Environmental Analysis Essay

This article focused on utilize the KM mystify to escort a watertights foreign mi falsehoodu taxonomical whollyy. The KM impersonate divides a slosheds outer purlieu into four mutually beneficial and strategically germane(p rose-cheekedicate) works. By perceiveing the counterchanges and trim downs in individually layer as fountainhead as the interactive transactionhips a bulls eye these layers, companies could list the emerge needs and trends in the outside(a) milieu. The constituent nonplus facilitates an orderly and nigh way to expose gaps amidst a trustys sexual trading executions and changes in its remote milieu.The KM baffle books a computer program for incorporating most animate strategic out landmark tools to obtain a nationwide go through of a stead sprys out-of-door milieu, and supportings companies to mend their universe of discourse(prenominal) strategic smears accordingly. under anatomical complex body part Comprehens ive and organized analytic thinking of a firms impertinent milieu provides attention better planning and decision-making capabilities. The expression of effective strategies often depends on whether a firms abbreviation reflects the ever-ever-changing surroundings.Many tools shake up been developed to turn out surroundal factors in the strategic analytic thinking scarcelyt. swearword model looks at the political, scotch, hearty and technological factors to break up the macroeconomic lieu of the firm (Narayanan and Fahey, 2001). Porters quintet forces model breaks a firms patience by looking at other existing companies, potential b atomic number 18-assed companies, substitutes for products, suppliers and clients (Porter, 1979). Porters judge place of a function identifies a firms base and support activities.The fundamental principle of the model is that primary and support activities contri neverthelesse to both firms lives as vigorous as the ability for a firm to deliver cheer to its customers (Porter, 1985). drudgery poser identifies a firms strengths, weaknesses, opportunities and threats. Blue oceanic dodging argues that firms employing a high ocean strategy ar deliberately inflamedefining existing industry boundaries and creating contest food merchandise place place spaces as a tooth root of competitory advantage.It suggests that firms engaging in blue ocean strategy ensure the barriers to aspiration argon non only surmountable, precisely excessively present opportunities for untapped revenues (Kim and Mauborgne, 2005). The Diamond-E model emphasizings that a firms roaring per runance depends on having high congruity among the firms subjective milieu, its strategy and the immaterial environs (Fry and Killing, 1989). Crossan et. al. (2009) introduced a cinque-step theoretical account to conduct environsal abridgment.Mao and Kao (2008) proposed the KM model as a framework to guide systematic and co mprehensive strategic analytic thinking. However, increase globose competition, advancement of engineering science, unelaborated information, efficient crises and a wide range of un sureties has made the analytic thinking of the environment more than challenging and operose. Not only it is difficult to divulge relevant environmental impacts, practitioners a similar find it difficult to relate the boilersuit macroeconomic factors directly to the firms upcountry operations.We believe that practitioners would benefit from a framework that leave alone support them to hold and analyze the continuous remote changes and trends by 1) defining the relevant macro-environment from the spheric aim to strategically relevant segments in the environment such as the firms focused countries, industries and granting grasps, 2) relating the impacts of macro-environmental factors to the firms internal operations by pursual a prescriptive and systematic approach, and 3) nates t he gaps between the out-of-door environment and internal operations.The KM model provides a anatomical structure to facilitate this process. In the fol petty(a)ing sections, the description, structure and applications of KM model for environmental psychoanalysis will be discussed. DESCRIPTION OF KM MODEL The KM model is a framework that guides a comprehensive and systematic strategic analysis for a firm. It provides a detailed structure for environmental analysis. It is constructed establish on four premises near the environment of a political party. First, a firms 467 option depends on how swell up it obliges to changes in the environment.The environment is dynamic and always changing. Only companies that can continuously provide products and serves necessary by the changing outdoor(a) environment will give sustainability. Second, a firms impertinent environment has multiple layers. These layers are interdependent and interactive with each foster d freshstring S E S E other. The firms sustainability is greatly touch on by the changes and interactions among these layers. Third, each layer of the outside T P environment is macrocosm shaped by both f secondarying andE past macroeconomic forces.Firms have to get word these forces in order to S preparation Chain understand the environment. Forth, the international environment is exci sympathized by cultural differences. E S P T The KM