Chp 3 The External Assessment LO2

Chapter 3

The External Assessment

Strategic Management:
Concepts & Cases
13th Edition
Fred David

Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

Ch 3 -1

External Audit

 Environmental Scanning
 Industry Analysis

Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

Ch 3 -2

External Audit

Purpose of an External Audit
 Develop a finite list of
 opportunities

that could benefit a firm
 threats that should be avoided

Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

Ch 3 -3

External Audit
Identify & evaluate factors beyond the control of a single firm:  Increased foreign competition
 Population shifts
 Aging society
 Fear of traveling
 Stock market volatility
Firms should be able to respond either offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or that minimize the impact of potential threats
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

Ch 3 -4

Relationships Between Key External
Forces and an Organization
FORCES
• Political
Governmental
• Economic
• Social, Cultural,
Demographic
• Technological
• Environmental
• Legal
• Competitive

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Competitors
Suppliers
Distributors
Creditors
Employees
Communities
Managers
Stakeholders
Labour Unions
Governments
Trade Association
Special Interest group
Products
Services
Markets
Natural Environment

Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

An
Organisation’s
Opportunities
& Threats

Ch 3 -5

The Process of Performing an
External Audit
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First, gather competitive intelligence and information about (PESTELC) political/governmental, economic, social/cultural/demographic, technological, environmental, legal, and competitiveness trends
Information should be assimilated and evaluated
A final list of the most important key external factors should be communicated
A prioritized list of these factors could