1 Expectations: BA 346 – Strategic Planning

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This document will outline the Professor’s expectations required for the successful completion of this

course. While you will receive a slightly different experience in each of your classes at Voorhees College,

based on my style of teaching, there are some general guidelines I would like to go over with you so that

you will have a consistent experience throughout this course.

Forum Topic Activities

• Etiquette (Netiquette) – I am committed to providing open, frank, yet civil dialogue in the forum

topic discussions. To achieve this, students should abide by the following guidelines:

o Never post, transmit or distribute content that is known to be illegal

o Avoid harassing, threatening, or embarrassing fellow learners

o Avoid language that is: harmful, abusive, racially or ethnically offensive, vulgar, or sexually

explicit.

o If you provide information/facts in your post that is from another source, I encourage you to

cite a source. While not necessary, this practice would make it easier for those reading your

post to locate the source for personal reference. PLEASE NOTE: APA format does not have

to be used for citing sources in a discussion post. Points will not be deducted if the citation

is not in APA format.

o The original discussion post for each specific topic should be a minimum of 250 words unless

a more significant number of words is specified in the actual forum discussion instruction. If

it is apparent there is no substantive evidence or content that contributes to the discussion,

regardless of word count, reduced points will be awarded. Original discussions posted after

midnight Thursday evening will receive reduced credit for the late posting. Original

discussions posted after midnight Sunday evening will receive zero credit.

o If the number of responses is not specified, a minimum of two, posted are required. Further,

a response post to a fellow student or the instructor should be a minimum of 150 words

unless more words are specified in the forum discussion instructions.

o If a student neglects to respond to a professor’s follow-up posted question(s) or query for

additional information to a student’s forum discussion post, there will be a reduction of

points in the participation category.

o For maximum credit on participation level for a forum discussion, the original post and at

least the prescribed number or more response posts must be posted during the week.

2 Expectations: BA 346 – Strategic Planning

Written Assignments and Case Studies

• All written assignments are to be typed, double-spaced, 12 pt. Times New Roman font, in APA style.

APA style means there must be a cover page on the assignment. Also, the cover page must have the

following features: o A “Running head:” (label in the upper left-hand corner) followed by a running head

title (in the upper left-hand corner). Please see the example below:

o Running head: CASE STUDY 1

o A title for the assignment that is not more than 12 words.

o Student’s name

o Course Title & number (BA 346 A – Strategic Planning)

o Institutional affiliation (Department of Business & Entrepreneurship)

o Assignment Date

o Professor’s name (Katherine Whitaker, DBA)

Please note – the running head title without the running head label should appear on all subsequent

pages following the cover page in a submitted written assignment.

• Academic honesty is highly valued. Always submit work that represents your original words or ideas.

If any words or concepts used in a class posting or assignment submission do not represent your

original words or ideas, you must cite all relevant sources in APA format and make clear the extent

to which such sources were used.

• Most plagiarism issues are unintended. For example, a student forgets to put quotation marks

around a direct quote or paraphrases research without adding a reference citation. The

consequences of plagiarism, however, do not decipher unintended from deliberate practice. Please

have a working knowledge of how to reference others in your written work, including knowing the

differences between quoting, paraphrasing, and synthesizing.

• The APA Manual1 will be used by the professor to cite all format discrepancies that are noted in a

graded assignment. Twenty percent of your overall grade on a written assignment will be based on

APA format and reference list.

• One must provide a textual citation using the APA author-date system format and also provide a

reference listing at the end of a written assignment if you use the ideas or directly quote other

authors. That also includes the definition of words.

• Using just the web address to cite a source does not provide a reader with all the information

needed. Nevertheless, it is also not proper APA format. APA format is how you communicate in

writing to cohorts that are human service professionals.

The specific reference source that will be used for grading APA format is The APA Manual (2010).

