External Analysis

Question 1

What is the objective of external environment analysis?

Answer 1

Through the swot analysis, help to identify opportunities (General environment conditions that, if exploited, help a company achieve strategic competitiveness)

and threats (General environment conditions that may hinder a company’s efforts to achieve strategic competitiveness)

Question 2

What are 4 generic components of analyzing the general external environment?

Answer 2

• scanning
• monitoring
• forecasting
• assessing

Question 3

What are general envsegments?

Answer 3

• Demographic segment: population size, age structure, geographic and income distributions
• Economic: inflation rate, savings and interest rates, GDPs
• Political/legal segment: antitrust, tax and labor laws

Socio-cultural segment: women in workforce, environmental concerns, products, service and career preferences

Technological segments: private vs government R&D, knowledge applications

Global: poltical events, global markets

Physical segment (environmental): ecological system

Question 4

Q: What is an industry?

Answer 4

R: group of firms producing products that are CLOSE SUBSTITUTES

Question 5

Q: What influences threat of new entrants?

Answer 5

BARRIERS TO ENTRY
-Switching costs
-economies of scale
-product differentiation
-capital requirements
-access to distributors
-gov. policy
EXPECTED RETALIATION

Question 6

When are suppliers powerful?

Answer 6

There’s threat of forward inetegration
suppliers products are cirtical for buyers success
few large concentrated companies than the industry to which they sell
switching costs due to suppliers efficecy
NO SUBSTITUTES

Question 7

When are buyers powerful?

Answer 7

no switching costs
firm buys a big part of the seller’s revenue
firm buys a big part of industry’s total output
threat of backward integration
products are undifferentiated or standardized

Question 8

When is the threat of substitute higher

Answer 8

• substitutes price are lower

- switching costs are low

Question 9

When is rivalry higher?

Answer 9

SLOW INDUSTRY GROWTH
HIGH FIXED COSTS
HIGH EXIT BARRIERS
HIGH STRATEGIC STAKES
lack of differentiation
lack of switching costs
numerous and equally balanced competitors

Question 10

Q: What makes an industry attractive?

Answer 10

HIGH barriers to entry

LOW bargaining power of supplier

LOW bargaining power of buyer

MODERATE INTENSITY OF RIVALRY

LOW threat of substitutes

Question 11

Q: When is backward integration appropriate?

Answer 11

• When the supplier is unreliable, too costly or cannot meet the firm’s needs.
• When number os suppliers is small and the number of ocmpetitors is large
• When the advantages of stable prices are particularly important; this is a factor because an organization can stabilize the cost of its raw materials and the associated price of its product(s) through backward integration.

Question 12

Q: When is forward inetgration appropriate and give examples?

Answer 12

• When there are small consumers
• when a firm’s present distributers are unreliable costly or cannot meeth the firm’s neds
• When an organization competes in an industry that is growing and is expected to continue to grow markedly; this is a factor because forward integration reduces an organization’s ability to diversify if its basic industry falters.

Question 13

Q: What to answer in a competitor analysis?

Answer 13

• What drives competitors? (future objectives)
• What the competitor is doing and can do? (current strategy)
• What the competitor believes about the industry? (assumptions)
• What are the competitor’s capabilities? (strengths and weaknesses)