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Environmental analysis and diagnosis

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Diego Forero

on 6 July 2015

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Transcript of Environmental analysis and diagnosis

Environmental analysis and diagnosis
Why to choose environmental analysis?
Because most of managers use to search the environment to determine what factors in the environment presents threats to the company's present strategy and objectives accomplishment and to determinate what factors in the environmental present opportunities for greater accomplishment of objectives by adjusting the company's strategy.
Firms which systematically analyze and diagnose the environmental are more effective than those which don't.
Miller and Friesen's research
These authors identified 10 types of firms which the "Archetypes".

The failing types include:
Company's environment
Economic Factors

-The stage of the business cycle.
-The inflationary or deflationary trend in prices of goods and services.
-Monetary policies, interest rates, currency.
-Fiscal policies: tax rates for firms and individuals.
-Balance of payments, surpluses.
Governmental or Legal factors
They legislate on such matters as wage and price controls, equal employment opportunity, safety and health at work, how consumer credit is administered, where the plan can locate...
Also it is quite important, because it allows strategist time to anticipate opportunities and to plan future plans to take action and have good responses to these opportunities.
-Stagnant bureaucracy
-Headless giant
-Swimming upstream

The six successful archetypes:
-Giant under fire
-Adaptive firm under extreme dynamism
-Adaptive firm under moderate dynamism
-Dominant firm

These lawsand regulations chenge how businesses operate on a day-today basis.
Market or competitive factors
-Changes in population
-Age shifts in population
-Income distribution of the population
-Product/services life cycles.
Those are factors that are affecting the market for the firm's goods or services, what economists and marketing experts call "primary demand factors"
Supplier and Technological Factors
The strategist is concerned with the cost and availability of all the factors of production presently used in business.
Also in the supplier field, we have to see the value chain, where participate buyer, seller and supplier.
We have to see also the suppliers power, where have to gain the lowest price and lower buyer profits, specially when buying to a monopolist or oligopolist.
The power of buyer also affects the cost of supplies.
The buyer's power is at a maximum when the buyer industry is concentrated, when the buyer is a significant portion of the supplier's business, and if the buyer could virtually integrate backward.
The geographic factors
All the effective strategist also can scans the geographic environment to determinate opportunities and threats, and once detected start with the procedures to avoid it with a very smart plan.
The strategist seeks locations to add to current locations, in order to establish bigger influence areas in the market.
Diagnosis and strategist's characteristics
- Intelligence
- Reflectiveness
- Dogmatism
- Abstract conceptual structure.

- Experience and age
- Motivation and aspiration level

For all the managers should be very important the fact of diagnose all the environment, because through that tool they can realize that they are not alone in the market, and they need to implement strategist that protect the organization's objective.
Glueck, W.. (1980). Strategic Management and Business Policy. United States: McGraw Hill.
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