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Strategic Planning: Environmental Scanning. Dr. Clive Vlieland-Boddy FCA FCCA MBA. I think you should be more explicit here in step two. “How can you govern a country which has 246 varieties of cheese?” -- Charles De Gaulle.

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Strategic planning environmental scanning l.jpg

Strategic Planning: Environmental Scanning

Dr. Clive Vlieland-Boddy

FCA FCCA MBA




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STRATEGIC MANAGEMENT: CONCEPT as a complete surprise, and is not preceded by a period of worry and depression.”

  • Ongoing process , evaluates and controls the business and the industries in which the company is involved.

  • Assesses its competitors and sets goals and strategies to meet all existing and potential competitors.

  • Reassesses each strategy regularly.


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MISSION AND OBJECTIVES as a complete surprise, and is not preceded by a period of worry and depression.”

  • Describes the company's business vision: unchanging values and purpose of the firm, forward-looking visionary goals that guide the pursuit of future opportunities.

  • Define measurable financial and strategic objectives:

    • Financial objectives involve measures such as sales targets and earnings growth.

    • Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation.


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Environmental Scanning as a complete surprise, and is not preceded by a period of worry and depression.”

  • Common part of strategic analysis

  • There are internal elements & external elements

  • All interrelate


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Tools/Methods of Analysis Results Interpretation as a complete surprise, and is not preceded by a period of worry and depression.”

TOOLS AND METHODS

SWOT

Strenghts, Weaknesses, Opportunities and Threats Analysis

Other Tools

Economic Development Scenarios


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SWOT as a complete surprise, and is not preceded by a period of worry and depression.”


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External Environment as a complete surprise, and is not preceded by a period of worry and depression.”is not controllable

Social

Change

Demographics

Ever-Changing

Marketplace

Economic

Conditions

Product

Distribution

Promotion

Price

Competition

Target Market

Political &

Legal Factors

Technology

Environmental

Scanning

External Marketing Environment


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SWOT Framework as a complete surprise, and is not preceded by a period of worry and depression.”


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SWOT analysis as a complete surprise, and is not preceded by a period of worry and depression.”

  • Popular method used for summarising of the innovation analysis results;

  • Provides an overview of regional strengths and weaknesses as well as opportunities and threats the region is currently facing or may face in the future.


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ENVIRONMENTAL SCAN as a complete surprise, and is not preceded by a period of worry and depression.”

The environmental scan includes the following components:

  • Internal analysis of the firm

    • SWOT Analysis

  • Analysis of the firm's industry

    • Porter's five forces

  • External macro-environment

    • PEST Analysis


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Definitions: Strengths (S) as a complete surprise, and is not preceded by a period of worry and depression.”

  • An organizational resource or capability

  • May be used to advance the organization’s / program’s interests


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Definitions: Weaknesses (W) as a complete surprise, and is not preceded by a period of worry and depression.”

  • The absence of certain strengths or capabilities that are needed to move the organization forward


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Internal factors as a complete surprise, and is not preceded by a period of worry and depression.”

  • A STRENGTH is a is a resource or capacity of the region that it can take advantage of to improve its innovation system and competitiveness, e.g.

    • Access to well-educated labour force;

    • Good communication and infrastructure;

    • Diversified regional economic structure;

    • Well-functioning public services;

    • Etc.


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Internal factors as a complete surprise, and is not preceded by a period of worry and depression.”

  • WEAKNESS is a limitation, fault or defect in the region that will keep it from improving the innovation system, e.g.

    • Limited number of start ups in the region;

    • Peripheral location and low population density;

    • High degree of long-term unemployment;

    • Lack of cooperation between companies;

    • Etc.


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Strengths & Weaknesses as a complete surprise, and is not preceded by a period of worry and depression.”

  • May be identified by asking questions:

    • Why does we do well?

    • What do we do less well?

    • In what areas are we healthy & robust?

    • In what areas are we weak or struggling?


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Strengths & Weaknesses as a complete surprise, and is not preceded by a period of worry and depression.”

  • May be identified by asking questions:

    • What might someone looking at our industry in general point out as unique or distinctive – either positive or negative – about us?

    • What resources can we call upon?

    • How do these resources compare with our needs?


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Definitions: Opportunities (O) as a complete surprise, and is not preceded by a period of worry and depression.”

  • Chances for growth or positive change in direction revealed by changes or trends in the external environment


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Definitions: Threats (T) as a complete surprise, and is not preceded by a period of worry and depression.”

  • Changes or trends in the external environment

  • May also reveal a treat to overcome or challenge to meet

  • “Threats” are sometimes described as “Traps”


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External factors as a complete surprise, and is not preceded by a period of worry and depression.”

  • OPPORTUNITY is a favourable situation in the region's environment, e.g.

