Sin título

Understanding the external environment

Macro thinking – the ‘far’ environment

The biggest single problem with macro thinking - the sheer distance of the far environment, and the seeming lack of ability to be able to influence or control the various external forces at play within that environment;

These forces are sometimes referred to as ‘megatrends’, significant changes which can be slow to form but which have significant impact (e.g. changing age of populations in different countries with its resultant impact upon the available workforce)

At the oversight level it is possible to differentiate between the changeability and the predictability of these differing environmental dynamics.

Changeability - degree to which the external environment is likely to change

Predictability - degree to which such changes can be predicted

PESTEL

political

economic

socio-cultural

technological

environmental

legal.

use of this model is primarily as a checklist to force the brain to consider different environmental perspectives

1. POLITICAL

- influence and role that government, or governments, might play in the wider operational marketplace

- In many countries the state, represented by the government, can be an owner, a customer, a supplier, and often a regulator of business (e.g. deference sector, airline industry)

2. ECONOMIC

- impact of interest rates, currency exchange rates, inflation rates (e.g. company with a high level of financial gearing

3. SOCIO CULTURAL

- recognises not just the social forces at play but also the significant influence of culture and changing cultural attitudes

- the impact of changing demographics within a region or a country and the differing levels of wealth distribution among the population

Demographics - many western countries have an increasingly ageing population, at least in part as a result of increased longevity, and this can provide both an opportunity and a threat within the private and public sector. The result - diminishing supply of younger people within the workforce.

Wealth distribution - western civilisation has seen an increasing concentration of wealth in the hands of fewer people. This has had a constraining effect on certain areas of consumption, but with an increase in demand for luxury goods in other areas

4. TECHNOLOGICAL

Technology push or market pull - in our strategic thinking, are we anticipating the use of technology to help us to drive effective business solutions, or are we being forced down a particular route by either customer or supplier, or have we have failed to keep our hardware or software current and leading edge?

People skill divergence - have we recognised as a strategy the likely need for higher skilled, technologically aware people within an organisation, recognising a future point where the structure of many jobs may well be undertaken through robotic mechanisms?

Diffusion - have we considered the process and likely timing of the spread (diffusion) of the use of technology within the differing boundaries that we are considering?

5. ENVIRONMENTAL

- There has been a strong focus in recent years on how an organisation tackles its CSR

- requirement to comply with laws covering areas such as waste disposal to increasing narrative reporting requirements from companies whose shares are publicly traded

Sustainability and stewardship: what damage is being done to natural resources, and how can we show that our longer-term impact is either positive or neutral?

Global warming: how will the arguments surrounding this topic, and its potential impact, affect our strategic plans?

Public conscience: although this might be included under the sociocultural aspect, there are potentially specific supply and demand implications that could arise from our strategic planning.

6. LEGAL

- the legal and regulatory landscape is the one where an organisation is most likely to have to respond and comply rather than have any influence or impact

labour and employment laws

environmental protection legislation and consumer regulation

finance, taxation and reporting requirements

ownership, merger and competition law.