Strategic Management External Assessment
Chapter 3: Making an External Assessment
External Strategic Management Audit -Identify & evaluate factors beyond the control of a single firm.
Increased foreign competition
Population shifts
Aging society
Fear of traveling
Stock market volatility
Purpose of an External Audit
Develop a finite list of opportunities that could benefit a firm threats that should be avoided
Process of performing an External Audit:
Gather competitive intelligence
Assimilate information
Evaluate
Key External Forces: economic forces social, cultural, demographic, and natural environment forces political, governmental, and legal forces technological forces competitive forces
Industrial Organization (I/O) View:
Industry factors are more important than internal factors
Industry Properties
Economies of Scale
Product Differentiation
Level of Competitiveness
Barriers to Market Entry
The Economy
KEY EXTERNAL FORCES:
1. Economic Forces:
GDP
Trends in the peso value
Unemployment rates
2.Social, Cultural, Demographic, and Natural Environmental Forces:
Major Impact –
Products
Services
Markets
Customers
3.Political, Governmental, and Legal Forces:
Government Regulation
Key opportunities & threats
Antitrust legislation
Tax rates
Lobbying activities
Patent laws
4.Technological Forces:
Major Impact –
Internet
Significance of IT
Chief Information Officer (CIO)
Chief Technology Officer (CTO)
5.Competitive Forces:
Collection & evaluation of data on competitors is essential for successful strategy formulation
Key Questions Concerning Competitors:
Their strengths
Our product/service positioning
Their weaknesses
Entry and exit of firms in the industry
Their objectives and strategies
Key factors for our current position in industry
Their responses to external variables
Sales/profit ranking of competitors over time
Their vulnerability to our alternative strategies
Nature of supplier and distributor
External Strategic Management Audit -Identify & evaluate factors beyond the control of a single firm.
Increased foreign competition
Population shifts
Aging society
Fear of traveling
Stock market volatility
Purpose of an External Audit
Develop a finite list of opportunities that could benefit a firm threats that should be avoided
Process of performing an External Audit:
Gather competitive intelligence
Assimilate information
Evaluate
Key External Forces: economic forces social, cultural, demographic, and natural environment forces political, governmental, and legal forces technological forces competitive forces
Industrial Organization (I/O) View:
Industry factors are more important than internal factors
Industry Properties
Economies of Scale
Product Differentiation
Level of Competitiveness
Barriers to Market Entry
The Economy
KEY EXTERNAL FORCES:
1. Economic Forces:
GDP
Trends in the peso value
Unemployment rates
2.Social, Cultural, Demographic, and Natural Environmental Forces:
Major Impact –
Products
Services
Markets
Customers
3.Political, Governmental, and Legal Forces:
Government Regulation
Key opportunities & threats
Antitrust legislation
Tax rates
Lobbying activities
Patent laws
4.Technological Forces:
Major Impact –
Internet
Significance of IT
Chief Information Officer (CIO)
Chief Technology Officer (CTO)
5.Competitive Forces:
Collection & evaluation of data on competitors is essential for successful strategy formulation
Key Questions Concerning Competitors:
Their strengths
Our product/service positioning
Their weaknesses
Entry and exit of firms in the industry
Their objectives and strategies
Key factors for our current position in industry
Their responses to external variables
Sales/profit ranking of competitors over time
Their vulnerability to our alternative strategies
Nature of supplier and distributor