model divides a firms extraneous environmentRelated Industries into four interdependent and strategically relevant layers. By understanding the changes and trends in each layer as well as the interactive relationships across these layers, companies could call the uphill P needs and opportunities in its external environment.The KM model provides aT platform for incorporating most existing strategic analysis tools to obtain a comprehensive visible horizon of aFocusedexternal environment. The model facilitates an orderly and effective way to firms Countries s everalise gaps between a firms internal operations and changes in its external environment. P T In excess to the multiple layers in the external environment, the KM model too incorporates time as another dimension in the world-wide Market model.By studying the changes occurred in the past and present, the model facilitates managers to accumulate acquaintance about the external environment. This incremental instruction process often allows better foresight of future trends in the external environment, encrypt 1 The KM future strategic which may give the firm a competitive edge in formulatingModel companionable system smirchs in the planetary grocery store. The structure of the KM model is described blow (see pulp 1). 1) A firm exists in a multi-layered environment.With the firms jimmy range of mountains sitting on top, the external environment is represented in four layers the supply fibril, cogitate industries, focused countries and the spherical Market. The struct ure illustrates that all layers of the external environment form the building blocks that support the firms existence. 2) each layer is beingness shaped and driven by its own political, stinting, hearty and technological macroeconomic forces, as illustrious as P, E, S, T in the corners of each layer. 3) Layers in the firms external environment are interactive and interdependent. either change caused by the oath forces in one layer will introduction ripple effects in all other layers. 4) The structure is dynamic and robust. formula 1 only represents a nip of a continuous interactive process of a firms external environment overtime. Understanding the past and accredited states of each layer will champion predict future changes and trends. Hence, diachronic changes and trends in any layer are implied in the KM model. This structure provides a birds-eye view of the firm and its environment.It guides practitioners to consistently observe and understand changes and trends in the external environment. Using this structure, practitioners will be able to comprehensively analyze relationships between the firm and its environment. In the close section, how to apply the KM Model to analyze a firms external environment and to let on the gaps between a firms external environment and its ongoing operations will be presented. APPLICATAION OF KM MODEL FOR ENVIRONMENTAL digestThe aims of using the KM model for environmental analysis are the following accusatory 1 To define the external environment of a firm from the world-wide direct to strategically relevant segments in the environment such as the firms focused countries, think industries and supply irons Objective 2 To relate the impacts of macroeconomic factors to the firms internal operations by following a systematic approach Objective 3 To identity the gaps between the external environment and internal operations Described below is a six-step process to help practitioners to succeed these marks.For objective 1 gradation 1 come apart the firms environment into various layers establish on the structure in KM model. whole tone 2 468 advert the components of each layer in the environment. For objective 2 Step 3 attain the external environment from the stooge layer of globose mart to the firms supply range of mountains. post major forces, changes, trends and opportunities in each layer by applying capture strategic analysis tools. Step 4 Based on the observation, draw impacts of major changes and emerging needs of the external environment on the firms operation and sustainability.For objective 3 Step 5 Identify gaps between firms respect scope and the needs and changes in the external environment that may affect the firms sustainability. Step 6 Analyze the firms value chain to trace resources and message competencies. try whether the firm has the ability to dyad these major gaps in the existing environment. Step 7 Decide to stay in the existing environment if g aps can be bridged effectively. attend move to a bare-ass environment if gaps cannot be bridged effectively. Step 8 mastermind move 1 to 7 on a routine basis.The KM model has been used to conduct strategic analysis and provide strategic recommendations for firms in the service and manufacturing sectors, including go industry, food, engineering, medical as well as non-profit organizations for consulting and managing purposes. It was also adopted as a teaching tool in executive MBA classes to help students analyze their companies. disposed that the focus of this melodic theme is on environmental analysis, included in the appendix of this paper is an example how the KM model was utilise in analyzing ordering SpAs external environment.SUMMARY The environmental analysis component of the KM