Blue and Green Business infographic

THE EXTERNAL ENVIRONMENT: OPPORTUNITIES, THREATS AND INDUSTRY COMPETITORS.

Learning Objectives:. AT THE END OF THIS MODULE, STUDENTS ARE EXPECTED TO:.

THE NATURE OF AN EXTERNAL AUDIT. The purpose of an external audit is to develop a finite list of opportunities that could benefit a firm and threats that should be avoided..

EXTERNAL ENVIRONMENT ANALYSIS.. An Opportunity is a general environment condition that is exploited helps a company achieve strategic competitiveness..

Four components of external environmental analysis.

The General, Industry, and Competitor Environments.

General Environment. composed of dimensions in the broader society that influence an industry and the firms within it..

Industry Environment. set of factors that directly influence a firm and its competitive actions and competitive responses..

Competitor Environment. details about the direct and indirect competitors for a firm and the competitive dynamics that are expected to impact a firm‘s efforts to generate above-average returns..

KEY EXTERNAL FORCES.

KEY EXTERNAL FORCES. Economic forces cultural, demographic, and natural environment forces Political, legal, and governmental forces Technological forces Comrxtitive forces Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Lat»r unions Governments Trade asscxiations Special interest groups Products Markets Natural environment AN ORGANIZATION'S OPPORTUNITIES AND THREATS.

1. Economic Force. - has a direct impact on the potential attractiveness of various strategies.

Key Economic Variables to be monitored:. a. Availability of Credit.

2. Social, cultural, demographic, and environmental forces.

Key Social Variables to be monitored:. a. Growth Rate.

3.Political, governmental, and legal forces. - can represent key opportunities or threats for both small and large organization..

Key Political Variables to be monitored:. a. Environmental Regulations.

4. Technological force. - technological changes and discoveries are having a dramatic impact on the organizations.

Results of technological advancements are varied, as shown in the following list:.

c. They can create new markets, result in a proliferation of new and improved products, change the relative competitive cost positions in an industry, and render existing products and services obsolete..

5. Competitive forces. - collecting and evaluating information on competitors is essential for successful strategy formulation..

Industry Environment Analysis. ·This section presents the Porter's Five Forces of Model to provide a method for understanding the mix of acting strategies that influence an industry and offer a suggestion for appropriate strategies to employ while operating within a particular industry. This model yields an understanding of the intensity of industry competition and the long-term profit potential of the industry..

Bargaining power of suppliers Potential development of substitute products Rivalry among competing firms Potential entry of new competitors Bargaining power of consumers.

1. POTENTIAL ENTRY OF NEW COMPETITORS. - whenever new firm can easily enter a particular industry, the intensityof competitiveness among firms increases..

2. POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTS. - in many industries, firms are in close competition with the producers of substitute products in other industry..

3. BARGAINING POWER OF SUPPLIERS. - affects the intensity of the competition in an industry, especially when there is a large number of suppliers, when there are only a few good substitute raw materials, or when the cost of switching raw materials is especially costly..

4. BARGAINING POWER OF CONSUMERS. - when customers are concentrated or large, or buy in volume, their bargaining power represents a major force affecting the intensity of competition to the industry..

Rival firms may offer extended warranties or special services to gain customer loyalty whenever the bargaining power of consumers is substantial -.

5. RIVALRY AMONG COMPETING FIRMS. - is usually the most powerful of the five competitive forces. The strategies pursued by one firm can be successful only to the extent that they provide competitive advantage over the strategies pursued by rival firms..

Intensity of Rivalry is Low if:. Competitors are few. Competitors have unequal size. Competitors have unequal market share. Industry growth is fast. Fixed costs are low. Products are differentiated. Brand loyalty is significant. Consumer switching costs are high. Competitors are not strategically diverse. There is no excess production capacity. Exit barriers are low..

SOURCE OF EXTERNAL INFORMATION. UNPUBLISHED SOURCES.

UNPUBLISHED SOURCES. - sources include customer surveys, market research, speeches and professional and share holders’ meeting, television programs, interviews, and conversation with stakeholders..

PUBLISHED SOURCES. - sources of strategic information include periodicals, journals, reports, government documents, abstract, directories, newspaper, and manuals..

FORECASTING TOOLS AND TECHNIQUES.

MAKING ASSUMPTIONS. McKinney defines assumptions as the.

Understanding Competitors and Their Intentions. - This section brings competitor intentions into the analysis of competitive firms. The importance and method for evaluating competitors’ objectives, strategies, assumptions, and capabilities are also discussed, along with the need to fully understand all relevant public policies..

Various legal and ethical ways to obtain competitive intelligence include the following:.

COMPETITOR ANALYSIS. FUTURE OBJECTIVES. CURRENT STRATEGY.

FUTURE OBJECTIVES. How do our goals compare to our competitors’ goals?.

CURRENT STRATEGY. How are they currently competing? Does this strategy support changes in the competitive structure?.

ASSUMPTIONS. Do we assume the future will be volatile? What assumptions do our competitors hold about the industry and themselves? Are we assuming stable competitive conditions?.

CAPABILITIES. What are my competitors’ strengths and weaknesses? How do our capabilities compare to our competitors?.

THANK YOU!.

PRINCESS LORRAINE. JAYCIE. JESSA MAINE. MEMBERS. VALENCIA.