External Environment-
Transcript of External Environment-
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External Environment-
Questions that analyzes it
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External Environment
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General Environment• Dimensions in the broader society that
influence and industry and the firms within it
– Economic
– Socio cultural
– Global
– Technological
– Political/legal
– Demographic
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Analysis of the External Environments
• 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
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Industry Environment
Set of factors directly influencing a firm and its competitive actions and competitive responses
Threat of new entrantsPower of suppliersPower of buyersThreat of product substitutesIntensity of rivalry among competitors
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Analysis of the External Environments
• 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
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Opportunities and Threats
• Opportunity– A condition in the general environment that if
exploited, helps a company achieve strategic competitiveness
• Threat– A condition in the general environment that
may hinder a company’s efforts to achieve strategic competitiveness
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Components of the External Environmental Analysis
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General Environment (cont’dThe Economic Segment
Inflation ratesInterest ratesTrade deficits or surplusesBudget deficits or surplusesPersonal savings rateBusiness savings ratesGross domestic product
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The Sociocultural Segment
-Women in the workplace
– Attitudes about quality of worklife
– Concerns about environment
– Shifts in work and career preferences
– Shifts in product and service preferences
– Workforce Diversity
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The Global Segment
– Product innovations
– Applications of knowledge
– Focus of private and government-supported R&D expenditures
– New communication technologies
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The Technological Segment
– Product innovations
– Applications of knowledge
– Focus of private and government-supported R&D expenditures
– New communication technologies
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The Political/Legal Segment
---Antitrust laws
–Taxation laws
–Deregulation philosophies
–Labor training laws
–Educational philosophies and policies
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The Demographic Segment
– Population size
– Age structure
– Geographic distribution
– Ethnic mix
– Income distribution
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Industry Environment
• Industry Defined– A group of firms producing products that are
close substitutes
• Firms that influence one another
• Includes a rich mix of competitive strategies that companies use in pursuing strategic competitiveness and above-average returns
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The Five Forces of Competition Model