External Environment Analysis

Wyeth Ayerst’s external environment consists of three components: its remote, industry, and operating environment. In these three environments, there is a chance that one of its external environments may change. All of these environmental sectors affect the firm's operations both on an international and domestic level, and it is very possible for changes to occur. Change is an inevitable factor in the world of business. In fact, I have predicted that there will be several changes that will impact Wyeth’s external environment. It is for this reason that I must create a set of long-term objectives for Wyeth Ayerst.

The remote environment is what originates beyond the daily operations of Wyeth. The Remote Environment is made up of five factors that are not influenced by a single firm. These factors are economic, social, political, technological, and ecological. Although these factors cannot be affected by Wyeth, they can definitely effect the operations of Wyeth. These must be all considered by the firm when working with the market. Over the next ten years, there are several changes that might take place in the remote environment. For example, if technology changes rapidly, then Wyeth must modify its technology to the level needed in order to stay competitive in the market. If political factors change laws and regulations (i.e. the FDA), then they must make changes in order to meet these Political standards. Ecological factors also might cause several issues. If pollution and global warming continues to be an issue, then the energy used by Wyeth to produce its products must be modified in order to meet ecological standards. The remote environment is anything outside of Wyeth that cannot directly be affected by the company but can certainly cause changes in the company itself.

The Industry Environment is made up of the entry barriers, supplier power, buyer power, and competitive rivalry. These competing forces are of the greatest importance to Wyeth in strategy formulation. There is always a threat of new entrants in the world of Pharmaceuticals. Many companies are in competition of finding drugs that are similar. However, substitute products become a problem if a firm cannot differentiate the product or service in some way (i.e. cost or quality). Wyeth must make sure that if they are producing a substitute product, and their product must be cheaper then its competitors or it must have a higher quality. There is also bargaining power of the customer. The customer has the advantage of bargaining to the point where the prices go down. However, as the prices go down, the customer will also expect quality requirements to go up. In the Industry Environment, a buyer becomes powerful if it is concentrated or purchases in large volume. If a service is deemed unimportant to a buyer then this might pose a threat to Wyeth. Wyeth must also be aware of the bargaining power of their suppliers. If prices go up then there is normally a reduction in the quality of the product. Wyeth must always be aware of these changes to remain in the market.

The Operating Environment is a part of the external environment that deals closely with competitors, creditors, customers, employees, and suppliers. Part of Wyeth’s operating environment is the effectiveness of their sales distribution, price competitiveness, and their advertising effectiveness. Wyeth’s relationship with its suppliers is very important because it relies on them for the materials and equipment to make the drugs. Creditors