    • Availability of EU funds and programmes;

    • New markets through increased internationalisation;

    • New educational opportunities;

    • Cross-border cooperation;

    • Global increase for demand in tourism services;

    • Etc.


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External factors as a complete surprise, and is not preceded by a period of worry and depression.”

  • THREAT is an unfavourable situation in the region's environment that may potentially damage the strategy, e.g.

    • Increasing of energy prices;

    • Termination of regional development funding;

    • Decrease of population;

    • Emigration of high-qualified labour force;

    • Etc.


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Opportunities & Threats as a complete surprise, and is not preceded by a period of worry and depression.”

  • Are identified by looking beyond the boundaries of the organization

  • Questions might include the following:

    • What are the external trends that will affect us? How?

    • What is changing in our communities that will affect us? How?


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Opportunities & Threats as a complete surprise, and is not preceded by a period of worry and depression.”

  • Questions might include the following:

    • What are the the needs in the external environment that could be met us?

    • Do any of our weaknesses make us particularly vulnerable to a changing environment?


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SWOT Design as a complete surprise, and is not preceded by a period of worry and depression.”

  • One SWOT strategy for the whole region; or

  • A set of SWOT strategies

    • Relevant if different views of the actors involved in the SWOT process;

    • E.g. a regional economic strength may be regarded as a weakness from environmental point of view;

    • May be structured along different sectors (economic, environmental, social, etc) or target groups (companies, public agencies, R&D sector, etc).


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STRATEGIC MANAGEMENT: MODEL as a complete surprise, and is not preceded by a period of worry and depression.”

Scan External Environment

Identify Strategic Factors

  • National

  • Global

  • Opportunities

  • Threats

Implementing Strategy via Changes in:

Evaluate Current:

Identify

Strategic:

  • Mission

  • Goals

  • Grand Strategy

Define New:

  • Mission

  • Goals

  • Grand Strategy

SWOT

  • Structure

  • Human resources

  • Information & control systems

  • Corporate

  • Business

  • Functional

Scan Internal Environment

Identify Strategic Factors

  • Core Competence

  • Synergy

  • Value Creation

  • Strengths

  • Weaknesses


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STRATEGIC MANAGEMENT: SWOT ANALYSIS as a complete surprise, and is not preceded by a period of worry and depression.”

  • A scan of the internal and external environment is an important part of the strategic planning process.

  • Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T).

  • The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates


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SWOT Analysis – Main Steps as a complete surprise, and is not preceded by a period of worry and depression.”

Strenghts

1 2 3

Weaknesses

1 2 3

Scaning of Regional Environment

Analysis of Strenghts and Weaknesss

Analysis of Opportunities and Threats

Opportunities 1 2 3

OS Actions OxSx OxSx OxSx

OW Actions OxWx OxWx OxWx

TS Actions TxSx TxSx TxSx

TW Actions TxWx TxWx TxWx

Threats 1 2 3

SWOT Matrix


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STRATEGIC MANAGEMENT: SWOT ANALYSIS as a complete surprise, and is not preceded by a period of worry and depression.”

Strengths

Patents

Strong brand names

Good reputation among customers

Cost advantages from proprietary know-how

Exclusive access to high grade natural resources

Favorable access to distribution networks

Weaknesses

Lack of patent protection

A weak brand name

Poor reputation among customers

High cost structure

Lack of access to the best natural resources

Lack of access to key distribution channels


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STRATEGIC MANAGEMENT: SWOT ANALYSIS as a complete surprise, and is not preceded by a period of worry and depression.”

Opportunities

An unfulfilled customer need

Arrival of new technologies

Loosening of regulations

Removal of international trade barriers

Threats

Shifts in consumer tastes away from the firm's products

Emergence of substitute products

New regulations

Increased trade barriers


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STRATEGIC MANAGEMENT: SWOT MATRIX as a complete surprise, and is not preceded by a period of worry and depression.”

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed.

  • S-O strategies pursue opportunities that are a good fit to the company's strengths.

  • W-O strategies overcome weaknesses to pursue opportunities.

  • S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.

  • W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.


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Using SWOT as a Basis for Regional Development Strategy as a complete surprise, and is not preceded by a period of worry and depression.”

The strategy shall define priorities and actions that

  • Build on STRENGTHS;

  • Eliminate WEAKNESSES;

  • Exploit OPPORTUNITIES;

  • Mitigate the effect of THREATS.


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SWOT Golden Rules as a complete surprise, and is not preceded by a period of worry and depression.”

  • Be realistic about the strengths and weakness of your region when conducting the SWOT;

  • Avoid generalSWOT! It should always be specific;

  • Distinguish between where your region is today and where it could be in the future;

  • Keep your SWOT short and simple.


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Development Scenarios as a complete surprise, and is not preceded by a period of worry and depression.”