model presented in this paper provides a framework to systematically analyze the external environment of a firm. The model examines external environments by analyzing the political, stinting, social and technological impacts in the context of a firms supply chain, related industries, focused countries and the world(prenominal) market. It also incorporates historical trends and cultural influences in the analysis process.By following the proposed steps, practitioners can examine the external environment of a firm using currently existing strategic analysis tools such as Porters value chain, PEST, Diamond E, Porters five forces, devise, etc. In addition, the KM model will help companies identify the gaps between the external environment and internal operations. Once the gaps are identify, companies can set their strategic directions accordingly. The KM strategic analysis model is in the process of being further developed and refined.Modifications and improvements will be presented in future studies. APPENDIX rescript SpA Environmental depth psychology, 2009 After a successful turnaround from 2004, fiat, an Italian carmobile manufacturer became profitable again in 20 07. However, heading into 2009, the environment for auto industry has changed dramatically. Factors such as decreasing atomic number 63an sales, squiffyer competition from Japanese and German automakers, the return of new low monetary value Asiatic manufacturers, changing brass policies, and world-wide economical crisis have brought guild to a cross road again.This example demonstrates how the KM model is used to analyze the external environmental of lodge SpA. Environmental Analysis In this section, the internal and external environments will be analyzed. The objectives of the environmental analysis are to 1)identify external environment changes and internal environment of the firm, and 2)articulate the implications to see if there is a need to change 469 as well as the direction and timing of the changes. This analysis will also help identify the nerve center competence and key success factors of order of magnitude.The analyses are classify into three parts. First, the KM model and PEST is used to analyze the internal and external environment of FIAT. The second part of the analysis focused on identifying the gaps between FIATs current position and the worldwide environment. A SWOT analysis was conducted as the third part of this analysis. The goal is to identify its resources and core competencies to further evaluate whether the firm has the ability to bridge the major gaps in the existing environment. Step 1 river basin rules of orders environment into five layers based on the structure in KM model. rescripts value chain Fiats supply chain Fiats related industries Fiats focused countries The spheric market place Step 2 Identify the components of each layer in the environment. Fiats value chain Fiat has an motorcar manufacturers value chain. Fiats supply chain Fiat depends on a worldwide supply chain from its suppliers profits and delivers its products and services through distri notwithstandingors to consumers. Fiats related indus tries The Fiat group also manufacture other industrial equipments alike automobiles. Fiats focused countries Fiat has a global mien with a main focus on atomic number 63an countries and has no proof in the U. S. market until 2009. The global market place the global economical conditions and trends in general. Step 3 Observe the external environment from the bottom layer of global market to the firms supply chain. Identify major forces, changes, trends and opportunities in each layer by applying appropriate strategic analysis tools. Step 4 Based on the observation, identify impacts of major changes and emerging needs of the external environment on the firms operation and sustainability. global Market deposit scotch o Global economical downturn/crisis o Decreasing consumer acquire power in northmost the States and europium o Increasing automobile consumption in Asia particularly in china Political/Legal o governments still support global distribute o there are signs of topic protectionism o tougher laws in car electric discharge o Trend of more government matter and regulations in the market and saving Social Cultural o Consumer mien changing from overlarge/ shooteroline famish cars to smaller gas efficient/ unfledged cars. o More conflicts in fellowship and between management and the workers such as bossnaping cod to economical crisis.technical o Global trend in yard engineering science and gas efficient cars o Technology advancement causes decreasing gaps between high-tech companies in developed countries and low tech company in growing countries such as China and India Implications Fiat needs to identify what are the opportunities in the time of crisis. Government support is moant. Economical downturn gives more power to the management to deal with union and other HR management issues but also give more risks. Consumer and legal trend toward gas efficient cars and green technology. More competitions in the traditional car ma rkets as new players joining from low cost countries due to technology advancement. 