General External Env Analaysis Report

Analysis of the General External Environment Michael Alao MGMT 600 September 19, 2009

Introduction The purpose of this paper is to explore the general external environment in terms of the six segments presented in the textbook: demographic; economic; political and legal; sociocultural; technological; and global. The environment will be added as an additional, seventh segment. Each of the segments will be addressed in terms of the results of scanning and monitoring popular media such as magazines (The Economist, Wired, and Parents) and radio (NPR). For each segment the current state and short-term (e.g. one year forward) emerging trends will be considered. At the conclusion of the paper, the long-term trends identified through consideration of all seven segments and the current and short-term emerging trends will be addressed. Demographic The developed, industrialized half of the world is aging, while the developing world is becoming younger. In the US the topic of the baby boomers’ retirement is a frequent topic addressed throughout various media. Currently there is concern that the aging workforce will result in shortages of qualified management talent, and that social welfare programs such as social security and Medicare will be unsustainable without incurring massive deficit spending. The debates surrounding healthcare and social security are pitting the young against the old, with many of those opposed to healthcare reforms being among the older population who at the Page 1 of 7

Analysis of the General External Environment same time staunchly defend the Medicare programs whose costs will be borne by the current workforce. The debates over healthcare in general, Medicare, and Social Security will still be ongoing a year from now. If anything, the debates will continue to intensify. Meanwhile, what may be the inevitable solution for maintaining entitlement benefits for an aging workforce – immigration of young workers, will not result in significant immigration reform during this period. Economic Separating the healthcare debate from the economic environment is impossible, because much of the concern and resistance to reform is the fear of government deficit spending and the adverse effect it will have on future economic growth. Amid the arguments it is difficult to find an independent and unbiased source that can provide voters with an honest estimate of the proposed costs of healthcare reform. There may also be the inherent lack of honesty with regard to balancing the federal budget without increasing taxes. How do you spend more and at the same time balance the budget without increasing taxes? The public is concerned that the government has already spent too much to tame the recession. The recession is a topic on just about everyone’s mind and almost impossible to escape when perusing popular media. The public has changed its behavior and the personal savings rate in the US has actually increased. Bargain hunting and financial literacy are the current fashion, with a plethora of articles and stories on cost saving tips offered to people of all age groups and interests. Even big businesses are bargain shopping with mergers and acquisitions seeing a recent Page 2 of 7

Analysis of the General External Environment uptick – possibly a sign of an end to the recession and economic growth during the next year.

Political and Legal Regulation is on the rise. The health care debate is essentially a debate about the extent of government regulation. The ongoing financial institution bailouts are also government regulation, or will be in the very near future as Wall Street will not be allowed to return to business as usual after such a massive government investment. The same can be said for any of the other industries that resulted in government bailouts – they should expect continued and more government regulation in the next year. From an international relations standpoint, the major global players realize that much of their security is dependent on financial growth. Expect to see greater international collaboration to restrain potential threats to global commerce. Threats such as those posed by Afghanistan, Iran, and North Korea – all of which are currently in the news and will continue to be over the next year. Sociocultural The general public displays greater awareness and interest in issues related to healthcare, the effect of lifestyle and diet on health, the environment, and financial responsibility. The current economic crisis has been remarkable in tying

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Analysis of the General External Environment all of these things together. The crisis seems to have gotten peoples’ attention, they are afraid and reexamining their priorities. Fear can be a great motivator for change, and the recent rise in the personal savings rate is a great example. Over the next year we should expect to see people continue to change their personal habits (e.g. smoking, diet, shopping, saving, etc.). Another significant change is that many older workers have realized that they cannot afford to retire. At the same time there is also greater acceptance and desire to have older Americans in the workforce. Expect this trend to continue as the economy begins to grow over the next year. Technological Communication technology is making significant differences in peoples’ lives with such things as social media and near-constant access to a wealth of information. Although the change as a result of communication technology in developed countries is remarkable, it pales in comparison to the effect that technology such as low-priced cell phones have had in developing countries. Over the next year expect to continue seeing massive growth in cell phone penetration throughout the developing world. With that growth expect to continue seeing news events from countries with repressive regimes whose censorship methods will be unable to keep up with the technological advances in communication. Global The effects of the financial crisis were felt globally, and Americans are not the only ones anxious to see the US economy recover. Concern for the global economy

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Analysis of the General External Environment will continue throughout the year. Expect to continue seeing interest in events throughout the world as instability anywhere is more likely to be seen as a threat to economic growth. As the economy in the US and throughout the world begins to recover, expect to see more companies involved in cross-border acquisitions and mergers. Environmental The health care bill is not the only significant bill working its way through the US congress. There is also the cap and trade bill, which in some form is likely to become law during the next year. The risks posed by global warming will continue to be topic of conversation during the next year. Expect to see more disasters such as drought, storms, and wildfires throughout the next year – and those disasters being connected by popular media to global warning.

The Long-Term Developed nations will realize that the only way to maintain a workforce sufficient to pay for the retirement and care of its aging citizens will be through immigration. The underdeveloped world is full of young people in stagnant economies that will not be able to create sufficient jobs to sustain their young population. Business must advocate strongly for immigration reform, because the public is unlikely to do so as a result of xenophobia. Business must also advocate for increased spending on higher education in order to develop the workforce that will be required to replace the aging Baby Boomers. Expect the government to

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Analysis of the General External Environment increase spending on higher education in order to attract and retain talent internationally. Competition among developed and newly-developed nations for the best and the brightest will be fierce. Taxes will increase. Supply-side economics, never accepted by economists, has been disproven in the real world. Further, people want security and a social safety net, which costs money. If the majority is not convinced today that higher taxes are warranted, they will be over the next five to ten years. Government regulation will increase across all sectors of the economy. Governments throughout the world, including the US, will select slower, but stable growth. Regulation will provide the stability that will prevent the near-economic collapse experienced during 2008. The voting public has a short memory, however, and de-regulation will begin anew in six to eight years. Environmental regulations, however, will continue to be strengthened significantly over the next decade, despite the fact that they will be too late to make a difference, but frightened citizens will demand that their governments appear to be doing something. The planet is warming, and it is irreversible. Weather patterns will become less predictable and natural disasters more frequent. Regional conflicts will increase as water becomes scarce. Organizations will have to develop ways to remain flexible and to deal with unforeseen circumstances.

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Analysis of the General External Environment Sources Wired, September 2009 The Economist, September 12th – 18th 2009 Parents Magazine, September 2009 91.7 WVXU Cincinnati, Various radio programs during the week of September 14, 2009

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