Publication manual of the American psychological association (6th Ed.). Washington, D.C: American

Psychological Association

Chapter 3: Evaluating the External Environment

Chapter 3: Evaluating the External Environment

3.1 Evaluating the External Environment

3.2 The Relationship between an Organization and Its Environment

3.3 Evaluating the General Environment

3.4 Evaluating the Industry

3.5 Mapping Strategic Groups

3.6 Conclusion

3.1 Evaluating the External Environment

Learning Objectives

After reading this chapter, you should be able to understand and articulate answers to the following questions:

1. What is the general environment and why is it important to organizations?

2. What are the features of Porter’s five forces industry analysis?

3. What are strategic groups and how are they useful to evaluating the environment?

Subway Is on a Roll

As shown in the highlighted countries, Subway is well on its way to building a worldwide sandwich empire.

Wikimedia Commons – CC BY-SA 3.0.

Many observers were stunned in March 2011 when news broke that Subway had surpassed McDonald’s as the biggest restaurant chain in the world. At the time of the announcement, Subway had 33,749 units under its banner while McDonald’s had 32,737 (Kingsley, 2011). Despite its meteoric growth, many opportunities remained. In China, for example, Subway had fewer than two hundred stores. In contrast, China hosts more than 3,200 Kentucky Fried Chicken stores. Overall, Subway was on a roll, and this success seemed likely to continue.

How had Subway surpassed a global icon like McDonald’s? One key factor was Subway’s efforts to provide and promote healthy eating options. This emphasis took hold in the late 1990s when the American public became captivated by college student Jared Fogle. As a freshman at Indiana University in 1998, the 425 pound Fogle decided to try to lose weight by walking regularly and eating a diet consisting of Subway subs. Amazingly, Fogle dropped 245 pounds by February of 1999.

Subway executives knew that a great story had fallen into their laps. They decided to feature Fogle in Subway’s advertising and soon he was a well-known celebrity. In 2007, Fogle met with President Bush about nutrition and testified before the US Congress about the need for healthier snack options in schools. Today, Fogle is the face of Subway and

one of the few celebrities that are instantly recognizable based on his first name alone. Much like Beyoncé and Oprah, you can mention “Jared” to almost anyone in America and that person will know exactly of whom you are speaking. Subway’s line of Fresh Fit sandwiches is targeted at prospective Jareds who want to improve their diets.

Because American diets contain too much salt, which can cause high blood pressure, salt levels in restaurant food are attracting increased scrutiny. Subway responded to this issue in April 2011 when its outlets in the United States reduced the amount of salt in all its sandwiches by at least 15 percent without any alteration in taste. The Fresh Fit line of sandwiches received a more dramatic 28 percent reduction in salt. These changes were enacted after customers of Subway’s outlets in New Zealand and Australia embraced similar adjustments. Although the new sandwich recipes cost slightly more than the old ones, Subway plans to absorb these costs rather than raising their prices (Riley, 2011). This may be a wise strategy for retaining customers, who have become very price sensitive because of the ongoing uncertainty surrounding the American economy and the high unemployment.

References

Kingsley, P. 2011, March 9. How a sandwich franchise ousted McDonald’s. The Guardian. Retrieved from

http://www.guardian.co.uk/lifeandstyle/2011/mar/09/subway-biggest -fast-food-chain.

Riley, C. 2011, April. Subway lowers salt in its sandwiches. CNNMoney. Retrieved from http://money.cnn.com/

2011/04/18/news/companies/subway_salt/index.htm.

69 Mastering Strategic Management

3.2 The Relationship between an Organization and Its Environment

Learning Objectives

1. Define the environment in the context of business.

2. Understand how an organization and its environment affect each other.

3. Learn the difference between the general environment and the industry.

What Is the Environment?

For any organization, the environment consists of the set of external conditions and forces that have the potential

to influence the organization. In the case of Subway, for example, the environment contains its customers, its

rivals such as McDonald’s and Kentucky Fried Chicken, social trends such as the shift in society toward healthier

eating, political entities such as the US Congress, and many additional conditions and forces.

