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Strategic Management: External Environment Factors

Impact of Social Environment

Strategy and Functional Decision Making

The social environment dictates market needs and operational constraints. Understanding factors like demographics and consumer behavior is crucial for maintaining relevance and competitive advantage.

Key Environmental Drivers

1

Demographic Changes

Ageing populations or youth demographics affect product demand and workforce availability.
2

Population Movements

Migration can create new markets and labour pools or require adaptation to new cultural demands.
3

Changes in Consumer Lifestyle and Buying Behaviour

Trends such as health consciousness or eco-friendliness influence product development and marketing.
4

Growth of Online Businesses

Digitalisation reshapes distribution, marketing, and customer engagement. Businesses adapt e-commerce platforms and digital marketing strategies.

Corporate Social Responsibility (CSR)

CSR involves businesses operating ethically and sustainably, considering social and environmental impacts beyond profit.

🌎

CSR

Operating ethically and sustainably, considering social and environmental impacts beyond profit.
📈

Shareholder Model

Focuses on maximising returns for owners.
🤝

Stakeholder Model

Considers interests of all parties affected (employees, customers, community, environment).

CSR: Reasons vs. Conflicts

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Reasons for CSRBuilding brand reputation. Meeting stakeholder expectations. Reducing risks and ensuring compliance.
❌
Arguments Against CSRCosts may reduce short-term profits. Potential conflicts between CSR and shareholder wealth maximisation.

Carroll's CSR Pyramid

Outlines four structured levels of corporate responsibility, from base to apex.

4

Philanthropic Responsibilities

Contribute to society.
3

Ethical Responsibilities

Do what is right.
2

Legal Responsibilities

Obey the law.
1

Economic Responsibilities

Be profitable.

Technological Change Impact

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Technology & Strategic Investment: Technology drives innovation and efficiency in all functional areas. Impacts include automation of operations, digital marketing, big data for insights, and e-commerce expansion. Businesses may need strategic investment in new technologies to maintain competitiveness.

Pressures for Socially Responsible Behaviour

External stakeholders driving ethical corporate conduct.

C

Consumers

Consumers increasingly demand ethical products.
G

Governments and Regulators

Governments and regulators enforce standards.
I

Investors

Investors may favour socially responsible firms.
M

Media and Activism

Media and social activism highlight corporate behaviour.
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Impact of Social Environment on Strategy Deck
Q
Demographic Changes

How do demographic changes affect business strategy?

A
Impact

They influence product demand and workforce availability.

Q
Population Movements

What is the impact of population movements on businesses?

A
Impact

Creates new markets and labor pools or requires cultural adaptation.

Q
Consumer Lifestyle Changes

How do changes in consumer lifestyle affect product development?

A
Effect

Trends like health consciousness and eco-friendliness shape product features and marketing.

Q
Growth of Online Business

What role does the growth of online businesses play in functional decisions?

A
Role

Promotes e-commerce, digital marketing, and customer engagement strategies.

Q
Corporate Social Responsibility (CSR)

What is Corporate Social Responsibility (CSR)?

A
Definition

Businesses operating ethically and sustainably, considering social and environmental impacts beyond profit.

Q
Reasons for CSR

Why do companies engage in CSR?

A
Reasons

To build brand reputation, meet stakeholder expectations, reduce risks, and ensure compliance.

Q
Arguments Against CSR

What are common arguments against CSR?

A
Arguments

CSR can reduce short-term profits and conflict with maximizing shareholder wealth.

Q
Shareholder vs Stakeholder Models

What is the difference between shareholder and stakeholder models?

A
Difference

Shareholder model focuses on owners’ returns; stakeholder model considers interests of all impacted parties.

Q
Carroll’s CSR Pyramid

What are the four levels of Carroll’s CSR Pyramid?

A
Levels

Economic, Legal, Ethical, and Philanthropic responsibilities.

Q
Technological Change

How does technological change affect business strategy?

A
Effect

Drives innovation, automation, digital marketing, big data use, and requires investment to stay competitive.

Q
Pressures for Social Responsibility

What pressures exist for socially responsible behavior?

A
Pressures

Consumer demand, government regulations, investor preferences, and media/social activism.

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🌸 Impact of Social Environment on Strategy and Functional Decision Making

1. Which of the following demographic changes can affect workforce availability?

All demographic shifts influence workforce size and characteristics, affecting strategy.

2. What is one key reason companies pursue Corporate Social Responsibility?

CSR helps enhance a company’s image and meets stakeholder expectations.

3. Carroll’s CSR Pyramid includes which of the following levels?

Carroll’s pyramid covers Economic, Legal, Ethical, and Philanthropic layers.

4. How does technological change primarily influence business functional decisions?

Technology enables efficiency and new marketing strategies, impacting operations.

5. Which stakeholder is NOT typically considered in stakeholder theory?

Stakeholder theory focuses on parties directly affected by the business, not competitors.

📊 Results

  • Notes and Quiz
  • Business
  • AS & A Level
  • External Influences
  • AQA