The success of a company lies in the way to face the adversities that are presented and use them to your advantage. When an organization is created, it sets goals as well as goals; to achieve them, it must have the ability to overcome the complex situations that it may face and that keep it from fulfilling its planned purposes.
Organizations formulate strategic plans with which they can anticipate and resolve different contexts in which their position in the market is at risk. In the same way, they adapt the strategies proposed to identify opportunities and take advantage of them in their favor. So the organization must be able to make the relevant decisions to choose the best possible path when going through critical conditions.
However, how do you know what strategies to use or what the organization is facing? The key is to have information. For adequate and correct decision-making, a company must seek to obtain maximum information (Fuertes, 1993).
This leads to an analysis of the organization towards knowing the environment in which it is located, obtaining all the possible information about it, as well as the environment that surrounds it, making it possible to identify its strengths, weaknesses, opportunities and threats, which leads to know the competitive position of the company.
Organizations are considered systems since they are part of a set of elements that relate to more elements such as customers and suppliers, but also to competitors, the environment and the government, which is why companies are said to be an open system that interact with everything around it. What is known as a business environment.
According to Daft (2010) the environment of the organization is defined as all those elements that are outside the borders of the organization and have the potential to affect it in whole or in part. So we understand as an environment the factors that the company is not able to fully control and that can affect its position in the market if the correct strategic plans are not applied.
Every day companies find themselves facing a changing and competitive environment where the market is increasingly demanding, as well as more difficult to satisfy due to advances in processes and technologies. Given this, it is important for organizations to be interested in knowing the environment around them as well as possible, as well as trying to adapt to it (Sáez Vacas, García, Palao, & Rojo, 2006).
Analysis of the external environment
Saz and Marcuello (2011) mention that the objective of analyzing the environment is to establish what the key variables are and how they affect the organization. To understand the external environment of an organization, it is divided into two types of analysis depending on the degree of control that the company has over the factors that surround it.
Kotler and Armstrong (2012) consider that the environment is formed by a microenvironment and a macroenvironment. The microenvironment is the elements that affect but are close to the company such as suppliers, competitors and customers. While the macro environment are the forces that influence the micro environment such as demographic and political forces.
Microenvironment
The microenvironment, also called by some authors as a specific environment, refers to all the elements or forces that are close to the company and that influence its development. Organizations are considered to have a little control over these elements since they can try to choose a favorable environment and take advantage of certain factors and influence them, such as, for example, determining whether or not to have a business relationship with them.
The main components of the microenvironment are as follows:
- Suppliers: They are the organizations with which they have business relationships and are in charge of supplying the necessary resources for companies to carry out the realization of their products or services.
Fischer and Espejo (2017) consider that it is important to seek integration with suppliers, since to require a good product or service, companies require quality, so it needs that the organizations involved with it also work with quality.
- Clients : Clients are the most important elements for companies since they are the ones that will provide the goods or services. Yáñez (2015) refers to two types of customers, calling consumer customers those who buy the product for end use and business customers to those organizations that buy the product to use it in their production processes. Competition: they are all those companies that offer a similar or the same type of good or service or in the same way that use the same technology to manufacture products. Fischer and Espejo (2017) consider that it is important to know the competition almost as much as the company itself is known, since today the competition is much more aggressive and it is difficult to survive without fighting it.
Nowadays, thanks to international treaties and imported products, companies must always be alert to the changes that are generated in the market and its environment.
- Intermediaries: Kotler and Armstrong (2012) define intermediaries as companies that help the company to promote, sell and distribute its products or services to end consumers. Intermediaries collaborate with the organization to reach more consumers and potential clients, in the same way they favor covering more market sectors. Some types of intermediaries are: wholesalers, retailers, warehouses, etc. Financial entities: These are the organizations that grant financing to the company and influence the ability of the company to obtain funds. Some of these are banks, investment analysts, and shareholders. Public administrations: The companies must be related to the city council of the town where it is established, and municipal taxes must also be paid, which are in charge of regulating and controlling the company's activities with respect to the community.
