Identify the major drivers of change that will come from the environment external to PCC and explain how they will affect business operations.
PCC has a multiple organizational environment; each link in its value chain expands this environment and adds more complexity in the boundary definition of all these environments.
We have seven main environments which with PCC should deal, they are:
1. The economic environment
2. The technological environment
3. The political-legal environment
4. The socio-cultural environment
5. The business environment
6. Emerging-challenge opportunities
7. Global environment
In addition, we could find some additional environment such as Stakeholders environment [1] that we add to our initial list:
8. Stakeholder environment
I will discuss briefly each one of them:
1. The economic environment. Many factors could affect in any sense the PCC business because of the broad of the PCC value chain:
a. Some of these factors could affect softly the PCC business in mid and/or long term period:
i. Power to buy (e.g.: business cycle, GDP, inflation, deflation, stagnation, unemployment);
ii. Potatoes price (According to the US Potato Board [2] the potato price is relatively inelastic (From April 1990 to April 2005, potato prices increased 3.7 percent));
b. other factors could affect more significantly such as:
i. the fuel cost (transportation, heating and cooling fuels, as well as electricity);
ii. labor market, input goods (e.g.: fertilizers, paper, bags)
iii. land competition (e.g.: potatoes vs. biofuels);
iv. global economy (e.g.: access to credit, shift in shareholder opportunities, bankruptcies)
2. The technological environment. This environment has different impact for each of the PCC value chain. PCC management should be very attentive with the technological evolution that could affect each part of its business. Usually the new technology is expensive to be implemented quickly; but over the time this technology is more accessible; following this evolution, we reach a point in which its adoption helps to improve the overall business of the company. PCC management should be attentive to this trend for each link in the PCC value chain. The technological improvement could occur in any part of this value chain (e.g.: the potatoes quality, methods for farming, transportation, communication, automation).
3. The political-legal environment. This environment is very dynamic and it presents important constraints for the PCC business. New environmental regulations are emerging continually, and they could affect all sectors in the PCC value chain (e.g.: water use, air quality, emissions, noise, waste disposal, fuel efficiency). In addition, other important but less changing laws may impact the PCC business (e.g.: lobby act, labor act and regulations, international trades).
4. The socio-cultural environment. This environment is dynamic and it shows elasticity as function of the advertising campaigns, change in the fashion or different life style patterns, etc. PCC management should be very attentive and perceptive of these changes because they change slowly but in a relatively constant direction (e.g.: flavor, low salted meal, green products, packages, lower environmental impact products, regional products).
5. The business environment. This environment, if the company has not a dominant position in the market, is one of the most important for PCC management. Most of the other described environments affect the whole sector; so, any change in the other environments, they affect almost in the same direction to every company which PCC is dealing with (suppliers, customers, competitors, etc.). But this environment affects the relative position between the competitors in the sector. As conclusion, the effect in the PCC business could be more important. This is the main reason because PCC management should be very attentive with any change in its business (e.g.: suppliers, buyers, alliances, substitutes, competitors, partners, strategies, subsidies). Finally, changes in this environment should be detected and followed at different levels (e.g.: local, regional, provincial, national, global) due to the PCC business characteristic.
6. Emerging-challenge opportunities. The big PCC value chain offers many opportunities of improvements, which they represent continuous challenge opportunities. Each link in the PCC value chain offers continuous opportunities to explore improvements (e.g.: reaching more efficiency, increasing profit, market share, improving people welfare).
7. Global environment. This environment works very close to “The business environment” but taking into considerations high level issues (e.g.: acquisitions, mergers, divestitures, spinoffs, alliances, subsidies).
8. Stakeholder environment. This environment is most rated as a potential impact on the company than a certain occurrence (e.g.: lobbyists, shareholders).
Finally, although I discussed what I believed they are the most important points, to try to establish a priority or ranking between them it is impossible because of the nature of PCC business, the extension of the PCC value chain and the dynamism of each of the described factors. In addition, many of these factors are extremely difficult to seize and model and the error of doing it will be higher than the relative difference in the outcome of the potential analysis.
Gustavo
[1] http://en.wikipedia.org/wiki/Environmental_scanning
19/05/11
