Business Strategy 2024/2025

Business Strategy (2024/2025)

• The business environment creates both opportunities and threats for organizations.
• Examples of how environments impact organizations include: Canal+ or SKY being destabilized by new competitors (Netflix, Amazon, etc.) and Alibaba's rapid growth due to environmental changes (technological progress, Chinese political/economic change, and international regulations).

The Strategic Position: Macro-Environment Analysis

• The macro-environment encompasses broad environmental factors affecting organizations, industries, and sectors—including their significance.
• Industry/sector consists of organizations producing similar products or services, examples include the car industry and pharmaceutical industry.
• Markets and competitors are essential aspects of the macro-environment (e.g., competitors for Renault include Ford, Fiat).

Analyzing the Macro-Environment

• Forecasting, using megatrends, inflexion points, and weak signals
• Prediction emphasis is a critical aspect of forecasting.
• Scenario analysis: emphasizing learning as a key element.
• PESTEL Analysis which includes market and nonmarket factors.

PESTEL Analysis

• Useful for forecasting and scenario development.
• Strategy should consider economic and nonmarket factors.
• Market environment includes suppliers, customers, and competitors.
• Companies compete by sharing resources, revenues, and profits.

PESTEL Analysis: Nonmarket Environment

• Social, political, legal, and ecological factors, influenced by economic factors.
• These factors involve businesses, NGOs, politicians, government departments, regulators, political activists, campaign groups, and the media.
• Organizations need to develop a reputation, connections, influence, and legitimacy. Strategies include lobbying, public relations, networking, and collaboration.

Politics

• Analyzing political factors involves identifying their importance and carrying out a political risks analysis.
• Two key variables for analyzing political factors include the role of the state (as a major economic player) and exposure to civil society organizations (lobbyists, pressure groups, social networks, media).
• Industries highly affected by the state (e.g., defense industry) and those with high exposure to civil society (e.g., food industry).
• Political risk analysis has macro-micro and internal-external dimensions. Macro risks are associated with whole countries (e.g., France).

Economics

• Macroeconomics influence includes fluctuating currencies and interest rates, impacting global economic growth.
• The economic cycle involves regular ups and downs in economic growth, with potential recessions.
• Businesses in discretionary spending industries (e.g., restaurants) are vulnerable to economic downturns.
• High fixed-cost industries (e.g., airlines, hotels, steel) also face challenges during economic downturns.

Social

• Social influences significantly impact the demand and supply within an economic context.
• Demographic trends (e.g., population aging in Western societies) impact markets.
• Geography concentrates industries and markets in specific locations (e.g., the Paris region).
• Changes in wealth distribution impact market sizes—often showing an increase in the wealth of the upper class while reducing the consumption of the middle class.
• Changing cultural attitudes can create challenges for organizations, especially in highly competitive marketplaces.
• Organizational networks are important. Companies interact frequently with other companies within a similar industry.
• Companies can use sociograms to analyze networks and fields of organizations, identifying important social (or economic) connections.

Social - Key Concepts

• Network Density: Interconnections between network members affect effectiveness with more interconnections improving communication flow.
• Central Hub Positions: Organizations connecting multiple network members have significant power.
• Broker Positions: Organizations connecting otherwise separate groups have unique ability to access information and drive innovation.
• "Small Worlds": Most network members are closely connected, providing protection and effectiveness and being difficult for external organizations to penetrate.

Technology

• Emerging technologies (internet, nanotechnology, new composite materials) can affect multiple industries.
• Technologies such as internet streaming can open opportunities for some companies while challenging others (such as traditional music and broadcasting companies).
• Research and Development budgets are a key indicator of innovative activity.
• Patents are crucial in identifying technological breakthroughs.
• Citation analysis, new announcements, and media coverage are also helpful in tracking innovative activity.
• Technology roadmaps can map out future demands and develop alternative technologies to meet these demands.

Ecological

• Environmental issues, including pollution, recycling, and global warming, pose challenges for organizations.
• Environmental regulations (e.g., pollution controls) can impose additional costs.
• Direct pollution obligations involve safely disposing of waste by-products and minimizing pollution.
• Product stewardship emphasizes responsibility for the ecological impact throughout a product's entire life cycle.
• Sustainable development refers to managing environmental effects indefinitely into the future, especially avoiding resource over-exploitation.
• Environmental context is an important source of pressure and is viewed as visible and emotional. High levels of interconnectivity in the organization field increase ecological issues.
• Internal organization and leadership values help shape the organization's response.

Legal

• Legal constraints ('rules of the game') include labor, environmental, consumer regulations, taxation, and corporate governance.
• Deregulation creates new opportunities for some companies (such as low-cost airlines and schools).
• Informal norms/rules that vary between countries are also important to consider (e.g., varieties of capitalism).

Key Drivers

• PESTEL analysis provides potentially complex issues to be considered.
• Categorization of factors doesn't require rigid classifications—a focus on key drivers that affect specific industries is more manageable.
• Consideration of social, and political contexts is critical to identifying high impact factors.

Forecasting

• Strategic decisions require forecasting future conditions and outcomes. Predictability in strategy is necessary when resources are allocated.
• Forecasting approaches are based on uncertainty.
• Different forecasting approaches include single-point, range, and alternative futures.

Directions of Change

• Megatrends are slow-forming changes that have broad influence.
• Inflexion points are shifts in trend direction (usually sudden and significant).
• Weak signals are early signs of future trends.

Scenarios

• Scenarios are alternative views of how the macro-environment might develop, generally focused on the long term.
• Scenario analysis helps managers deal with uncertainty by exploring alternative future environments.
• Developing scenarios avoids presenting alternatives in explicit probabilities.
• The process is used to learn about possible inter-related environmental factors.

The Scenario Process

• Defining scope, key drivers, developing distinct scenarios, identifying impacts, and monitoring progress.

International Trading Relationships

• Complex relationships between countries are fluid. Factors of trust between countries, monopolies, and the desire for a business diversity play a critical role.