Macroenvironment
The macroenvironment is all the factors that are not directly related to the company or its operations but that influence the microenvironment and have an impact on the growth and success of the organization. The macro environment is also called the general environment since it eventually affects all companies equally.
This environment is more difficult to control, although the company must constantly analyze it to identify the opportunities and threats that arise from it (Yánez, 2015) . In the same way, analyzing this environment increases the reaction capacity to anticipate possible changes.
Kotler and Armstrong (2012) indicate that there are five main forces of the company's macro environment, which are described below.
- Political-legal environment: it is the set of laws, as well as government agencies that apply standards in terms of labor, commercial, tax, incentives, quality standards, the protection of trademarks and patents, as well as liability for damages caused, the which influence and limit the behavior of organizations.
Sáez (2006) emphasizes two fundamental actions of the political factor, the first is the promotion of organizations creating positive conditions to attract investment, to create new companies or to promote the development of existing ones. And the second is that legal restrictions can limit the development of companies.
- Economic environment: Kotler and Armstrong (2012) define the economic environment as the factors or forces that affect purchasing power, and consumer spending patterns. When deciding to establish a new company or introduce a new product to the market, the economic condition of the country or region of the target buyers must be considered. Such as inflation, unemployment rate, exchange rate, devaluation and credit availability.
When making strategic decisions, economic variables such as income levels, cost of labor, energy, wages, must be taken into account. A good analysis of the economic environment should allow companies to anticipate economic crisis situations and prepare to face them.
- Ecological environment: These factors refer to the physical characteristics of the environment, nature, natural resources, as well as natural phenomena and the climate to which a company is exposed depending on the region where it is established, which may influence in the activities of the company, as well as in the marketing of its products or services.
Another of the components that have great importance for the environmental environment are the environmental movements and environmental reforms that have taken hold today, so companies should consider applying ecological policies within manufacturing processes to reduce industrial pollution.
Daft (2010) hints that concern for the environment can lead to an increase in the cost of manufacturing processes, however they leave a better image as well as greater consumer satisfaction by participating in the improvement of social and environmental well-being.
- Technological environment: Technological advances have provided the improvement in processes and products, as well as the creation of new systems implementing new machinery and electronics which facilitate work and at the same time reduce business costs.
Technological innovation is essential for organizations to face their competition since today new information and communication technologies such as the Internet have changed the way of doing business. Electronic commerce allows companies to have global reach to buy and sell their products without having to go to an establishment.
Currently, technological factors make the difference in the productivity of companies, improving quality and increasing customer satisfaction, therefore it is necessary for management to be very attentive to the changes and advances that occur in this countryside. (Sáez Vacas et al., 2006)
- Socio-cultural environment: with those who refer to the characteristics of the society in which the company operates, such as demographics (nationality, age, gender, race, income), educational level, cultural values, ethics, the lifestyle, desires, behaviors, beliefs and language that can influence the demand for products or services. (Daft, 2010)
It is important to analyze these factors since it will depend on where the company is going to direct the products or services that it commercializes, in the same way that knowing these data will help satisfy the needs of a certain population depending on the tastes and preferences of that market.
Create an organization aware of its environment
That a company is aware of its environment allows determining its permanence, growth and competition, it is important to constantly analyze the different factors that affect their operation.
Dess and Lumpkin describe four important phases for the analysis of the environment (Arano, Cano, & Olivera, 2013).
- Exploring the environment: it consists of examining the company's environment to identify the moment in which changes will arise and detect them in time to warn the organization of possible critical events that will affect it significantly before competitors recognize them. Monitoring the environment: constantly monitoring the environment is to find trends, sequences of events or the course of activities that the environment usually has, which facilitates the formulation of predictions and the creation and adaptation of business and marketing strategies. The process aims to obtain the most information and data on the competition that will help them understand their way of acting, as well as identify the strengths and weaknesses of their competitors,using and interpreting the information for the management decision-making process. Forecasting the environment: with the information obtained in the previous phases, patterns can be identified and predictions can be made about the possible direction, scope, speed and intensity of changes in the environment. environment. The purpose of predicting change, such as; forecast how long it will take for a new technology to come onto the market, lifestyle trends, the propitiation of new legislation, among other aspects.forecast how long it will take for a new technology to come onto the market, lifestyle trends, the propitiation of new legislation, among other aspects.forecast how long it will take for a new technology to come onto the market, lifestyle trends, the propitiation of new legislation, among other aspects.
