Page 15 - CIMA MCS Workbook May 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

EXERCISE 2

It is important for JORD to regularly scan the business’s external environment, which may present
threats or opportunities to its future success. These threats will be in addition to those presented
by the increasing competition. This requires an appraisal to be undertaken by management of
factors relevant to the organisation’s current and future activities.

Two useful frameworks which can assist in this process:

PEST (EL) framework which helps in the analysis of the macro or general environment, and divides
the business environment into six main areas:

 Political

 Economic

 Social (and cultural)

 Technical/technological

 Ecological/environmental

 Legal

Porter’s Five Forces which examines the attractiveness and profitability of industries by analysing
and understanding the nature of the competitive environment by examining:

 New entrants into a market or industry
 Rivalry amongst existing and new competitors
 Substitutes for prefabricated homes
 Power of customers
 Power of suppliers

Applying these to JORD will need to consider the following:

 political influences and events – there are many changes in this context. For example,
increased environmental control, government legislation re fuel emission control on
delivery vehicles (e.g. environmentally friendly vehicles), changes in policy e.g. recent
events such as Brexit and the UK government target for 300,000 new homes a year by
2025. The big driver however is the current crisis in the worldwide housing market.
Additionally JORD will also need to be aware of world‐wide austerity measures which will
directly affect key customer groups and further complicate a key constraint of
unpredictable consumer numbers. This will inevitably have a subsequent effect on the JIT
manufacturing process of accurately predicting the required supply of raw materials. Given
the developments in the nature of JORD’s business e.g. expansion into North America and
therefore sourcing timber from new suppliers, political influence may even be of increased
future relevance.

KAPLAN PUBLISHING 65