External Environment Analysis 
CHAPTER TWO
EXTERNAL ENVIRONMENT ANALYSIS
At the end of this chapter, the student should be able to:
1. Understand the processes for an environmentally conscious organization.
2. Know the importance of SWOT analysis in analyzing both external and internal environment.
3. Understand the different segments of the external environment known as the general environment.
4. To find out how the strength of the company’s competitive forces are congruent with the industry’s through the five-forces model of industry competition.
5. To understand the relevance of benchmarking in evaluating company’s performance as against competitors.
INTRODUCTION:
Companies must be responsive to the external business environment. Knowledge about the business environment is essential to detect key trends and events. Successful managers must recognize opportunities and threats in their firm’s external environment. They must be aware of what is going on outside their company. To become environmentally aware, managers must first realize that many external factors are uncontrollable like recession, government interference, actions of competitors and other factors.
PROCESSES FOR AN ENVIRONMENTALLY CONSCIOUS ORGANIZATION
1. Environmental scanning. Environmental scanning involves surveillance of a firm’s external environment to predict environmental changes and detect changes already underway. Successful environmental scanning alerts the organization to critical trends and events before the changes have developed a discernible pattern and before competitors recognize them.
2. Environmental monitoring. Environmental monitoring tracks the evolution of environmental trends, sequences of events, or streams of activities. They may be trends that the firm came across by accident or ones that brought to its attention from outside the organization.
3. Competitive intelligence. Competitive intelligence helps firms define and understand their industry and identify rivals’ strengths and
EXTERNAL ENVIRONMENT ANALYSIS
At the end of this chapter, the student should be able to:
1. Understand the processes for an environmentally conscious organization.
2. Know the importance of SWOT analysis in analyzing both external and internal environment.
3. Understand the different segments of the external environment known as the general environment.
4. To find out how the strength of the company’s competitive forces are congruent with the industry’s through the five-forces model of industry competition.
5. To understand the relevance of benchmarking in evaluating company’s performance as against competitors.
INTRODUCTION:
Companies must be responsive to the external business environment. Knowledge about the business environment is essential to detect key trends and events. Successful managers must recognize opportunities and threats in their firm’s external environment. They must be aware of what is going on outside their company. To become environmentally aware, managers must first realize that many external factors are uncontrollable like recession, government interference, actions of competitors and other factors.
PROCESSES FOR AN ENVIRONMENTALLY CONSCIOUS ORGANIZATION
1. Environmental scanning. Environmental scanning involves surveillance of a firm’s external environment to predict environmental changes and detect changes already underway. Successful environmental scanning alerts the organization to critical trends and events before the changes have developed a discernible pattern and before competitors recognize them.
2. Environmental monitoring. Environmental monitoring tracks the evolution of environmental trends, sequences of events, or streams of activities. They may be trends that the firm came across by accident or ones that brought to its attention from outside the organization.
3. Competitive intelligence. Competitive intelligence helps firms define and understand their industry and identify rivals’ strengths and