[MUSIC] A chain of business strategies we covered in the previous module from the mainstream of company's development. Although they can be well-balanced, truly smart, and refined that is still not enough. Any strategy needs details and clarification, a set of specific tactics to implement. In this module, we are going to discuss several tactical issues that can help you to strengthen the position of your company and provide better opportunities. We start with understanding business environment. As far as any business is an open system, it is highly dependent on many things that are outside. There can be distinguish the two types of environment, global and local. Global business environment is represented by general trends and changes undergoing within politics, economics, society and culture, technology, ecology or legislation. They are not associated with specific companies and are seen as outside, uncontrolled forces which should be taken into account. In contrast to this, local business environment is represented by specific parties such as competitors, partners, suppliers, clients, officials or local communities. The company needs to interact with them on a regular basis, thus making them a part of its business ecosystem. I'd like to stress a special attention to a simple, though very deep and productive, idea. A change has no modality. It is neither good nor bad. There is absolutely no difference between opportunities and threats. All the difference is with our head only. Everything here depends on our understanding, readiness and ability to act. If there is a change and you either do not understand it or ready to act, it is definitely a threat. Things are going to change and you are going to stay the same and be pushed aside. Unlike the risks, threats cannot be prevented or escaped. There are three ways to treat the threats. You can ignore, compensate or neutralize them. If a threat is insignificant, you can ignore it and save your time, consideration, and effort. More significant threats can be compensated. You can think of a set of measures to diminish its negative consequences. It is like taking an umbrella with you when it rains heavily. The rain is still going to happen, and you are going to get wet, but still it can help you for a period of time. Threats can also be neutralized. This means you can change your business model and processes so that the threat would become insignificant and could be ignored. It is like deciding not to go out and do what you want to do inside a building instead of going out. But there is something more important. The same trends may present many opportunities in case you understand them and ready and able to act. If you manage to recognize those opportunities, you may want to pursue them. It is all about our thinking. If you have a number of evident threats, you need to think how to turn the same factors into opportunities. Never panic or give way to despair. Be positive. Let me give you an example. Several years ago, I took the position of a board director at a company producing technical gases like oxygen, nitrogen, or carbon dioxide. When we were working over our corporate strategy, we recognized several significant threats. One of them was the expected entering of a global player into our local market. Definitely that was a threat. And global player had much more resources, better quality and lower cost, and that seemed to us like an uuu. We expected some losses in our sales and decrease in market share, so the profits, too, would shorten. We then thought of a possible compensation. We could reduce costs and thus partly diminish costs and save profits to some extent. We could also change our strategy and focus on local niche markets that are of no interest to the global player. Thus, it was possible to neutralize the threats. But what about opportunities? Do they always exist as the other side of the threats? It is definitely so. A far as we expected a new powerful force to enter our market, then it was almost obvious that this is going to change things here. There was no company that was able to resist or fight against this force. Consequently, the company that could use the force would inevitably be a success. Abandoning fighting and becoming partners could be a good strategy. It was just necessary to understand what they needed and make a good offer. As far as they were just entering the market with their abundant resources, experience, and production capacities, they urgently needed to increase sales and provide the high coverage of the market. We have that coverage. We could make an alliance. They produce, we sell, thus capturing the market in a short period of time with a high return rate. In order to understand the changes and the trends, the threats, and the opportunities they present, you may need to conduct a PESTEL analysis. You need to take several steps for this. Step 1, Write out the trends and changes. Think of what is happening and what is changing in your business. Are there any changes in the powers that influence the industry, the economy of your target region, the people's behavior and attitudes, the technology, ecology, or legislation? Write out every important change or trend. Step 2, Turn them to threats. For each change, write out at least one threat that is expected as an outcome. Try to be precise and objective. Focus on the exact negative consequences and transformations within your business model. Step 3, Rank importance. Sort those threats according to their importance. Rank the importance using one to four scale, four being the most important, and one, almost insignificant. Step 4, Suggest compensations and neutralizations. The threats ranked one should be ignored. You may think of several compensations for all the rest. As far as neutralization is often connected with dramatic changes in business models, I suggest that you use this approach for the threats ranked four only. Ultimately, you will have a list of actions and solutions to resist the threat. Step 5, Turn threats into opportunities. First, have a look at your list of threats. Think of how harmful they are for your competitors. Can you be stronger than they are? Is there anything the organizational business model that can help you to resist the threat better and suffer less? Then, this is your possible advantage, and hence, this is an opportunity to win the competition. Then, look at the initial changes and trends. Think of how these forces can be used, what opportunities can be pursued with the help of them. Make a list. Step 6, for all opportunities in the list, rank importance on the scale of one to four. Step 7, for each important opportunity, suggest at least one way how they can be pursued. The PESTEL analysis helps you to understand the global business environment and get prepared to deal with it. Let's sum it up. Any business exists within a specific environment. Local business environment is represented by several parties such as competitors, partners, suppliers, clients and officials of local communities. Global business environment is represented by unspecified changes or trends in groups or powers, such as politics, economy, society, technology, ecology, or legislation. The change may be seen both as a threat and as an opportunity. Threats can be compensated or neutralized. Opportunities should be recognized and pursued. Use PESTEL analysis in order to compose a list of possible tactics and measures to deal with the changes. [MUSIC]
