Environmental Scanning a result, it made a number of strategic positioning moves. First, it signed a deal with Vodafone UK in 2014 to provide new customers with a free six-month subscription to Netflix. The deal included free 4G streaming for customers over their Environmental scanning attempts to provide management with accurate forecasts of trends that relate to external changes Vodafone devices, encouraging U.K. customers to use Netflix while on the move. Later in 2014, Netflix rolled out to six in geographic areas where the firm is currently doing business or considering setting up operations. These changes relate to mainland European countries, including France, Germany, and Belgium, to compete directly against existing streaming environmental factors that can affect the company and include the industry or market, technology, and regulatory, providers for the more than 100 million potential customers in countries with the highest existing Internet economic, social, and political aspects. penetration." The following year, Netflix began to roll out its subscriptions to other untapped European regions, with lower environmental scanning levels of penetration by both streaming competitors and high-speed Internet providers. In 2019, Netflix also announced The process of providing management with accurate forecasts of trends related to external changes in geographic areas plans to drastically increase the European-produced content on its platform, in an effort to attract more subscribers across where the firm currently is doing business or is considering setting up operations. the continent. In the short term, these investments have resulted in losses for Netflix; however, as Internet connectivity and MNCs observe and evaluate an exorbitant amount of information, and, while data are usually collected for all forms mobile streaming continue to increase in places like Spain, Italy, and Eastern Europe, the 298hope is that the number of of environmental factors, the order in which they 297approach each factor and the extent to which they are studied depend subscribers will continue to expand, resulting in large profits (see The World of International Management at the beginning on the industry and the goals of the MNC." One of the most important foci is the industry or the market. This includes the of Chapter 7) 92.63 role of all potential competitors and the relationships surrounding those competitors, such as affiliation with one another or the connection between the company and its customers and suppliers. Monitoring changes in technology will also help keep Internal Resource Analysis the company modern and innovative. Some technological options managers may wish to follow are those that influence When formulating strategy, some firms wait until they have completed their environmental scanning before conducting an business efficiencies or changes in production. From a competitor standpoint, it is good to familiarize oneself with the rise internal resource analysis, which is a microeconomic aspect of activity. Others perform these two steps simultaneously. of new products or services and the existing infrastructure Internal resource analysis helps the firm evaluate its current managerial, technical, material, and financial resources and The regulatory environment can also change at any time, shifting laws or regulatory guidelines. Managers should be capabilities to better assess its strengths and weaknesses. The MNC then uses this assessment to determine its ability to take aware of ownership or property rights within an area and the kind of employment practices exhibited in a region Minimum advantage of international market opportunities. The primary thrust of this analysis is to match external opportunities wage laws and tax rates should also be considered because they can affect the hiring process and company finances. This is (gained through the environmental scan) with internal capabilities (gained through the internal resource analysis). In other different from the economic environment, which mainly highlights rates-rates of employment, exchange rates, inflation words, these evaluations should not be viewed as how the environment creates a barrier to entry but, rather, how companies rates, and the level of GNP for a country. can utilize their resources and capabilities to best take advantage of environmental opportunities. Appropriate observation of the social environment can help the company. Awareness of demographic shifts, including An internal analysis identifies the key factors for success that will dictate how well the firm is likely to do. A key age, education, and income, coupled with in-depth knowledge of consumer attitudes, is imperative for a company to assess success factor (KSF) is a factor that is necessary for a firm to compete effectively in a market niche. For example, a KSF whether its services would be welcomed within a region. Finally, the political environment can impact how a company runs for an international airline is price. An airline that discounts its prices will gain market share vis-a-vis competitors that do operations. We discussed in Chapter 2 the different political systems that exist across the world, and an understanding of not. A second KSF for the airline is safety, and a third is quality of service in terms of on-time departures and arrivals; those systems, along with the current state of affairs, can alert MNCs to any warnings that may impede expansion convenient schedules; and friendly, helpful personnel. In the automobile industry, quality of products has emerged as the After obtaining the information, MNCs then go through an analyzing process that gives rise to the relevant features of number-one KSF in world markets. Japanese firms have been able to invade the U.S. auto market successfully because they the external environment. By performing analyses, the company can discover the risks and opportunities involved in have been able to prove that the quality of their cars is better than that of the average domestically built U.S. car. Toyota expanding to that region. Typically, managers communicate the results and then try to formulate the best strategy to take and Honda have had a quality edge over the competition in recent years in the eyes of U.S. car buyers. A second KSF is advantage of a ripening market. However, the external environment is not the only aspect to consider, and more styling. For example, the redesigned Mini-Cooper has been successful, in part, because customers like its unique look. information must be reviewed before those steps can be taken key success factor (KSF) Environmental scanning is central to discovering if an MNC can survive in a particular region; however, it is only A factor necessary for a firm to effectively compete in a market niche. effective if it is done consistently. The environment changes very rapidly, and, in order for firms to continually adapt, they The key question for the management of an MNC is, Do we have the people and resources that can help us develop must assess the external dynamics that could bolster or hinder future productivity. Each country will have a different and sustain the necessary KSFs, or can we acquire them? If the answer is yes, the recommendation is to proceed. If the perspective as to which factors create the most roadblocks and therefore must be evaluated on a more consistent basis. For answer is no, management will begin looking at other markets where it has, or can develop, the necessary KSFs. example, a recent study showed that while both Malaysian and U.S. managers see competitors and the market as highly The balance between environmental scanning and internal resource analysis can be quite delicate. Managers do not important, U.S. managers consider regulatory issues more relevant than Malaysians do. In this case, Malaysian MNCs have want to spend too much time looking inward; otherwise, they could miss changes in the environment that would alter the not been exposed to the sometimes strict directives that U.S. MNC's can face. company's strengths and weaknesses based on that market. Conversely, managers do not want to appraise the outward view Netflix's push into Europe provides an example of how this environmental scanning process works. The company for too long, as they could take time away from improving internal systems and taking advantage of opportunities. analyzed the wireless streaming environment in Europe and concluded that the mobile market was ideal for penetration As 299