2. External Analysis

Question 1

3 levels to External Analysis

Answer 1

1. General Environment
2. Industry Environment
3. Competitor Environment
   Informs firms about the threats and opportunities, i.e., what the firm might or should do.

Internal analysis determines what they can do.

You can evaluate the attractiveness of any industry using Porter’s five forces model. The analysis is done for an entire industry, not for a firm!

The industry environment interacts with the broader external environment.

Question 2

General Environment components

Answer 2

7 segment analysis - Comparable to PESTEL - Physical, Economic, Demographic, Political/Legal, Tachnological, Global, Sociocultural

Question 3

2. Industry Environment and how to analyse it?

Answer 3

More direct effect on firms strategic competitiveness - evaluate industry competition intensity and profit potential (attractiveness of the industry)
- Use Porters 5 forces

Question 4

Porters 5 forces

Answer 4

1. Threat of new entrants
2. Threat of substitutes
   3.Bargaining power of suppliers
3. Bargaining power of buyers
4. Rivalry Among existing competitors

Question 5

Threat of New Entrants

Answer 5

=Barriers to enter + expected retaliation
Raise level of competition and reduces attractiveness

Question 6

Bargaining power of suppliers

Answer 6

Suppliers are powerful when:
- Few large companies and more concentrated than the industry to which they sell
- No alternatives
- No significant customers to suppliers
- Goods critical to buyers success
- High switching costs

Question 7

Bargaining Power of Buyers

Answer 7

Buyers Powerful when:
- Purchase large portion of industry total output
- Product sales account for significant part of sellers annual rev
- low switching costs
- Industries products undifferentiated or standardized
The higher the relative bargaining power of the buyer the larger its share of the total value that is created in the value chain

Question 8

Threat of substitute products

Answer 8

Goods or services outside of a given industry perform the same or similar functions

Question 9

Intensity of Rivalry Among Competitors

Answer 9

• Numerous or equally balanced competitors
• Slow industry growth
• High fixed costs
• Lack of differentiation or low switching costs
• High exit barriers

Question 10

3. Competitor Environment

Answer 10

Direct and Indirect Competitors

Question 11

Competitor Environment Analysis

Answer 11

Analyse:
- What drives competition?
- Current strategies - what comp is doing?
- Competitors capabilities (Strengths and Weaknesses)

Question 12

4 Components of analyzing the External Environment

Answer 12

1. Scanning
2. Monitoring
3. Forecasting
4. Assessing