FORECASTING STRATEGY (BUSINESS ENVIRONMENT ANALYSIS)

Analyzing business environment is to identify chances and threats from environment.

Macro environment affects all business sectors but the effect levels are different. Microenvironment is defined towards specific sectors.

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Internal environment includes internal factors of one enterprise and this is the environment that an enterprise can control.

Economic environment of an enterprise is defined through the potency of national economy. Therefore, the important factors to evaluate this potency include growth rate of the economy, interests and trending, currency exchange rates, inflation rate, consumption level, unemployment rate and tax system.

Technological environment: is the active factor covering several chances and threats towards an enterprise; it has huge and direct impact on strategic business of sectors.

Socio-cultural environment is the largest changing factor and the change of lifestyle followed by integration trend. It always brings chances to manufacturers.

Enterprises have to take consumption behavior, marriage and birth rates, position and roles of woman in the society and family into account.

Residential environment: the change of residences leads to serious and important changes of economic – social process in the large scale (even all over the world). This process affects and changes strategy of an enterprise.

Legal environment: the stability or instability on politics, the change of laws and management policies can either increase the pressure (threats) or create chances for an enterprise to have better business.

Natural environment: this is the important factor not only towards human lives but also towards input factor of the economy, including location, weather, land, natural resources, minerals and ecosystem…

Global environment: regionalization and globalization have been and will be the inevitable trend that every enterprise and nation has to take into account.

Analysis of microenvironment: this is the environment deciding characteristics and competition level in the sector. They are factors in the sector;

therefore, missions of strategists are to analyze impacts on the environment to identify chances and threats that an enterprise must face with, they are:

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- New competitors entering the market: are enterprises which do not compete in the same sector at present but they have competitive capacity if they choose to join the sector and bring new technology, new persons or new finance capacity as well.

- Pressure from suppliers: the operation of enterprises need input factors bought from suppliers. To whom, advantages of buying of selling belong depend on the number of persons trading in the market.

- Pressure from customers: this is the target that enterprises care and exploit and it is the decisive factor towards the existence of an enterprise. Therefore, buyers can be seen as competitive threat when they force enterprises to decrease the price or when they require high-qualified needs and better services; on the other hand, when buyers are on weak side, this brings enterprises the chance to increase price and profit.

- Alternative products and services: they are other products that satisfy the same needs of customers.

We can summarize threat factors in microenvironment as Figure 2.1

Figure 2.1 – Threat factors for micro environment towards enterprises’

business

Internal analysis: Internal analysis will contribute to formulating a base system to plan complete strategy. When analyzing this environment, therefore, we have to analyze factors deeply to identify strengths and weaknesses. Then, we realize that the existence of an enterprise depends on capacity whether this

Customer pressure Current enterprises and

competitors New participants (Potential competitors)

Supplier pressure

Alternate products and services

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enterprise can receive sources from external environment (such as capital, human resource and materials) or not.

Human resources: include managers at various levels and executive employees at all sectors. For managers, qualifications about professional ethics, specialized skills, human relations skills, thinking skills must be evaluated deeply in each period to have appropriate management planning, especially for advanced managers. For executive agents, standards of ethics and qualifications must be checked and analyzed through placement tests to plan training process aiming at increasing quality.

Working capital of an enterprise includes capital by cash and properties.

Capital structure includes equity and loan capital, structure, mobilization level of kinds of capital.

Organizational structure: depending on each period, organizational structure is set up in line with missions and strategic planning. When missions and planning are changed, and then organizational structure needs to be evaluated and reconsidered to maintain current structure because it belongs to organizational management system.

The situation of production: factors to be considered and evaluated are price and supplier level of materials, relations with suppliers, inventory system, turnover level, arrangement of means of production with planning and the ways to exploit such means, expenses and technological ability compared to the whole sector and competitors.

We can also summarize parts of micro and macro environments as below:

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Figure 2.2 – Parts of micro and macro environments

(Source: PHD. Chiachi Tsan, Study materials of Strategic management, Assoc.

Prof. Dr. Le The Gioi – Dr. Nguyen Thanh Liem – Mr. Tran Huu Hai, Strategic management, Statistical Publishing House and Phan Thi Ngoc Thuan (2005), Business strategy and internal corporation planning, Science and Technics Publishing House, Hanoi)

2.2.4. FORMULATING POSSIBLE STRATEGIES AND CHOOSING