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Development Scenarios as a complete surprise, and is not preceded by a period of worry and depression.”

An alternative to SWOT analysis

  • Development scenarios are not predictions or forecasts of the future!

  • They intend to explore a number of wide-ranging „possible futures“ and access their implications for the region and its main actors


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Development Scenarios – Main Steps as a complete surprise, and is not preceded by a period of worry and depression.”

Identification of Regional Drivers and Regional Issues

Development Scenario 1

Development Scenario 2

Assessment of Regional Drivers and Dependency Analysis

Elaboration of Dependency Matrix

Development Scenario 3

Development Scenario 4


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Scenarios Design as a complete surprise, and is not preceded by a period of worry and depression.”

  • Elaboration of a DEPENDENCY MATRIX


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Using Scenarios as a Basis for Regional Development Strategy as a complete surprise, and is not preceded by a period of worry and depression.”

  • Definition of OPPORTUNITIES and THREATS for the region under each of the scenarios;

  • Selection of number of STRATEGIC THREATS and STRATEGIC OPPORTUNITIES from all scenarios;

  • Finally definition of STRATEGIC PRIORITIES and ACTIONS based on the above strategic risks and preferences;


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Stages of your RIS project as a complete surprise, and is not preceded by a period of worry and depression.”

06/05

05/06

04/07

01/08

Stage 0

Stage 1

Stage 2

Definition and selection of pilot actions

Preparing for

Monitoring

Definition

of strategic priorities

and

actions

Your

Regional

Innovation

Strategy

Needanalysis

Network

analysis

Interpretation & discussionof analysesresults;

Consensusbuilding

Detailedelabora-tionof theworkprogram

Coordination

Offeranalysis

SWOT andSynthesis

Regular meetings of the Steering Committee


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Porters 5 Forces as a complete surprise, and is not preceded by a period of worry and depression.”


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PORTER’S FIVE FORCES as a complete surprise, and is not preceded by a period of worry and depression.”

Threat of substitute products

Potential new entrants

Rivalry among competitors

Bargaining power of buyers

Beware

Bargaining power of suppliers


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PEST or PESTEL as a complete surprise, and is not preceded by a period of worry and depression.”


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PEST ANALYSIS as a complete surprise, and is not preceded by a period of worry and depression.”

Some add Environmental and Legal to extend PEST to PESTEL

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

  • Political

  • Economic

  • Social

  • Technological


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PEST ANALYSIS as a complete surprise, and is not preceded by a period of worry and depression.”

Political Factors

  • Tax policy

  • Employment laws

  • Environmental regulations

  • Trade restrictions and tariffs

  • Political stability

Economic Factors

  • Economic growth

  • Interest rates

  • Exchange rates

  • Inflation rate

Social Factors

  • Health consciousness

  • Population growth rate

  • Age distribution

  • Career attitudes

  • Emphasis on safety

Technological Factors

  • R&D activity

  • Automation

  • Technology incentives

  • Rate of technological change


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STRATEGY FORMULATION as a complete surprise, and is not preceded by a period of worry and depression.”

Strategy formulation is vital to the well-being of a company or organization.

A leadership skill

A process that leaders use to focus for positioning the firm

Iterative

Assess, decide, act, and review

Leaders determine how much to stretch

How to create the benefits for customers


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PESTEL as a complete surprise, and is not preceded by a period of worry and depression.”

  • E is for Environmental and

  • L is for Legal


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Strategic Issues as a complete surprise, and is not preceded by a period of worry and depression.”


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HIERARCHICAL LEVELS as a complete surprise, and is not preceded by a period of worry and depression.”

Strategy can be formulated on three different levels:

  • Corporate level: Company's overall direction in terms of its general attitude towards growth and management of its various business and product lines.

    • Directional strategy

    • Portfolio analysis

    • Parenting strategy

  • Business unit level: It usually occurs at the business unit or product level and it emphasizes improvement of the competitive position of a corporation's products or services in the specific industry or marketing segment served by that business unit.

  • Functional or departmental level

    • It is the approach taken by a functional area to achieve corporate and

    • business unit objectives and strategies by maximizing resource productivity


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SIX SUPPORTING FACTORS as a complete surprise, and is not preceded by a period of worry and depression.”

Action Planning

Organization Structure

Human Resources

The Annual Business Plan

Monitoring and Control

Linkage.


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STRATEGY EVALUATION as a complete surprise, and is not preceded by a period of worry and depression.”

The implementation of the strategy must be monitored and adjustments made as needed.

Evaluation and control consists of the following steps:

  • Define parameters to be measured

  • Define target values for those parameters

  • Perform measurements

  • Compare measured results to the pre-defined standard

  • Make necessary changes

    Evaluation Criteria:

  • Suitability

  • Feasibility

  • Acceptability


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SUITABILITY as a complete surprise, and is not preceded by a period of worry and depression.”

