-: Hi, welcome to Situational Analysis Part 2.
So now we're gonna look at the external environment
that which you, as a business person or organization,
do not have a lot of control or influence over.
It's sort of the external factors in which you operate.
One of the models is PEST, which stands for political,
economic, social, and technological.
And we're gonna speak a bit more about
how you can frame the external environment.
So again, it's those parts which
you don't have a lot of control over,
and you can think of 'em as either accelerators,
that which helps you,
or brakes, those which impede you.
First we'll think about social forces.
There are many, many of them.
Some of these might apply to you,
and there are certainly others that won't.
But think about, we certainly live in a time where
there are so-called Culture Wars,
that we've seen great advancement
in things like LGBTQ+ rights,
racism, sexism, et cetera,
along with sort of strong backlash against that.
We're seeing forces like the public health
and opioid crisis, climate change and environmental crises,
both sort of how that plays out
as well as efforts to address it.
As well as things like income inequality, housing crisis,
and you can think of many of the social changes
that have happened since
and as a result of the COVID pandemic here as well.
I think some current political forces here in the U.S.,
we certainly live in a time of extreme political
and partisan polarization.
I think a lot of folks are sort of feeling
really disengaged, losing faith in our institutions,
feeling apathetic,
and thinking about how does that impact your business?
How does that impact your community?
Again, many economic forces here.
The state of infrastructure,
there's so much debt, including student debt.
Again, housing inequality,
I mean, income inequality, housing affordability
which, you know, is really hard to like find space to work,
find place to live here, you know, to hire folks,
and the so-called Great Resignation.
The overarching economic paradigm
under which we have lived for the last 40 some years,
imagining that's most,
if not all of you have only lived under this,
is called neoliberalism.
And I'm gonna speak a bit about that.
So note that this definition
is from someone who opposes it, George Monbiot,
and he talks about how it sees
the defining characteristic of human relations
as being sort of competitive and transactional,
and that the best social outcome
comes from letting markets do their work
and to be interfered with as little as it can be.
Again, Monbiot is a sharp critic of this mindset.
The Nobel Laureate economist, Milton Friedman,
I think it's fair to say, is a big proponent of it.
And here's a quotation of his,
which I think sort of extolled its virtues.
And it's not my job to make you think one is right
or one is wrong, it's good or bad.
It's simply this is the environment in which we live
and in which we have to operate,
and whether it's good or bad,
or what parts are good or what parts are bad,
are up to you to decide.
So here are some of the actions,
basically minimized taxes and regulation,
privatization, the devaluation of unions
and most public institutions.
And seeing that we live in a meritocracy,
that if you work hard, if you're better at what you do,
you'll do better.
And that wealth is the sort of primary virtue
and the primary way in which that is delivered.
One of the features of neoliberalism
is that it remakes our institution into its own image.
It makes them all into markets.
Religion, government,
education are all increasingly run like a business,
sort of managed to make 'em money
to pay for themselves,
and less sort of focusing on their intrinsic value.
And there's a lot of implications
on the various community capitals
of how these are either built up
or not built up under this regime.
The next force is technological,
and just thinking about all the ways
that life on the internet and smartphones
and tablets have changed our lives.
There's many, many, many things
that basically none of these existed
when I was an undergrad,
and now they just seem so normal
due to this sort of technological revolution.
We can think as well of the competitive environment.
How competitive?
How many other goods or services
are you competing with?
And again, this might be the single most important concept
in this class,
and we're gonna revisit it a lot of times.
One way to think about
the competitive environment of products
is by this continuum.
So again, this is a continuum
with sort of these two columns represent
the end-points or poles.
And most things fall somewhere in-between these two,
maybe nearer or farther than each pole.
And so I'll go through each one.
So perhaps the best example of a commodity
that I can think of, or at least a very good one,
is a plastic jug,
a gallon jug of whole milk with a red cap.
Probably you all have seen this
or you have all bought it.