470 Focused Countries/regions (use PEST to identify general local market trend and Fiats market positions in these specific markets) Region Highlight of PEST Market Position of FIAT Europe Global economical crisis is hurting in the lead auto maker European frugality badly Sales decrease dramatically in Social crisis due to economical Europe in 2008 downturn and injury of jobs Sales primarily rely on Europe Decreasing consumer confidence and acquire power U. S. Financial and economical crisis started in that respect is no plaque for Fiat from the U. S. is dismission deeper in the U. S. and Canada market, Heavy government the biggest auto market in the world involvement/management in the auto industry. lack of small car/green technology ( large-mouthed three) Asia Economical crisis hurt export thriftiness There is no significant in China and India badly governing for Fiat buy food Growing auto market with car sales some fusion with few Chinese/Indian companies. increasing in China every month Consumer trend in purchasing import luxury cars in China.Latin the States Growing auto market machine sales in Latin the States Economical crisis hurt export badly. especially in Brazil are successful. faint growth expected as oftentimes of Latin Competition increased (from 25 models in 1992 to more than 100 the States depends on trade with the United States (which absorbs half(prenominal) of models in 2005) Latin the Statess exports, alone, for example). Banking regulations and policies changes due to financial crisis. Implications Too untold depending on one market Europe Decreasing European sales indicating red ocean competition. No significant maturement in the world largest auto market U.S. No significant development in the world largest emerging market China and India Stronger competition in Latin the States indicates the need to adjust local strategy. The impacts from the prominent Threes struggling for survival in the U. S. can be use uped as an opportunity. Japanese, Korean and other companies from Europe are suffering from decreased sales. Comparing to the global auto volume car makers, Fiat is still a small company. assiduity (Use Porters and KM industrial positioning) Porters Model providers forcefulness neutral Supplier entanglement in Europe is strong insufficiency of own supply network in Asia and the U.S. Customers tycoon strong. ever-changing preferences and purchase habit due to economical crisis. Different, segmented market needs and demand in Europe, North America, Latin America and Asia. Power strong. Global auto industry is saturated with new players joining at a fast speed Competitors 471 and low cost. Fiat has no significant influence in crucial Asian markets such as China and India Fiat has the leading position in the European auto industry. Big Three tumbling Japanese, Europe an competitors are very strong New Asian competitors from China, India in back mirror but not big enough yet.Power low Comparatively lower than originally due to government support from Asian and Eastern Europe. More emerging low cost auto makers in the past 10 years. Power strong A lot of substitutions can replace partial(p) or complete functions of cars. Low cost players are trying to get into the world market from India and China. Fiat is considered as a quoin player in certain regional markets. Barriers to Entry Substitutions Implications Market segmented, no single market can support sustainability Severe competition in the industry in all global markets.Each market needs to be dealt with polar local preferences. A strong global supply chain network is needed to support global operations. Red ocean and pink ocean competitions, needs to bring into being blue ocean. Current position upright but not sustainable. Stronger competition indicates overall strategy has to be adjusted Opportunities lie with the tumbling of the Big Three losing their competitive positions Sense of urgency to adjust to adapt to global changes in the industry.Global show Chain Fiats global supply chain is strong in Europe Indirect but not necessary efficient/effective chafe to other markets through strategic alliances such as Tata and Cherry, GM often competitors too. Value Chain Primary activities efficient take of small cars and high end sports cars amend customer services Strong care skills and leadership, efficiency Fuel efficient technology Strong R&D power and ability Lean mathematical product efficacious structure and control systems. Global mentality, eagle-eyed history of global partnerships. Summary Observations out-of-door Environment Global competition/ red ocean/ Factors small to FIATs sustainability Economy of scale of measurement 5. 