  • Suitability deals with the overall rationale of the strategy. The key point to consider is whether the strategy would address the key strategic issues underlined by the organization's strategic position.

  • Does it make economic sense?

  • Would the organization obtain economies of scale, economies of scope or experience economy?

  • Would it be suitable in terms of environment and capabilities?

  • Tools that can be used to evaluate suitability include:

  • Ranking strategic options

  • Decision trees

  • What-if analysis


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FEASIBILITY as a complete surprise, and is not preceded by a period of worry and depression.”

  • Feasibility is concerned with the resources required to implement the strategy are available, can be developed or obtained.

  • Resources include funding, people, time and information.

  • Tools that can be used to evaluate feasibility include:

  • Break-even analysis

  • Resource deployment analysis

  • Cash flow analysis and forecasting


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STRATEGY EVALUATION: ACCEPTABILITY as a complete surprise, and is not preceded by a period of worry and depression.”

  • Acceptability is concerned with the expectations of the identified stakeholders (mainly shareholders, employees and customers) with the expected performance outcomes.

  • Return deals with the benefits expected by the stakeholders (financial and non-financial).

  • Risk deals with the probability and consequences of failure of a strategy (financial and non-financial).

  • Stakeholder reactions deals with anticipating the likely reaction of stakeholders.

  • Tools that can be used to evaluate acceptability include:

  • what-if analysis

  • stakeholder mapping


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STRATEGIC MANAGEMENT: GENERAL APPROACHES as a complete surprise, and is not preceded by a period of worry and depression.”

In general terms, there are two main approaches, which are opposite but complement each other in some ways, to strategic management:

The Industrial Organizational Approach

  • Based on economic theory — deals with issues like competitive rivalry, resource allocation, economies of scale

  • Assumptions — rationality, self disciplined behavior, profit maximization

    The sociological approach

  • Deals primarily with human interactions

  • Assumptions — bounded rationality, satisfying behavior, profit sub-optimality. An example of a company that currently operates this way is Google

    Strategic management techniques can be viewed as bottom-up, top-down, or collaborative processes.


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STRATEGIC MANAGEMENT: LIMITATIONS as a complete surprise, and is not preceded by a period of worry and depression.”

Stifle creativity, especially if it is rigidly enforced.

When a strategy becomes internalized into a corporate culture, it can lead to group think

Can cause an organization to define itself too narrowly.

In 2000, Gary Hamel coined the term strategic convergence –

Explain the limited scope of the strategies being used by rivals in greatly differing circumstances.

Strategies converge more than they should, because the more successful ones are imitated by firms that do not understand that the strategic process involves designing a custom strategy for the specifics of each situation.


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Other Issues as a complete surprise, and is not preceded by a period of worry and depression.”


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Social Forces- as a complete surprise, and is not preceded by a period of worry and depression.”

The Poverty of Time

A lack of time to do anything but work, commute to work, handle family situations, do housework, shop, eat, sleep...


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An environmental scan of today’s marketplace as a complete surprise, and is not preceded by a period of worry and depression.”


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SOCIAL FORCES- as a complete surprise, and is not preceded by a period of worry and depression.”Demographics

  • The World Population at a Glance – 6.4 billion

    Growth in developing nations

    Shift of age structure of populations

    Rising income levels and living standards

Implications?


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ECONOMIC FORCES as a complete surprise, and is not preceded by a period of worry and depression.”

-Economy

  • Macroeconomic Conditions

    • Inflation-rise in prices without rise in wages

    • Recession-drop in income, production and employment

  • Microeconomic Conditions

    • Consumer Income

      Gross Income – 100% of earnings

      Disposable Income-85% of earnings

      Discretionary Income-15% of earnings


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Technological Factors as a complete surprise, and is not preceded by a period of worry and depression.”

  • New technology is a weapon against inflation and recession

  • U.S. excels at basic research

  • Japan excels at applied research

  • Information technology and the Internet have increased productivity


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COMPETITIVE FORCES as a complete surprise, and is not preceded by a period of worry and depression.”

-Competition


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Demographics as a complete surprise, and is not preceded by a period of worry and depression.”

Demographics describes a population according to selected characteristics such as age, gender, ethnicity, income, and occupation.


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Baby Boomers as a complete surprise, and is not preceded by a period of worry and depression.”

Baby boomers is the generation of children born between 1946 and 1964.


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Generation X as a complete surprise, and is not preceded by a period of worry and depression.”

Generation X includes the 15% of the U.S. population born between 1965 and 1976.


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Generation Y as a complete surprise, and is not preceded by a period of worry and depression.”

Generation Y includes the 72 million Americans born between 1977 and 1994.


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THANK YOU as a complete surprise, and is not preceded by a period of worry and depression.”


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