It tends to be very homogeneous.
That is no matter where you buy it or where it was grown
or by whom, really every bottle is the same
in sense that there's low information,
that there really aren't a lot of attributes
beyond that it's whole milk.
There tends to be one price for this
that no matter where you buy it,
that gallon of milk costs pretty much the same.
It's a highly-competitive environment.
Most individuals, or there's many, many stores who sell it.
Gas stations, convenience stores, grocery stores.
And to make your way in the world to produce this
you need to be fairly high-volume,
because it's the amount that you make
on every one that you sell tends to be quite small
because it's such a competitive environment.
So you need a high-volume to make it worth your while.
On the other end is a differentiated product,
which you're saying mine is not like the ordinary one.
Mine, in some way, is better.
Mine has attributes.
So it might be organic and fair-trade
and fair-labor treatment and grass-fed,
and lots of other things, grown locally,
many attributes like that.
So you can see it's very high-information.
Since it is seen as being slightly better
than the commodity version,
you can charge somewhat of a price premium for it,
and it tends to be much more value-driven.
The more attributes that you have,
the more differentiated that you are,
the fewer direct competitors that you will have.
And hence, you don't have to produce
in as high a volume.
And since you're working in sort of the craft artisanal
high-quality world,
a low-volume approach tends to work well here.
Another way of thinking about this
is the red or blue ocean.
The red ocean is shark-infested waters.
There's lots and lots of competitors, it's highly contested.
It's a very crowded marketplace.
So if you sell that gallon of milk, you know,
again, it's a very highly-contested/crowded market.
But the more differentiated that you are,
the more you swim in this blue ocean
where there's fewer competitors, at least for now.
And these tend to be things that have a new value,
a new innovation, and a new idea.
Something that really stands apart from the crowd.
Thinking more about competitive forces that we can see.
On one hand there's lots and lots of, you know,
we live in a very globalized economy.
At various times in recent years
we've engaged in trade wars.
There's a lot of outsourcing things that we buy
or, you know, the parts are produced all over the world,
they're put together all over the world.
But there's also this movement
toward this sort of buy local, locavore localization
with more niche market things
where there's value in supporting local businesses
and goods from close to where you live.
There are many, many regulatory forces.
I might have a list here, but in many cases,
depending on what and where you wanna sell,
there are many regulations
that you will need to meet.
I want you to think as well,
how does climate change both create
and impede opportunity?
The reason we look at the external environment
is that it helps us see opportunity and overcome barriers.
One way that we can do this,
and this is an exercise that you can do
if you don't have an idea yet
for your final marketing plan
for your business or organization, is to trendspot.
So look at what are others doing?
What are other people listening to, watching,
reading, done through networking,
it's done through self-observation?
And it's important to challenge your own assumptions,
to talk with potential customers
and to move beyond the same old, same old, you know?
Especially talk to folks who aren't like you,
who don't have the same habits as you,
and see what they are doing,
because in this way you'll have sound assumptions
and beliefs on which to base your strategies
which will inform what your operations are,
which will then hopefully give you
the performance that you want.
So we put this all together
in what's called a SWOT analysis,
strengths, weaknesses, opportunities and threats.
So what are the internal
and the external forces that work for you
and against you?
So we can get this through the external scan.
What are the social and technologic
and other forces?
Which one work in your favor,
which ones work not in your favor?
And then we can map it out.
So hopefully we will be in the top-right
where the opportunities are greater than the threats,
the strengths are greater than the weaknesses,
and we can just sort of play offense.
The worst place is to be in the bottom-left
where we're basically playing defense.
Or it may be that we would just wish to stop operations
and find another thing to do.
If the opportunities are great
but the weaknesses are great,
you may wish to sort of shore up those weaknesses
and turn around to meet the opportunity.
And if the threats are great
but you have strengths, you may wish to diversify
and think about other applications to devote your strengths.
That is the end of Part 2.
Thank you.