Business External Environmental Assessment - Assignment Example

Business External Environmental Assessment al Affiliation Due Comcast, like any other business establishment, does not operate in I isolation. There are certain external factors that influence crucial business decisions. Failure to properly scan the external business environment can always have serious negative effects on the performance of a business. Certain tools for analyzing the external environment have been devised and are widely being used by big businesses to understand and respond to changes in the external environment. Comcast is a firm in two industries majorly; Telecommunications and mass media. These two industries are globally known to have several players and external environmental components and factors. These factors are never constant. They keep changing, which is why big business like Comcast should analyze the external environment as often as possible. PEST and Porter’s Five Force Analysis are the most commonly used tools for analyzing the external business environment. PEST is an acronym for Political, Economic, Socio-cultural and Technological environmental aspects. All of these PEST factors are located outside of the business. The management at Comcast, for instance, understands the political issues that affect business either directly or indirectly. The political environment is constituted by elected leaders and the policies they introduce. These policies could be aimed at regulating business through a range of business and corporate policies, amending the taxation system, protecting the environment, and customer protection. These factors are mainly controlled by the political class through legislations. Economic environment makes the most sense of all the factors. Comcast Corporation must always scan the economic environment to check how stable the economy is at any given time. Another aspect of the economic environment that must be investigated is whether disposable incomes of existing and potential customers is rising or declining. The extent of globalization and competition in the telecommunication and mass media industries too must be checked. The level of competition may be checked by determining if the market share is growing or shrinking. Socio-cultural aspects of the environment in which Comcast operates entails issues like the population growth trend and the accompanying growth in the number of customers. Generational social attitudes and the society’s levels of education, health and social mobility also influence Comcast’s business decisions and industry standing. These socio-cultural issues must be looked into after every predetermined lengths of time. Comcast Corporation, a firm in the telecommunication and mass media industry, is largely technology-based. It primarily uses technological equipment in its business operations. Technological changes are rapid. Technology-based businesses like Comcast Corp. will always need to make adjustments in line with changes in technology so as to enhance efficiency that comes with adopting latest technologies. Such adjustments will always give Comcast Corp. the much needed competitive edge in the telecommunication and mass media industries. Porter’s Five Forces tool helps Comcast and other big businesses understand where power lies in the industry. In any industry, however small, there is always a level of competition and rivalry that comes with it. Knowing where power lies within the industry, a firm finds it much easier to take advantage of other firms’ weaknesses so as to bolster its positioning the industry. Porter’s Five Forces tool is a very vital tool for planning. For Comcast, planning takes the form of wanting to introduce a new product and services into the telecommunications and mass media industries. In such a case, Porter’s Five Force tool will be used to check whether or not introduction of such a new product or service would be profitable. In the business world, there is always an assumption those five key forces are determinant of a firm’s competitive power. The five forces include the supplier power, buyer power, threat of substitution, competitive rivalry, and the threat of new entry. Comcast is always concerned about every aspect of its business environment. Therefore, it is always important to look into these five areas. In virtually industries, the supplier always has some amount of power; and so does the buyer who, in this case, is Comcast. There are key inputs that Comcast requires and mostly, they are technological products to which are components of the installations in the mass media and telecommunication industry. Suppliers can always drive up prices of these inputs, and that depends on the number of suppliers of a particular input, cost of switching from one supplier to another, size and strength of the suppliers as well as the uniqueness of the product they are supplying. Where suppliers of these inputs are few, firms will always require more help than in a case where suppliers are many. This means that few suppliers will always tend to be powerful. Buyer power is always opposite that of the suppliers. Whereas suppliers always try to increase input prices, buyers will always try to use their power to have input prices lowered. Comcast as one of the buyers of technological components for its installations in the telecommunication in mass media industries, will always combines forces with other like-minded firms to frustrate suppliers’ efforts to increase the prices. The buyer power to bring down input prices depends on the number of buyers, the cost of switching from one product or service to some others, size of a customer’s order and the importance of buyers to the suppliers’ businesses. Where buyers are numerous, it is never easy to bring down input prices because suppliers would not be shaken by losing a few customers who cannot meet the prices they (the suppliers) have set. The reverse is true in a case where buyers are few. Competitive rivalry is real in any industry where there are two or more firms. The number and capability of competitors must be ascertained at all times. Comcast is a leading player in the telecommunications and mass media industries, but it faces competition from other big firms in the industry. Where competitors are many and they all offer products of high quality, a firm would not have power over the situation because suppliers of inputs and buyers of finished products will tend to go elsewhere if they are not satisfied by the way a particular firm handles them. Comcast would lose it suppliers to rivals if it demands lower input prices than do the rival firms. Similarly, it will lose customers to competitors if the customers feel they are not treated right, especially if they feel exploited. Where one firm does what other firms cannot do, it will always be the strongest in the industry. Threat of substitution is a situation where customers try to find alternatives. In a situation where it is easy for the customers to find substitutes, a firm tends to less powerful. For instance, where Comcast customers decide to abandon Comcast internet because they think it is cheaper to access the internet using their phone or iPad, the firm will be vulnerable and not prevent customers from going for the substitute. Where substitutes are difficult to get, a firm tends to be powerful. The last force is threat to new entry. It answers the question; to what extent is a firm threatened when new firms join the industry. Entering an industry may never be easy as there could be barriers such as cost of entry. Where entry of other firms into the industry is easy, the already existing firms tend to weakened by such an entry. Where barriers to entry exist, the leading firms in an industry will always be powerful. PEST and Porter’s Five Force tool are both very useful instruments used to analyze the business environment at macro-level. SWOT analysis of a firm’s position should, at best, be based on the finding of analysis using these two vital tools because, essentially, using both of them covers all the business external environmental aspects. Reference Magretta, J. (2013). Understanding Michael Porter: the essential guide to competition and strategy. Harvard Business Press. Ho, J. K. K. (2014). Formulation of a Systemic PEST Analysis for Strategic Analysis. European academic research, 2(5), 6478-6492. Read More