The process of Strategic Segmentation consists of constructing a SEGMENTATION TREE which is illustrated in the following figure. As the figure below shows, a single NEED can generate a large number of SBAs.
TIME TARGET AND LIFE SPAN
Estimate the number of T1 it takes from start to finish in your chosen SBA to develop and launch a new generation of products/services based on a new technology. We will call T1 the TIME TARGET.
Enter T1 below.
Estimate the number of years from launching time T1 to time T2 during which the new generation of products/services will remain profitable. We will call T1 to T2 person the profitable LIFE SPAN of the next generation of products/services based on a new technology.
Enter T2 below.
You are writing the project for a manager who needs to know what the environment will look like when they are ready to launch the product/service in the industry on T1. This is the soonest possible time that one can prepare a product/service and bring it to market.
THE ANALYSIS OF THE ENVIRONMENT IN THIS PROCEDURE MUST BE FOCUSED ON THE TIME TARGET
ADDITIONAL QUESTIONS FOR THE QUESTIONNAIRE
Remember, you will have to know what all these terms and concepts mean, as well as be able to explain their meaning to managers in their language.
In addition to the general questions shown in the tables, you may find additional questions that will be important for the evaluation of the SBAs. Before executing the forms with the client, determine such additional questions and construct the answers for each of the levels specific to the table.
Translation of the Tables in Questionnaire
Since managers typically find it difficult to fill out complex tables (such as tables H-1), translate the tables into conventional form before executing the questionnaire. A questionnaire example of this translation is shown below:
From Figure H-1-1
1. How would you assess the pressure your firm will receive from your customers in the next 5-7 years?
a. None b. Weak c. Strong
d. Demanding e. Threatening
2. In your view, what will be the critical marketing success factors in your industry during the next 5-7 years?
a. Control of the Market
b. Dominant Market Share/Low Production Costs
c. Product Appeal/Responsiveness to Customer Needs
d. Anticipation of Changes in Customer Needs/Responsiveness to Changing Customer Values
e. Identification of Latent Customer Needs
From Figure H-1-2
3. In your view, how frequently will new products be introduced in your industry during the next 5-7 years?
a. Infrequent (every 5 or more years)
c. Moderate d. High
e. Very High (several per year)
FIGURE H-1-1 LEVELS OF MARKETING TURBULENCE