Responding to the external environment

by Gordon on Monday 6th February, 2012

A business’ external environment can change rapidly: the economy, competitors or technology can all cause challenges or opportunities.  Keeping aware of and being ready to respond to these changes can make the difference between turning a profit or loss.

Sony is predicting its fourth year of net losses for the year to the end of March. The company has been affected by a range of external factors in recent years.  These include being hit by the strong yen (affecting its ability to compete abroad) as well as poor sales in its television business.  Also, Sony’s factories were damaged by the tsunami and its reputation was hit by a security breach that left more than 100 million customers’ accounts compromised, forcing Sony to temporarily close its PlayStation network. (BBC, 1st February 2012)

Jessops, the UK’s premier photographic retailer has faced major challenges from the rapid onset of digital photography as well as the trend for online shopping rather than using the high street.  Jessops used a PEST analysis to map the key external factors affecting the business and plan for remedial action.

Jessops identified that it needed to refocus its business on the more profitable services, namely its imaging services, where profit margins were higher.  It also re-positioned its products to reflect the different ways younger and older consumers used image printing – providing multi-channel delivery services, such as iPhone and android apps for younger users to order online or in-store imaging kiosks for personal shoppers.

Sony’s response to falling profits includes a review of its management structure to focus on meeting customer needs. It has announced that its chief executive Sir Howard Stringer is to be replaced by vice president Kazuo Hirai, previously head of consumer products and services.  Sir Howard will stay on as chairman.

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