Understanding and Analyzing the
General Environment
HCAD 5390
Major Components of an Organization’s
External Environment
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Industry (or industries) and competitors
Market (or markets) and customers
General environmental forces
Strategic Benefits of External
Environmental Assessment
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Align the organization with its environment
Strategies more responsive to the environment
Information that informs strategic decisions
Early warning of environmental changes
Identify useful resources in the environment
Plot to effect change in the environment
External Environmental
Assessment Process
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Identify most influential environmental forces
Identify critical industry and market issues
Select forces and issues for close monitoring
Identify information sources on the forces
Conduct initial baseline assessment
Project trends and pace of change
Estimate impact of trends on the organization
What strategic decisions in response to trends
What decision makers receive environmental reports
External Environmental Analysis
A continuous process which includes
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Scanning: Identifying early signals of environmental
changes and trends
Monitoring: Detecting meaning through ongoing observations of
environmental changes and trends
Forecasting: Developing projections of anticipated outcomes based
on monitored changes and trends
Assessing: Determining the timing and importance of environmental
changes and trends for firms’ strategies and their management
Categories of Environmental Factors
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Political/Governmental
Legal
Profession/Industry
Economic (global, national, regional)
Sociocultural
Demographics
Technology
Environmental Factors:
Political/Governmental
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Specific election results
Specific politicians voted in or out of office
Political ideological mood of country or region
Opportunities for lobbying
Political/business leaders positions on industry-related issues
Government spending focus and levels
Government policies on industry-related issues
Governmental regulatory vigor
Government role in meeting societal needs
Media reports
Environmental Factors: Legal
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Existing laws (long established, how are they
interpreted and enforced)
New laws (recently enacted, how will they be
interpreted and enforced)
Proposed legislation (working their way
through the legislature, likely impact on
industry and organization)
Environmental Factors:
Profession/Industry
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Professional associations
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American Medical Association
American Nursing Association
American Academy of Procedural Coders
Industry trade associations
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American Hospital Association
Medical Group Management Association
Pharmaceutical Research and Manufacturers of America
Environmental Factors: Economic
At global, national and regional levels
 Interest rates
 Stock market prices
 Venture capital deals (IPOs, M&As)
 Government budget deficit or surplus
 Inflation rates
 Consumer income, disposable income, and debt
 Employment and unemployment levels
 Tax rates
 Economic cycle stage (boom vs recession)
 Global economic metrics
 Specific effects of economic trends
Environmental Factors: Sociocultural
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Characteristics – traditions, lifestyles, values,
ideals, aspirations, principles, ethics,
attitudes, beliefs, biases, opinions, tastes,
political views, and behavioral patterns
People – current customers, prospective
customers, influencers of customers, ends
users, employees, suppliers, shareholders,
bondholders, lenders, government
regulators, politicians, media, general public
Environmental Factors: Demographics
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Gender
Age
Income levels
Ethnicity
Race
Geographic place of
residence
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Family size and
composition
Education
Employment status
Birth rates
Life expectancies
Environmental Factors: Technology
New capabilities, equipment, and systems in:
 Clinical treatment and procedures (drugs,
medical devices, diagnostic tests, surgical
procedures, treatment regimens)
 Researching and developing clinical
technologies
 Gathering, recording, and communicating
clinical data (EMR, EHR, CPOE systems)
 Gathering and disseminating nonclinical data
(cost, quality, satisfaction, patient logistics)
Competitive Changes During
Industry Evolution
Demand
Stages of the Industry Life Cycle
Embryonic
Time
Competitive Changes During
Industry Evolution (Continued)
Demand
Stages of the Industry Life Cycle
Embryonic
Growth
Time
Competitive Changes During
Industry Evolution (Continued)
Demand
Stages of the Industry Life Cycle
Embryonic
Growth
Shakeout
Time
Competitive Changes During
Industry Evolution (Continued)
Growth in Demand and Capacity
Capacity
Excess
Capacity
Units
Demand
t1
t2
Time
Competitive Changes During
Industry Evolution (Continued)
Demand
Stages of the Industry Life Cycle
Embryonic
Growth
Shakeout
Time
Maturity
Competitive Changes During
Industry Evolution (Continued)
Demand
Stages of the Industry Life Cycle
Embryonic
Growth
Shakeout
Time
Maturity
Decline
Strategies in Fragmented
Industries
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Fragmented industry characteristics:
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Localized markets with low entry
barriers (e.g., Mom’s Diner).
Few economies of scale
opportunities exist.
High transportation costs
(e.g., sand) for products.
Focus strategies predominate
(e.g., customer group, region).
Strategies in Fragmented
Industries
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Competing in fragmented industries requires
strategic consolidation by:
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Chaining (Wal-Mart)
Franchising (Pearl Vision)
Horizontal mergers
Using the Internet (Lens.com)
Information Sources for External
Environmental Assessment
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Newspaper clipping services
General-purpose and narrow-focus websites
Charitable research foundations (Robert Wood Johnson Foundation,
Kaiser Foundation)
Think tanks (RAND Corporation)
Consulting firms (Deloitte Consulting)
Government agencies (CMS)
Legal research databases (Lexis-Nexis, Westlaw)
Journals, magazines, periodicals
Trade and professional associations
Published survey results
Analyzing the External Environmental
Data Gathered
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Sorting and classification
Trend identification and extrapolation
Statistical modeling
Brainstorming
Alternative future scenario projections
Delphi process dialogues
Role playing
War gaming