Techniques for analyzing the environment
The Michael Porter Five Forces model is a tool that allows analyzing the environment of a company through a complex analysis of business competition in a market with the aim of knowing where the company is located compared to the competition.
The Porter matrix is made up of 5 elements or forces that must be analyzed to select the strategies to follow, and determine the profitability that can be had. The five forces are described below (Villar, 2016)
First force: Threat of new competitors. - Refers to all the companies that want to enter to compete in an industry. Companies with the same line of business or similar products must be analyzed and detected. The more attractive an industry is, the more potential competitors there will be.
This threat may come to depend on entry barriers that are: economy of scales, differentiation, capital requirement. Access to distribution channels, government policies and independent cost advantages.
Second force: Power of negotiation with suppliers. - It consists of analyzing the existing relationships with suppliers to consider scenarios of price increases and change of suppliers that may generate a reduction or increase in costs.
Third force: Power of negotiation with clients. - Clients are informed about the different product options and prices on the market, making them increasingly demanding in terms of quality and prices. It is important to know customers well to be able to predict the potential effects in case of price adjustment.
Fourth force: Threat of substitute products. - This threat is present when substitute products start to become cheaper, which would lead us to reduce the price of our products, which would lead to a reduction in income for our company. To cope with this it is important to carry out a thorough study and evaluate the quality, as well as the advantages and disadvantages of substitute products.
Fifth force: Rivalry between competitors. –To analyze market rivalry, it is necessary to determine the position of the company in relation to its competitors by measuring the market that the company covers, as well as its penetration into it. In the same way they must buy the prices of the products, the technology, the innovations and the quality of the products.
The PEST model (political, economic, social and technological factors) is in charge of investigating and identifying the general factors that affect companies or brands to establish an adequate and effective strategy. Its origin was in 1968 by the theorists Liam Fahey and VK Narayanan in an essay on marketing entitled "Macro-environmental analysis in strategic management". (Peiró, 2017)
The PEST analysis studies the elements that make up the macroenvironment in which organizations, economic, political, social and technological factors develop. It is also called PESTE analysis by including ecological factors in the analysis.
The main advantages of the PEST analysis are to improve the managerial work since when knowing the environment adequate strategies are planned reducing risks. It is a simple and easy to use tool. It is focused on evaluating external risks.
It is a strategic diagnosis which, through the information obtained, shows the current state of the company depending on itself and the environment in which it develops. This analysis consists of a process where the weaknesses, threats, strengths and opportunities of a company are studied, where the current situation of the company is known.
The SWOT analysis analyzes the two environments of the company, the internal and the external. In the first, leadership, strategy, employees, existing resources, and processes should be questioned. And in the second, the market, the sector and the competition must be studied.
Within the external analysis, the strengths (differences with the competitors) and weaknesses of the company must be analyzed, while within the external analysis, the opportunities (new markets) and threats are analyzed. Depending on the results obtained, a certain type of strategy should be applied. (Kiziryan, 2015).
conclusion
It is of great importance that companies constantly carry out an analysis of the environment that surrounds them to know the factors that affect decision-making, reduce the level of uncertainty and achieve a competitive advantage.
Although the external environment is not controllable, it is necessary to carry out the analysis of these factors since it allows us to anticipate the effect of these variables that affect all business activities.
Thesis proposal
Analysis of the external environment to identify risks and opportunities to introduce a new service in the Orizaba, Veracruz region.
Overall objective
Analyze the general and specific environment using the PESTE tool to reduce uncertainty by offering a new service in Orizaba.
Sources consulted
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