Management and Communication

Lecture 2

External Environment

Parts of these slides are material developed and copyrighted by Johnson, Scholes & Whittington (2006) and Lynch (2006)

Sustainable Competitive Advantage

• One of the main purposes of analysing

competitors is to explore where and how

sustainable competitive advantage (SCA)

can be generated

• Public service and not-for-profit

organisations may also wish to explore

SCA as they may be in competition for

finance from external bodies

• SCA will probably require elements of both

emergent and prescriptive strategy

approaches to strategy development

The Competitive Advantage Process

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Competitive advantage should continuously

challenge an organisation to improve itself

Competitive advantage should be constantly

evolving (dynamic and not static)

Process of development should be built around

current strengths and exploit new areas

Long-term success is achieved by creating a

continuous flow of competitive advantages

A balance between structure and chaos is

essential

Explore new ideas, but also exploit existing

competences

Layers of the External Environment

Understanding the Environment

• Diversity

– Many different influences

• Complexity

– Interconnected influences

• Speed of change

– Particularly IT

Macro-External Environment (1)

Macro-External Environment (2)

Political

• Government stability

• Taxation policy

• Foreign trade regulations

• Social welfare policies

Economic

• Business cycles

• GNP trends

• Interest rates

• Money supply

• Inflation

• Unemployment

• Disposable income

Macro-External Environment (3)

Sociocultural

• Social mobility

• Lifestyle changes

• Attitudes to work and leisure

• Consumerism

Technological

• Government spending on research

• Government and industry focus on technological

effort

• New discoveries /developments

• Speed of technology transfer

• Rates of obsolescence

Macro-External Environment (4)

Environmental

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