handout 2 POM Q1

• Environmental scanning


  An in-depth examination of key factors that influence the business operations of a firm
• Macro environment


  The "external factors" that greatly impact the area, industry, and market in which the enterprise operates
• Factors included in the macro environment


  • Economic conditions
  • Technological advancements
  • Political and legal regulations
  • Social and cultural trends
  • Environmental factors
• PESTEL Analysis


  A tool to identify the external forces that may affect an organization positively and negatively
• PESTEL Analysis

  Assess the macro environment and make informed decisions to stay competitive and successful
• PESTEL Analysis


  Identify the external forces that may affect an organization positively and negatively
• Political factors


  • Influence of political forces on an organization's operations, decision-making, and strategic planning
  • Assessment of potential risks and opportunities shaping the external business environment affecting competitiveness, profitability, and sustainability
• Political factors


  • Emergency declaration of a nation
  • International disputes
  • Infrastructure policy
  • Government incentives and spending
  • Government regulations and policies
  • Immigration and Labor Law
  • Political leadership
  • Political corruption and bribery
  • Political unrest or conflicts
  • Political stability or instability
  • Tax policies and rates
  • Trade policies and barriers
• Economic factors


  • External conditions and forces that affect a country's economy, organization, or industry
  • Understanding potential opportunities and threats for informed decisions about investments, pricing strategies, resource allocation, and business planning
• Social factors


  • Determine the impact of the social environment and emerging trends on the business profitability of an organization
  • Help marketers understand changing preferences of customers
  • Include changing family demographics, education levels, cultural trends, attitude changes, and lifestyle changes
• Technological factors


  • Influence of technology on business and the external environment
  • Help organizations understand how technological advancements affect their operations and strategies to remain competitive
• Technological factors


  Influence of technology on business and the external environment
• Technological advancements affect operations and strategies to remain competitive in a fast-paced and ever-changing technological landscape
• Technological factors


  • Rampant use of artificial Intelligence
  • Automation and robotics
  • Cybersecurity and data protection
  • Level of innovation and digitalization
  • Adaption of remote work
  • Rise of e-commerce
• Environmental factors


  Environmental issues or concerns that can impact the organization
• Organizations assess environmental trends to adapt their strategies and practices and benefit from new opportunities
• Environmental factors


  • Supply of natural resources
  • Pollution control measures
  • Extreme climate change
  • Urbanization and land development
  • Deforestation leading to loss of biodiversity
  • Disrupted marine ecosystem
  • Improper waste management
  • Increasing carbon emission
• Legal factors


  Laws, regulations, and frameworks that influence the organization's strategy, decision-making, and overall business operations
• The organization needs to follow legal factors and manage any legal risks that may arise
• Legal factors

  • Employment laws
  • Health and safety regulations
  • Environmental regulations
  • Corporate tax rates
  • Regulations on import and export
  • Intellectual property laws
  • Consumer protection and product liability laws
  • Regulations governing business agreements
  • Regulatory requirements specific to the industry
  • Anti-trust laws to prevent unfair business practices
  • Data protection and privacy laws
• The micro-environment includes factors close to the company that impact its ability to serve customers
• The micro-environment comprises customers, suppliers, competitors, and other stakeholders
• Analyzing and comprehending the micro-environment is crucial for businesses to successfully adapt to market fluctuations and cater to the demands of their stakeholders
• The micro-environment directly influences the organization's operations and performance, empowering them to be proactive and responsive
• Micro-environment involves five forces, also known as Porters Five Forces, developed by Michael E. Porter as a framework for assessing and evaluating a business organization's competitive strength and position
• Porter's Five Forces

  • Threat of new entrants
  • Buyer power
• With barriers to entry, rivalry intensifies


  When more organizations compete for the same market share, profits fall
• Existing organizations need to create high barriers to entry

  To deter new entrants
• Buyer power


  • Analysis of how buyers can easily influence price decreases
  • Driven by the number of buyers in the market, the importance of each buyer to the organization, and the cost to the buyer of switching suppliers
  • Powerful business buyers can often dictate terms
• Threat of substitution


  • Threatening when buyers can easily find substitute products with better quality or attractive prices
  • Buyers can switch from products or services with little cost
  • Example: switching from coffee to tea costs nothing, unlike switching from a car to a bicycle
• Supplier power


  • Analysis of how suppliers can easily influence price increases
  • Driven by the number of suppliers of each essential input, the uniqueness of their product or service, the supplier’s relative size, and the cost of switching suppliers
• Competitive rivalry


  • Examination of the intensity of competition in the marketplace
  • Driven by the number and capability of competitors in the market
  • Rivalry competition is high when few businesses are equally selling a product or service, when the industry is growing, and when consumers can easily switch to a competitor's product for a cheaper cost
  • Intense rivalry can lead to advertising and price wars, negatively impacting the business in the long run