2. The Business Environment

No business operates in a vacuum. It's constantly interacting with its environment.

Two Layers:

• Micro-environment: The immediate players affecting the company - suppliers, customers, competitors, employees.
• Macro-environment: Broader forces that affect everyone - the economy, technology, culture, politics.

3. PESTLE Analysis

A framework for scanning the macro-environment. It stands for:

• Political: Government policies, stability, taxes. (e.g., 'Make in India' initiative).
• Economic: Interest rates, inflation, GDP growth.
• Socio-Cultural: Lifestyle trends, demographics, consumer attitudes. (e.g., growing health consciousness).
• Technological: Innovation, automation, R&D.
• Legal: Consumer laws, safety standards.
• Environmental: Climate change, waste disposal.

4. Going Global

Why do businesses expand internationally?

• Need to Grow: Domestic markets might be saturated.
• Cheaper Resources: Access to lower-cost labor or raw materials.
• New Markets: Tapping into a new customer base.
• Technology: Faster communication and transport make it easier than ever.

5. Product Life Cycle (PLC)

Products, like people, go through stages. Understanding this helps guide strategy.

• Introduction: Slow sales, high costs, little competition.
• Growth: Sales take off, competition enters.
• Maturity: Sales peak, competition is fierce, profits stabilize.
• Decline: Sales fall as new products emerge.

6. Porter's Five Forces

A model to analyze industry competition and attractiveness. The five forces are:

• Rivalry Among Competitors: How intense is the competition? (e.g., Coke vs. Pepsi).
• Threat of New Entrants: How easy is it for new companies to enter?
• Bargaining Power of Buyers: How much power do customers have to drive down prices?
• Bargaining Power of Suppliers: How much power do suppliers have to raise prices?
• Threat of Substitutes: Can customers achieve the same result with a different product? (e.g., video calls as a substitute for air travel).

7. Barriers to Entry

These are hurdles that make it hard for new companies to enter an industry.

• Capital Requirements: Needing a lot of money to start (e.g., starting an airline).
• Economies of Scale: Existing large players have lower costs per unit.
• Brand Identity: The trust and recognition of established brands (e.g., trying to compete with Nike).
• Switching Costs: The cost or hassle for a customer to switch to a new product.

8. Competitive Landscape

This means identifying and understanding your competitors.

Steps to Analyze:

• Identify: Who are they and what is their market share?
• Understand: What products do they offer?
• Determine Strengths: What do they do well? Why do customers choose them?
• Determine Weaknesses: Where are they lacking? What gaps can you fill?

9. Key Success Factors (KSFs)

These are the things a company MUST do well to succeed in its industry. They are the difference between profit and loss.

How to find them? Ask:

• On what basis do customers choose between brands?
• What resources are needed to be competitive?
• What does it take to get a sustainable advantage?
• Example for an airline: Safety, low cost, and on-time performance.