The external environment

4.3.4 The external environment

The focus in this section will be on identifying key variables in the external environment that can cause the organisation to thrive (opportunities) or pose major threats to the organisation’s survival.

The macro-environment includes forces t hat originate beyond any single organisation’s immediate environment. These forces constantly change.

This uncontrollable, remote environment is composed of the political, economic, social, technological, international and ecological environment – often called the PESTIE environment. When assessing the economic environment, managers should analyse factors such as the stage of the economic cycle, inflation and interest rates, and unemployment levels. An assessment of the political environment should address environmental protection This uncontrollable, remote environment is composed of the political, economic, social, technological, international and ecological environment – often called the PESTIE environment. When assessing the economic environment, managers should analyse factors such as the stage of the economic cycle, inflation and interest rates, and unemployment levels. An assessment of the political environment should address environmental protection

The societal environment includes factors such as attitudes towards quality of life, life expectancy, the population growth, the increasing/decreasing gap between the rich and poor, urbanisation and the career expectations of the population. The market environment is also constantly changing. Market environmental factors include: competitors, customers, suppliers, potential entrants, and substitute products.

New challenges for Comair Comair Limited

The following is an interview that Money web had with the chief executive officer of Comair on 23 May 2008 at 22:04.

MONEYWEB: in the studio with me now is Gidon Novick, the joint CEO of Comair. Oil is at $135 a barrel or thereabouts, Gidon. What does that mean for a business like yours?

GIDON NOVICK: Well, it means a lot. Fuel has always been a big cost for us and you can imagine that having our biggest cost, the kind of changes we’ve seen, more than doubling in a single year, has a dramatic impact. And it takes action, it takes reflection on the industry in terms of where we are, how strong we are in the industry. If you take a look, globally we’ve seen some reasonably sound

global airlines really strangling and quite a few going out of the business, so it’s challenging times. But I guess at the end of the day it comes down to what we are doing about it.

MONEYWEB: What are you doing about it?

GIDON NOVICK: The biggest thing we are doing about it is upgrading our fleet. The new aircraft that we are bringing in, the 737-400s, which replaced the old MV-82S, had a significant impact on our fuel burn. We save around 26% on every seat that we sell because the new aircraft not only are more fuel efficient, but they are bigger aircraft, so we get a big saving there.

So I think in some ways we are quite lucky that we put that programme in place two years ago, and we are coming to the end of that programme where our full fleet will be replaced, both on the BA brand and the Kulula brand.

Source: http://www.moneyweb.co.za/mw/view/mw/en/page82475?oid=208320sn=Detail&pid=82475 as cited in Smit, et al. (2013:107).

Management should identity any trend that poses a threat or opportunity to the organisation in the future. The excerpt on page 109 shows how the lifestyles of men have changed over the last years, creating a different type of consumer. An organisation’s survival depends to a large degree on the ability of management to anticipate

trends and/or changes in the environment (macro and market) and to prepare in advance for these changes. It is therefore necessary to predict the type of environment that the organisation will face in the future. In this regard the steps illustrated in Figure 4.9 are recommended to ensure that the organisation is pro-active in terms of possible changes – and not merely reactive.

The selection of critical environmental variable is usually a responsibility of top management. Time and money constraints obviously preclude the forecasting of all possible variables in the external environment. The most important variable that should be forecast are those that drive an industry. For instance, the birth rate of the population is significant for manufacturers of educational toys for children. The birth rate of the population, in turn, is greatly affected by variables such as the educational level of parents and the lifestyles of the population.

Select critical environmental variables

Select sources of information

Evaluate forecasting techniques

Develop an environmental profile

Monitor forecasts

Figure 4.8 Steps in environmental forecasting Source: Smit, et al. (2013:108) Many organisations find that environmental forecasting is beyond their capabilities.

Web Resource

For further insight on information on the business environment visit

http://www.werksmans.co.za

The changing male consumer

Discovery Networks (responsible for the Discovery channel on DSTV) has recently concluded

a comprehensive, unparalleled study of the changing male consumer. The mammoth research undertaking involved the study of more than 12000 men in 15 countries. The report findings suggest that there are four types of modern male consumers:  `Pressured Provider’ – 26% are traditional family men with a conservative’s view of his

role in family and society.  `Modern and Control’ – 34% are men who have a modern view of gender roles and are able to juggle numerous commitments.  `All About Me’- 26% of young men priorities themselves over relationships and are less family oriented.  `Non- Committal’ – 14% live for the day and shy away from serious commitment or responsibility.

Some of the findings of this report that shows a definite change in the male consumer are:  Men are very aware of greater equality between men and women.  Young men are delaying becoming dads  Young men are spending more time and money on their looks.  Being aware of their image can bring anxiety as well as pride to men.

Participants in the study were made to complete, amongst others, lifestyle diaries, telephone interviews and in depth lifestyle interviews at their homes. Over 50 experts were consulted during the process, including academics (professors of gender studies, psychology, and sociology), economists, marketers, journalists and social commentators.

The study has significant relevance for business as it shows profound changes in how modern young males view various life issues such as relationships, success, money, grooming, and health and so on. Supplied by these institutions and publications lies with the organisation and not the forecasters.

If an organisation is capable of gathering primary data, a number of quantitative and qualitative forecasting techniques can be applied. The choice of technique depends on considerations such the nature of the forecast decision, the usefulness and accuracy of available, and be cost and importance of the forecast.