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PHYSICAL Environment- natural elements that are inherent in the earth.

Ø  CLIMATE

Ø  The entrepreneurs must consider the prevalent climatic condition of the area they intend to open the business.

Ø  PHYSICAL RESOURCES

Ø  must critically assess the availability of raw materials in the locality before opening a new business

Ø  must evaluate if the available raw materials to be used are sufficient for a long-term operation

Ø  WILDLIFE

Ø  entrepreneurs must ensure that their business contributes to the preservation and not the destruction of the ecological system

SOCIETAL Environment

Ø  SOCIAL FORCES

Ø  elements in society resulting from human interactions that can influence thoughts, behavior, attitude, actions, beliefs, and customs of people.

·         values

·         traditions

·         literacy level

·         consumer psychology

·         time orientation

·         lifestyle patterns

·         professional career rules

Ø  POLITICAL FORCES

Ø  are various elements usually comprising of the political parties, systems, groups that substantially influence the political stability of the country.

·         trade regulations

·         taxation

·         government stability

·         unemployment

·         worker’s benefits

·         election practices

Ø  CULTURAL FORCES

Ø  Culture- integrated characteristics of a group of people or ethnic group in a particular society.

·         religion

·         language

·         beliefs

·         customs

·         education

Ø  ECONOMIC FORCES

Ø  factors that are primarily caused by changes or movements in the PH economy that have direct or indirect effects.

·         interest rate- amount of interest the lender charges to the borrower.

·         inflation rates

·         fiscal policies

·         monetary policies

·         income

·         exchange rates

·         employment

·         consumer confidence

Ø  LEGAL FORCES

Ø  elements and bodies that are directly involved in the legislation and interpretation of laws and ordinances.

·         product control, pricing, and labeling

·         health and safety of the workers

·         administration of election process

·         advertising and promotion

·         exercise of profession

·         education administration and fees

Ø  TECHNOLOGICAL FORCES

Ø  refer to the trends and developments in computer and information technology that have impact on business.

·         internet

·         social media

·         e-commerce

·         technological advancement

·         technological infrastructure

ENVIRONMENTAL SCANNING- refers to the gathering, critical evaluation, and utilization of information on events and activities and their relationships with the entrep. Environment.

Importance:

·         portrays the trends and developments happening

·         identifies the expected threats and opportunities

·         points out possible factors that determine success of venture

·         helps define the future path of the business

·         assist in the formulation of appropriate strategies

PESTEL analysis- tabular framework of the trends and developments in the different forces.

·         PEST analysis

·         STEEPLE analysis

·         STEEPLED analysis

Environmental Forces Matrix- classifies the various environmental forces into their frequency of occurrence and level of effect to the business.

-          High, moderate, low

-          Modified version of issue priority matrix(Wheelen & Hunger)

INDUSTRY Environment- where venture conduct entrepreneurial acts.

-          Trends & changes are easily felt by venture

-          Immediate environment

-          Macro environment (influences on path, growth, and survival

-          Define appropriate strategy to develop, grow, and survive

Composed of:

·         Individual person

·         Company

·         NGO or government

Ø  Government

Ø  refers to the system of institution that handles the affairs of a particular country.

Ø  can be democracy, autocracy, republican, monarchy, or dictatorship.

Ø  Suppliers

Ø  individual persons or companies that provide the required materials, parts, or services to the business.

Criteria:

Ø  quality of goods & services

Ø  terms of payment

Ø  stability

Ø  respond urgent needs

Ø  proximity of location

Ø  Customers

Ø  Buyers of goods and services produced by business

Ø  Competitors

Ø  Produce, sell, render products that are similar to those of the business

Ø  direct competitor- produce/sell similar products/services

Ø  indirect competitor- produce/sell substitute products

Ø  Employees

Ø  highly responsible for the production of goods or delivery of services to the customers

Ø  ensure quality & quantity of products

Ø  backbone of busines

Select according:

·         educ. Background

·         character

·         skills

·         experience

·         competencies

Ø  Creditors

Ø  banks, financial institutions, and financial intermediaries engaged in the lending of money to the borrower.

INDUSTRY ANALYSIS Scanning Tools- determine strategic position

Ø  SWOT Model (internal en.)

