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Environmental Legal

How do the activities of international
pressure groups affect your business (e.g., Are there relevant
Greenpeace, Earth First, PETA)? consumer laws?

Are there environmental protection laws? What is the status of
What are the regulations regarding waste disposal employment, health and safety,
and energy consumption? and product safety laws?

Firms cannot directly control the general environment’s segments and
elements. Accordingly, successful companies gather the information required to
understand each segment and its implications for the selection and implementation of
the appropriate strategies. For example, the terrorist attacks in the United States on
September 11, 2001, surprised businesses throughout the world. This single set of
events had substantial effects on the U.S. economy. Although individual firms were
affected differently, none could control the U.S. economy. Instead, companies around
the globe were challenged to understand the effects of this economy’s decline on their
current and future strategies. A similar set of events and relationships was seen
around the world as financial markets began to struggle one after the other starting in
late 2008.
Although the degree of impact varies, these environmental segments affect
each industry and its firms. The challenge to the firm is to evaluate those elements in
each segment that are of the greatest importance. Resulting from these efforts should
be a recognition of environmental changes, trends, opportunities, and threats.
Analyzing the Organization’s Microenvironment
When we say microenvironment we are referring primarily to an organization’s
industry, and the upstream and downstream markets related to it. An industry is a
group of firms producing products that are close substitutes. In the course of
competition, these firms influence one another. Typically, industries include a rich
mix of competitive strategies that companies use in pursuing strategic
competitiveness and above-average returns. In part, these strategies are chosen
because of the influence of an industry’s characteristics. Upstream markets are the
[2]
industries that provide the raw material or inputs for the focal industry,
while downstream markets are the industries (sometimes consumer segments) that
consume the industry outputs. For example, the oil production market is upstream of
the oil-refining market (and, conversely, the oil refiners are downstream of the oil
producers), which in turn is upstream of the gasoline sales market. Instead of
upstream and downstream, the terms wholesale and retail are often used.
Accordingly, the industry microenvironment consists of stakeholder groups that a
firm has regular dealings with. The way these relationships develop can affect the
costs, quality, and overall success of a business.
Porter’s Five-Forces Analysis of Market Structure
Figure 5.15 Porter’s Five Forces

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