It is useful to break the concept of the environment down into two components. The general environment

(or macroenvironment) includes overall trends and events in society such as social trends, technological trends,

demographics, and economic conditions. The industry (or competitive environment) consists of multiple

organizations that collectively compete with one another by providing similar goods, services, or both.

Every action that an organization takes, such as raising its prices or launching an advertising campaign, creates

some degree of changes in the world around it. Most organizations are limited to influencing their industry.

Subway’s move to cut salt in its sandwiches, for example, may lead other fast-food firms to revisit the amount of

salt contained in their products. A few organizations wield such power and influence that they can shape some

elements of the general environment. While most organizations simply react to major technological trends, for

example, the actions of firms such as Intel, Microsoft, and Apple help create these trends. Some aspects of the

general environment, such as demographics, simply must be taken as a given by all organizations. Overall, the

environment has a far greater influence on most organizations than most organizations have on the environment.

Why Does the Environment Matter?

Understanding the environment that surrounds an organization is important to the executives in charge of the

organizations. There are several reasons for this. First, the environment provides resources that an organization

needs in order to create goods and services. In the seventeenth century, British poet John Donne famously noted

that “no man is an island.” Similarly, it is accurate to say that no organization is self-sufficient. As the human

body must consume oxygen, food, and water, an organization needs to take in resources such as labor, money,

and raw materials from outside its boundaries. Subway, for example, simply would cease to exist without the

contributions of the franchisees that operate its stores, the suppliers that provide food and other necessary inputs,

and the customers who provide Subway with money through purchasing its products. An organization cannot

survive without the support of its environment.

Second, the environment is a source of opportunities and threats for an organization. Opportunities are

events and trends that create chances to improve an organization’s performance level. In the late 1990s, for

example, Jared Fogle’s growing fame created an opportunity for Subway to position itself as a healthy alternative

to traditional fast-food restaurants. Threats are events and trends that may undermine an organization’s

performance. Subway faces a threat from some upstart restaurant chains. Saladworks, for example, offers a variety

of salads that contain fewer than five hundred calories. Noodles and Company offers a variety of sandwiches,

pasta dishes, and salads that contain fewer than four hundred calories. These two firms are much smaller than

Subway, but they could grow to become substantial threats to Subway’s positioning as a healthy eatery.

Executives must also realize that virtually any environmental trend or event is likely to create opportunities for

some organizations and threats for others. This is true even in extreme cases. In addition to horrible human death

and suffering, the March 2011 earthquake and tsunami in Japan devastated many organizations, ranging from

small businesses that were simply wiped out to corporate giants such as Toyota whose manufacturing capabilities

were undermined. As odd as it may seem, however, these tragic events also opened up significant opportunities for

other organizations. The rebuilding of infrastructure and dwellings requires concrete, steel, and other materials.

Japanese concrete manufacturers, steelmakers, and construction companies are likely to be very busy in the years

ahead.

Natural disasters devastate many organizations.

Kim Seng – Monthly Newsletter – November 2011 – CC BY-NC-ND 2.0.

Third, the environment shapes the various strategic decisions that executives make as they attempt to lead

their organizations to success. The environment often places important constraints on an organization’s goals, for

71 Mastering Strategic Management

example. A firm that sets a goal of increasing annual sales by 50 percent might struggle to achieve this goal during

an economic recession or if several new competitors enter its business. Environmental conditions also need to be

taken into account when examining whether to start doing business in a new country, whether to acquire another

company, and whether to launch an innovative product, to name just a few.

Key Takeaway

• An organization’s environment is a major consideration. The environment is the source of resources that the organizations needs. It provides opportunities and threats, and it influences the various strategic decisions that executives must make.