Ø  Forces Competition Model/5 Forces of Competition (Michael Porter)

Barriers

·         THREATS OF NEW ENTRANTS- one competitive force

1.       strict government policy

2.       substancial capital requirement

3.       economies of scale

4.       high cost of product differentiation

5.       high switching cost

6.       difficulty in accessing distribution channels

·         BARGAINING POWER OF BUYERS- strong and magnified bargaining power

1.       buyer has potential for backward intergration

2.       the cost of switching the supplier cost is minimal

3.       purchases large portion of products

4.       several suppliers available

5.       product represents a hugh percentage of buyer’s cost

Ø  BARGAINING POWER OF SUPPLIERS

1.       product/service is unique

2.       switching cost is very high

3.       suppliers are few, sale volume is high

4.       substitute  products are not readily available

5.       supplier has ability for forward integration

Ø  RIVALRY AMONG EXISTING FIRMS

1.       number of competing firms

2.       rate of industry growth

3.       characteristics of products/services

4.       amount of fixed cost

5.       increased capacity

6.       diversity of rivals

Ø  THREATS OF SUBSTITUTE PRODUCTS

1.       price is lower

2.       preference of customers easily change

3.       quality of products dramatically improves

4.       switching cost is low

5.       product differentiation is hardly noticeable

Ø  Competitive Forces Matrix- can view total perspective of the competition within the industry.

-          High, moderate, low

Ø  BARRIERS- intensity of threat is highly influenced by the level or degree affecting the particular force.

INTERNAL/MICRO ENVIRONMENT- within business; environment under the firm operates.                              

Ø  BUSINESS RESOURCES- properties owned by business

Ø Tangible- physical form

Current- applied short period or 1 year

-          Cash

-          Receivables

-          Inventory/goods

Noncurrent/fixed- extend beyond 1 year

-          Land

-          Building

-          Machinery

-          equipment

Ø  Intangible- do not have physical form

·         Copyright

·         Patent

·         Formula

·         Comp software

·         Reputation & goodwill

Ø  Capability- utilize available resources

Ø  BUSINESS CULTURE

-          organizational/

corporate culture

-          values, beliefs, and principles learned/ shared by employees

Types

Ø  Culture of business/org.

-          Reflects the overall image of the business to community

Ø  Culture of employees

Ø  Cultural acceptance- degree employees accept the culture of business

Ø  Cultural integration- degree which all units across the business accept/share common culture.

Ø  BUSINESS STRUCTURE

Is formal organizational arrangement of the business in terms of:

·         hierarchy of positions

·         flow of communication

·         relationship of functional areas

·         production & marketing process

INTERNAL EN. SCANNING

Ø SWOT ANALYSIS- popular tool by:

·         George Albert Smith Jr.

·         Roland Christensen

Entrep must:

1.      Use strengths to exploit the business opportunities

2.      Improve weaknesses to avoid threats

Within business en.

Outside business en.

STRENGTHS- strong attributes/capabilities

WEAKNESSES- poor attributes

OPPORTUNITIES- situations form of products that must be exploited

THREATS- external events that harm business

1.       Qualified working force

2.       Complete & new physical acts.

3.       Democratic leadership style

4.       Motivated workers

5.       siValuable

1.       Autocratic form of leadership

2.       Demoralized employees

3.       Poor equipment & facilities

4.       Unskilled workers

5.       Poor technological structures

1.       Innovative products

2.       Increase market share

3.       Provide services to new customers

4.       New programs of govt.

1.       Possible entry of competitors

2.       Stiff govt. regulations

3.       Higher interest rates

4.       Entry of cheaper products

5.       Unstable peace and order sit.

6.       Shift of customer taste & preferences

Ø  BCG ANALYSIS MATRIX (Boston Consulting Group)- appropriate when several products are produced or rendered.

Stars

cash cows

  question marks

dogs

-          High market share

-          Low market growth

-          High market share

-          High market growth

-          Low market share

-          Low market growth

-          Low market share

-          High market growth

Business Competency- combination of entrepreneurial concepts and principles, entrepreneurial skills and characteristics.

Business Core Competency- harmonious coordination of business structure, resources, and culture.

Distinctive Business Competency- venture is able to perform better than competitors in the industry.