External Analysis Flashcards
Why shouldn’t you use a SWOT analysis in Strategic Management?
The strengths, weaknesses, opportunities, and threats are all put into one analysis and under the basic strategic framework these are all different elements.
Firm and industry level are compared in the same analysis.
What is the first step of external analysis?
Defining the industry
What should you consider when defining a industry?
When you do a narrow definition, you may miss to capture some of the trends around the particular industry.
Defining the geographical element, it is easier to find suppliers, customers, and competitors clearly.
What are the Marco environment analysis objectives?
What are the major trends affecting the future growth of the industry?
Will this industry grow faster or slower than average industry rates?
What is the timeframe for a macro environmental analysis?
3 to 5 years
What are the elements of a PESTEL analysis?
Political: Trade barriers, recent issues (Brexit)
Economic: Unemployment levels, exchange rates, disposable income.
Social: Multicultural, marital or work relationships
Technological: Digitalisation, social networking
Environmental: Environmentally cautious trends, reducing pollution contribution.
Legal: Linked with political, Fair Work Act, Working with children.
Why are some industries more profitable than others?
Determined by underlying economic characteristics found in Porter’s 5 forces.
What framework can be used to analyse the profitability of an industry?
Porter’s 5 Forces Analysis
Explain the elements of Porter’s 5 forces analysis
Threats of new entrants (switching costs, brand identity)
Bargaining power of suppliers (dependence on the product from supplier is high, suppliers have high amount of power).
Bargaining power of buyers (buyers’ profitability, industry concentration relative to buyers’ concentration – monopsony).
Power of substitutes (price and performance of substitutes).
Intensity of industry rivalry (industry growth rate, diversity of competitors, exit barriers).
