Evaluating the External Environment Flashcards
everything around us
Environment
refers to the sum total of all the
forces surrounding and influencing the life and
development of the firm.
Business environment
is the monitoring, evaluating,
and disseminating of information from external and
internal environment to key people in company.
Environmental scanning
is a strategic
planning tool businesses and individuals use to identify
and assess the strengths, weaknesses, opportunities and
threats associated with an organization, project, business
plan or activity.
SWOT matrix, or SWOT analysis
SWOT(Strength , Weaknesses, Opportunities, Threats)
is a tool designed to examine a
company’s external environment.
PESTLE analysis
matrix focuses on strategy formulation
especially as related to the competitive position of an
organization.
Strategic Position & ACtion Evaluation matrix or
SPACE
an attractive and relatively stable
industry, the company has a competitive advantage and it
can protect it, a critical factor is the possible entry of new
competitors into the industry
Aggressive position
attractive and relatively unstable
environment, the company has some competitive advantage,
a critical factor is the company’s financial strength.
Competitive position -
a stable industry with low growth
rate and financially stable company, a critical factor is in
the product competitiveness, company should protect its
succesful products and develop new ones and think about the
possibilities of the penetration into the industry more attractive
and reduce costs.
Conservative position -
an unattractive industry, the
company lacks competitive products and financial
resources, a critical factor is the competitiveness, the
company should reduce costs, reduce investment and
consider leaving the industry.
Defensive position -
a group of companies that produce similar
products or offer similar services that are close substitutes
Industry
comes from customer
segments that make up the markets. The
size and importance of customers provide
the power to negotiate prices and deals
that reduce the profitability of the industry.
The size and growth of segments
determine their potential influence on
product development and level of
competition.
primary force
comes from the competitors and their
strategies for gaining market share. Each competitor offers a set of
products and services that attempts to provide higher value to the
product-market segments they address.
secondary force
comes from the industry
Suppliers. Industry suppliers often control
critical inputs that can affect a firms ability to
compete. Access to critical equipment,
materials, or components can determine what
firms will lead the industry. For this reason,
increased outsourcing often leads to lower
entry barriers for new competition.
third force
represents the barriers to change in industry structure, either
from new competitors entering the industry or current competitors existing the
industry. Barriers to entry often include heavy investment in capital, equipment,
and market development
fourth force
