Opportunity and Threat of External

Environment

OPPORTUNITIES & THREATS

Opportunity a condition in the general environment

that, if exploits, helps a company achieve strategic

competitiveness

Threat a condition in the general environment that may

hinder a company’s efforts to achieve strategic

competitiveness

AIM & OBJECTIVE

Discuss the organization as an open system and assess

the impact of a number of environmental forces to

understand the opportunity-driven strategy depends

upon an ability to manage and to manage in the business

environment

To examine the threat of the business and implement

process to the strategic plan of the organization.

EXTERNAL ENVIRONMENT

The external environment comprises of all the entities

that exist outside its boundary, but have significant

influence on its growth and survival.

An organization has little or no control over its

environment but needs to constantly monitor and adapt

to these external changes, a pro active or reactive

response leads to significantly different outcome

TYPES OFEXTERNAL ENVIRONMENT

Direct interactive

this environment has an immediate and firsthand impact upon the organization.

Indirect interactive

this environment has a secondary and more distant effect upon the organization

EXTERNAL ENVIRONMENT ANALYSIS

Scanning, Identifying early signals of environmental

changes and trends.

Monitoring Detecting meaning through ongoing

observations of environmental changes and trends

Forecasting Developing projections of anticipated

outcomes based on monitored changes and trends.

Assessing Determining the timing and importance of

environmental changes and trends for firms strategies

and their management.

ANALYSIS OF THE EXTERNAL ENVIRONMENT

General Environment focused on the future

Industry Environment focused on factors and conditions

influencing a firm’s profitability within an industry

Competitor Environment focused on predicting the

dynamics of competitors’ actions, responses and

intentions

General Environment Dimension

Demographic Segment

Economic Segment

Political/Legal Segment

Sociocultural Segment

Technological Segment

Global Segment

THREAT OF NEW ENTRANTS barriers

To entry Economies of scale

High differentiate products or well-known brand names

Capital requirements

High consumer switching costs

Assess the distribution channels

Cost advantages independent of scale

Government policy Expected retaliation

THREAT OF NEW ENTRANTS

BARGAINING POWER OF THE SUPPLIER

BARGAINING POWER OF BUYERS/CUSTOMERS

THREAT OF PRODUCT SUBSTITUTES

INTENSITY OF RIVALRYAMONG COMPETITORS

COMPETITOR ENVIRONMENT

Competitor intelligence

The ethical gathering of needed information and data

that provides insight into

A competitor’s direction (future objective)

A competitor’s capabilities and intentions (current

strategy)

A competitor’s beliefs about the industry (its

assumption)

A competitor’s capabilities

COMPETITIVE ANALYSIS

Who are your competitors?

Do you know about your close competitors’ strengths

and weaknesses?

How detail should we analyze the competition?

Use a systematic approach

Analysis competition at various levels

EXAMPLE OF THREAT AND OPPORTUNITIES

The strength of economy effects

The level of demand includes shareholders, and capital

markets

Their satisfaction with company success

Changes in structure

Labour market

Availability of skills Influence of trade unions

EXAMPLE OF THREAT AND OPPORTUNITIES

Robotics in manufacturing

Technology Computers

Information technology

Changing population - by ageSociocultural

environment

Changing tastes and values

Regional movements

EXAMPLE OF THREAT AND OPPORTUNITIES

Suppliers Availability and cost of suppliers

Changes in preferences and

Customers purchasing power

Changes in competitive strategies

Competitors Innovation Effects of good and bad publicity,

The media drawing attention to companies, products and

services

WHY IS IT IMPORTANT TO KNOW THE COMPANY

OPPORTUNITIES AND THREATS?

By examining opportunities, you can discover untapped

markets, and new products or technologies, or identify

potential avenues for diversification

By examining threats, you can identify unfavorable

market shifts or changes in technology, and create a

defensive posture aimed at preserving your competitive

position

CONCLUSION

It is important for company to pay attention to external environment

The research in external environment is essential for the business

The company that adapt its strategy to the changes of external environment is likely to be more competitive in the business