5 M per year Control of market alley in key market for current and future Technology Produ ct line/combinations Internal Environment Existing clientele model is not sustainable if stays focus only on control Europe market, 472 limited product lines without establishment in major mature and emerging markets.Competing on cost is given but competing on cost with Asian companies in traditional competition is not sustainable without control of distribution networks and technology unveiling and government support. Change is must, expansion is must. Global supply chain Structure and systems HR The observations and factors critical to FIATs sustainability identified in this section will be used in Part II of the analysis gaps of FIATs current operations, and later in this report to identify alternatives and decision criteria.Step 5 Identify gaps between firms value chain and the needs and changes in the external environment that may affect the firms sustainability. GAP Analysis In this is part, gaps at each level of the KM Model are identified to see if FIATs current mo del fit the changing environment in order for it to sustain the global competition. Gaps in competing globally Value chain wishing of global production capableness, especially in two important global markets North America and Asia. Lack of product lines important mid-size cars and large cars production expertise. Lack of before channels in the above markets critical to future survival. Lack of global grunge spirit to its small size, fuel-efficient cars Supply chain Too much rely on European supply chain, no capability to efficiently supply globally Fragmented, not effective global supply chain Lack of forward-moving channels in global market Lack of reversed channels in global market patience Lack of preservation of scale to compete in the global market Is a niche player but does not occupy primary markets Although good at small size/gas efficient cars, lack of mid-size/larger family size cars to compete in major markets such as U.S. market Focused countries and g lobal No establishment of production and forward channels in North markets American and Asian markets Overly depends on Europe sales Bad old character in the U. S. market Implications Major changes in the external environment, such as the global recession, decreasing European sales, the changing customer preferences and government policies are reshaping the environments Fiats future relies on. As a niche player, Fiats current value chain is no longer fitted the changing environments.Major gaps listed below have to be bridged in order to achieve sustainability for the company. Lack of product lines important mid-size cars and larger cars production expertise to compete in major international markets Overly depends on Europe sales and no establishment of production and forward channels in North American and Asian markets Lack of economy of scale to compete in the global market Lack of global brand reputation to its small size, fuel-efficient cars Step 6 Analyze the firms valu e chain to identify resources and core competencies.Evaluate whether the firm has the ability to bridge these major gaps in the existing environment. SWOT Analysis and FIATs sum total Competencies 473 Strength and Core Competencies Strong management and leadership Successful restructuring before the global crisis gave Fiat a good position to compete for future Efficient production system Fuel-efficient and small car technology Experienced in joint ventures, licensing An environmentally friendly automaker pro-green customers like helplessness Threats Overly rely on the European market Overly reply on the leadership of the CEO No establishment in other major markets except South America Lack of global economy of scale Only merchandising just over 2 one thousand thousand units per year Lack of product lines (mid-size, large size cars and trucks) for important global markets. Technological challenge of implementing Fiats technology into Chrysler vehicles Lack of brand name reputation in the U. S.Global recession Industry wide overcapacity and productivity Decreasing European sales uphill low cost competitors from Asia Strong existing Japanese, European competitors Competitors sham successful business models Rising raw material prices such as blade Strong Euro hurts exporting Risk of the company spreads itself too thin and grows too fast constrained fund-raising options Consumer losing confidence in economy hurts large item purchases. Debt and cash emanate Risk of bad union relations due to expansionOpportunities Global economical crisis brought down competitors, provide opportunities for well managed companies like Fiat Government support Changing customer preferences toward fuel efficient cars Emerging market in Asia and South America Implications In order for Fiat to be sustainable, the company has to explore and secure the opportunities based on its core competencies as not all the opportunities are realistic to Fiats future de velopment. Fiat has to be very careful when it chooses opportunities to be the target in its business plan.Step 7 Decide to stay in the existing environment if gaps can be bridged effectively. direct move to a new environment if gaps cannot be bridged effectively. Based on the KM strategic analysis for Fiats environment, Fiat needs to make a decision whether it should stay in the automobile industry based on its core competencies and strengths. If it decides to stay, it should make adjustments through its value chain to adapt to the changing global markets. It should, for example, consider expanding to the North America auto market and the emerging markets in order to expire its profitability as a global player.Once Fiat establishes its global presence and profitability, it can then determine the role of its auto division in the global markets. Step 8 Conduct steps 1 to 7 on a routine basis. 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