Description:
The general environment constantly influences businesses either positively or negatively. The general environments are factors external to a firm that are beyond the firm’s control. However, they do affects the firm’s strategy and profitability and affects affects porter’s five forces in various ways. The general environment consists of six segments namely: Demographic, technological, economic, sociocultural, political/legal and global. Firms need to vigilantly track the different segments and assess changes in event in any of this segment that would affect performance. The firm should use scenario planning and have a contingency plan in place to respond and disrupt general environment changes. …show more content…
Being responsive to the external environment enables firms to avoid strategic mistakes. The general environment framework is applied because the firm’s leadership needs to have a plan on how to respond to opportunities and threats from the external environment in order to develop superior products. Therefore, understanding the general environment enables the firm increase the probability that the firm’s strategies developed will appropriately align to the firm’s general environment The general environment framework is applied and monitored at all times.
What are the challenges in applying this framework? How do you address those challenges?
Some of the challenges of applying this framework are the future uncertainty. Firms that have spent millions of dollars tracking the general environment might completely need to revisit their entire plan due to changes in one external factor. Currently, U.S firms are very unsure of how a new presidency will affect their business. Will an increase in middle class taxes affect their discretionary spending therefore limiting their purchasing power? While such factors affect a business, they do not have any control over …show more content…
This is an ongoing effort as things keep on evolving within an industry. Trends that were popular today might not be popular tomorrow and you’re competition might already know that and planning for the next big thing. The industry environment framework is applied because of competition. A firm’s competitors action affect the firm’s profitability because competitors will continually seek to gain an advantage over each other through differentiating their product and service or by seeking to provide better value for money. However, when a firm understand the environment it help identify the extent to which industry profitability is influenced by aggressive price competition it might depend on therefore adjusting their pricing strategies