Exercises

1. What are the three reasons that the environment matters?

2. Which of these three reasons is most important? Why?

3. Can you identify an environmental trend that no organizations can influence?

3.2 The Relationship between an Organization and Its Environment 72

3.3 Evaluating the General Environment

Learning Objectives

1. Explain how PESTEL analysis is useful to organizations.

2. Be able to offer an example of each of the elements of the general environment.

The Elements of the General Environment: PESTEL Analysis

An organization’s environment includes factors that it can readily affect as well as factors that largely lay beyond

its influence. The latter set of factors are said to exist within the general environment. Because the general

environment often has a substantial influence on an organization’s level of success, executives must track trends

and events as they evolve and try to anticipate the implications of these trends and events.

PESTEL analysis is one important tool that executives can rely on to organize factors within the general

environment and to identify how these factors influence industries and the firms within them. PESTEL is an

anagram, meaning it is a word that created by using parts of other words. In particular, PESTEL reflects the

names of the six segments of the general environment: (1) political, (2) economic, (3) social, (4) technological,

(5) environmental, and (6) legal. Wise executives carefully examine each of these six segments to identify major

opportunities and threats and then adjust their firms’ strategies accordingly (Table 3.1 “PESTEL”).

Table 3.1 PESTEL

Examining the general enviornment involves gaining an understanding of key factors and trends in broader

society. PESTEL analysis is a popular framework for organizing these factors and trends and isolating how they

influence industries and the firms within them. Below we describe each of the six dimensions associated with

PESTEL analysis: political, economic, social, technological, environmental, and legal.

P Political factors include elements such as tax policies, changes in trade restrictions and tariffs, and the stability of governments.

E Economic factors include elements such as interest rates, inflation rates, gross domestic product, unemployment rates, levels of disposable income, and the general growth or decline of the economy.

S Social factors include trends in demographics such as population size, age, and ethnic mix, as well as cultural trends such as attitudes toward obesity and consumer activism.

T Technological factors include, for example, changes in the rate of new product development, increases in automation, and advancements in service industry delivery.

E Environmental factors include, for example, natural disasters and weather patterns.

L Legal factors include laws involving issues such as employment, health and safety, discrimination, and antitrust.

P Is for “Political”

The political segment centers on the role of governments in shaping business. This segment includes elements

such as tax policies, changes in trade restrictions and tariffs, and the stability of governments (Table 3.2 “Political

Factors”). Immigration policy is an aspect of the political segment of the general environment that offers

important implications for many different organizations. What approach to take to illegal immigration into the

United States from Mexico has been a hotly debated dilemma. Some hospital executives have noted that illegal

immigrants put a strain on the health care system because immigrants seldom can pay for medical services and

hospitals cannot by law turn them away from emergency rooms.

Table 3.2 Political Factors

Examples of several key trends representing political factors in the general environment are illustrated below.

3.3 Evaluating the General Environment 74

The extent to which companies developing clean energy sources should be subsidized by the government versus being left on their own to compete with providers of traditional energy sources is currently a hotly contested political issue.

The use of child labor was once commonplace in the United States now firms face political scrutiny when using overseas suppliers that employ child labor.

The word tariff derived from an Arabic word meaning “fees to be paid.” By levying tariffs and implementing other trade restrictions, governments can — to some extent — protect domestic firms from international competition.

The stability of the US government provides a source of confidence for foreign firms who want to do business in the United States. Countries that face frequent regime change and political turmoil have a harder time attracting foreign investments.

One of the most important duties of elected officials in the United States is to debate and set new tax policies.

Proposals to provide support to businesses are often featured within political campaigns.

Meanwhile, farmers argue that a tightening of immigration policy would be harmful because farmers rely

heavily on cheap labor provided by illegal immigrants. In particular, if farmers were forced to employ only

legal workers, this would substantially increase the cost of vegetables. Restaurant chains such as Subway would

then pay higher prices for lettuce, tomatoes, and other perishables. Subway would then have to decide whether

to absorb these costs or pass them along to customers by charging more for subs. Overall, a