Ch5 Internal and External Analysis

Question 1

4 common tools for internal and external environmental analysis

Answer 1

1. SWOT analysis
   examines both in/external and +/- factors
   commonly used in planning and to analyze business as a whole
   for specfic objective or question
2. PETSEL analysis
   examines external environment
   useful in exploring specific opportunities and threats identified in a SWOT analysis
   used alone to analyze a specific initiative
3. Porter’s Five forces analysis
   help to analyze opportunties
   examine entity’s position within the industry/market
   used before expanding to new market
   can provide insight on current competitive position
   use both in/external data
4. Industry life cycle analysis
   used for resource allocations or new markets
   market research needed to obtain external data and determine industry’s stage

Question 2

SWOT analysis

Answer 2

Matrix for visualization (positive side - internal/strength & external/opportunities; negative side - internal/weakness & external/risks

Bullet list for exam

Only relevant and prioritize

Question 3

PESTEL analysis

Answer 3

Political
Economic
Societal
Thechnological
Environmental
Legal

Question 4

Political

Answer 4

Tax policy
Fiscal policy
Trade tariffs
Trade restrictions
Political stability

Question 5

Economic

Answer 5

Inflation rates
Interest rates
Foreign exchange rates
Economic stability

Question 6

Societal

Answer 6

Cultural trends
Demographics
Population analysis
Career attitudes
Education

Question 7

Technological

Answer 7

Automation
Research and development
Innovation
Rate of technology change

Question 8

Environmental

Answer 8

Climate
Weather
Geography
Climate change
Sustainability
Greening of an industry

Question 9

Legal

Answer 9

Consumer laws
Safety standards
Labour laws
Human rights
Antitrust laws

Question 10

Porter’s Five Forces

Answer 10

Supplier Power
Buyer Power
Threat of Substitution
Threat of New Entry
Competitive Rivary

Question 11

Supplier Power

Answer 11

1. Number of suppliers
2. Size of suppliers
3. Uniqueness of supplier service
4. An organization’s ability to substitue
5. Cost of changing suppliers

Question 12

Buyer Power - customers

Answer 12

1. number of customers
2. size of each order
3. competitor differences
4. price sensitivity of customers
5. cost to customers of chaning suppliers

Question 13

Threat of substitution - customer switch

Answer 13

1. performance of substitute products/services
2. cost for customers to adopt a substitue

Question 14

Threat of new entry - competition

Answer 14

1. time and cost of entry
2. specialized knowledge or processes
3. economies of scale
4. cost advantages
5. technical advantages
6. patent protection
7. barriers to entry

Question 15

Competitive Rivalry - contributed by the other four

Answer 15

put downward pressure on prices
force businesses to be innovative and attentive - lower costs

Question 16

Industry life cycle analysis

Answer 16

Introduction: startup
Growth
Maturity
Decline

Question 17

Introduction stage (Life-cycle）

Answer 17

Focus resources on creating awareness and demand

Expenses are high - as the industry continues to invest in R&D

Profits are low or non-existent

Market is highly fragmented; SMEs comete with each other and with larger entities.

No one competitor dominates the market

Question 18

Growth stage

Answer 18

Consumers are aware of the product / services

Demand increases

Competition between fewer survior companies

Resources still focused on marketing and R7D

Sales are increasing.

Considering expansion and new markets

Larger companies in similar indistries may enter through acquisisions and internal development

Question 19

Maturity stage

Answer 19

Growth slows

Market well established

Focus on controlling costs and competing on price

Reduced risk of new entrants becuase barriers (economies of scale, infrastructure costs are high)

Products / services perceived as necessary / useful by consumers

Question 20

Decline stage

Answer 20

The stage may be slow and prolonged, or may be sudden (Kodak)

Demand diminishes and revenue decline.

Companies looking for exit and repurpose resources - fewer competitors

Decline not death

Question 21

Additional tools

Answer 21

1. Industry structure analysis
   market conditions: monopoly, oligopoly, perfect, near-perfect and imperfect competition
2. Activity analysis
   internal processes: value added / non-value added
3. Product life cycle analysis
   development: estimate cost covered
   introduction: estimate length of life cycle and decide marketing and pricing strategy
   growth: strategic and budgeting cycle, anticipate decline phase
4. Value chain analysis
   focus on impact on customer value proposition