03-06. the external assessment - 2 mar - 9 maret 2015

The External AssessmentChapter Three

Copyright 2013 Pearson Education

Chapter ObjectivesDescribe how to conduct an external strategic-management audit.Discuss 10 major external forces that affect organizations: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive.Describe key sources of external information, including the Internet.Discuss important forecasting tools used in strategic management.Discuss the importance of monitoring external trends and events.3-*Copyright 2013 Pearson Education


Chapter Objectives (cont.)Explain how to develop an EFE Matrix.Explain how to develop a Competitive Profile Matrix.Discuss the importance of gathering competitive intelligence.Describe the trend toward cooperation among competitors.Discuss market commonality and resource similarity in relation to competitive analysis.3-*Copyright 2013 Pearson Education


External AuditExternal auditfocuses on identifying and evaluating trends and events beyond the control of a single firmreveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats3-*Copyright 2013 Pearson Education


The Nature of an External AuditThe external audit is aimed at identifying key variables that offer actionable responsesFirms 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.3-*Copyright 2013 Pearson Education


Key External ForcesExternal forces can be divided into five broad categories: economic forcessocial, cultural, demographic, and natural environment forcespolitical, governmental, and legal forcestechnological forcescompetitive forces3-*Copyright 2013 Pearson Education


The Process of Performing an External AuditFirst, gather competitive intelligence and information about economic, social, cultural, demographic, environmental, political, governmental, legal, and technological trends.3-*Copyright 2013 Pearson Education


The Process of Performing an External AuditInformation should be assimilated and evaluatedA final list of the most important key external factors should be communicated

3-*Copyright 2013 Pearson Education


The Process of Performing an External AuditKey external factors should be:important to achieving long-term and annual objectivesmeasurableapplicable to all competing firms, andhierarchical in the sense that some will pertain to the overall company and others will be more narrowly focused on functional or divisional areas3-*Copyright 2013 Pearson Education


The Industrial Organization (I/O) ViewThe Industrial Organization (I/O) approach to competitive advantage advocates that external (industry) factors are more important than internal factors in a firm for achieving competitive advantage.3-*Copyright 2013 Pearson Education


Social, Cultural, Demographic, and Natural Environmental ForcesU.S. FactsAging populationLess whiteWidening gap between rich & poor2025 = 18.5% population > 65 years2075 = no ethnic or racial majority3-*Copyright 2013 Pearson Education


Social, Cultural, Demographic, and Natural Environmental ForcesFactsWorld population 7 billionWorld population = 8 billion by 2028World population = 9 billion by 2054U.S. population > 310 million 3-*Copyright 2013 Pearson Education


Political, Governmental, and Legal ForcesThe increasing global interdependence among economies, markets, governments, and organizations makes it imperative that firms consider the possible impact of political variables on the formulation and implementation of competitive strategies.3-*Copyright 2013 Pearson Education


American Labor UnionsThe extent that a state is unionized can be a significant political factor in strategic planning decisions as related to manufacturing plant location and other operational mattersThe size of American labor unions has fallen sharply in the last decade due in large part to erosion of the U.S. manufacturing base3-*Copyright 2013 Pearson Education


Technological ForcesThe Internet has changed the very nature of opportunities and threats by: altering the life cycles of products, increasing the speed of distribution, creating new products and services, erasing limitations of traditional geographic markets,changing the historical trade-off between production standardization and flexibility.3-*Copyright 2013 Pearson Education


Technological ForcesThe Internet is altering economies of scale, changing entry barriers, and redefining the relationship between industries and various suppliers, creditors, customers, and competitors3-*Copyright 2013 Pearson Education


Technological ForcesMany firms now have a Chief Information Officer (CIO) and a Chief Technology Officer (CTO) who work together to ensure that information needed to formulate, implement, and evaluate strategies is available where and when it is needed3-*Copyright 2013 Pearson Education


Technological ForcesTechnological advancements can: Create new markets,Result in a proliferation of new and improved products,Change the relative competitive cost positions in an industry,Render existing products and services obsolete.3-*Copyright 2013 Pearson Education


Competitive ForcesAn important part of an external audit is identifying rival firms and determining their strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies3-*Copyright 2013 Pearson Education


Competitive ForcesCharacteristics of the most competitive companies:Market share mattersUnderstand and remember precisely what business you are inWhether its broke or not, fix itmake it betterInnovate or evaporateAcquisition is essential to growthPeople make a differenceThere is no substitute for quality3-*Copyright 2013 Pearson Education


Competitive Intelligence ProgramsCompetitive intelligence (CI)a systematic and ethical process for gathering and analyzing information about the competitions activities and general business trends to further a businesss own goals3-*Copyright 2013 Pearson Education


Competitive Intelligence ProgramsThe three basic objectives of a CI program are: to provide a general understanding of an industry and its competitorsto identify areas in which competitors are vulnerable and to assess the impact strategic actions would have on competitors3-*Copyright 2013 Pearson Education


Competitive Intelligence Programsto identify potential moves that a competitor might make that would endanger a firms position in the market



Market Commonality and Resource SimilarityMarket commonality the number and significance of markets that a firm competes in with rivalsResource similarity the extent to which the type and amount of a firms internal resources are comparable to a rival3-*Copyright 2013 Pearson Education


The Five-Forces Model of CompetitionIdentify key aspects or elements of each competitive force that impact the firm.Evaluate how strong and important each element is for the firm.Decide whether the collective strength of the elements is worth the firm entering or staying in the industry.3-*Copyright 2013 Pearson Education


Barriers to EntryNeed to gain economies of scale quicklyNeed to gain technology and specialized know-howLack of experienceStrong customer loyaltyStrong brand preferencesLarge capital requirements Lack of adequate distribution channels3-*Copyright 2013 Pearson Education


Barriers to EntryGovernment regulatory policiesTariffsLack of access to raw materialsPossession of patentsUndesirable locationsCounterattack by entrenched firmsPotential saturation of the market



The Five-Forces ModelBargaining Power of Suppliers is increased when there are:Large numbers of suppliersFew substitutesCosts of switching raw materials is highBackward integration is gaining control or ownership of suppliers 3-*Copyright 2013 Pearson Education


The Five-Forces ModelBargaining power of consumersCustomers being concentrated or buying in volume affects intensity of competitionConsumer power is higher where products are standard or undifferentiated3-*Copyright 2013 Pearson Education


Conditions Where Consumers GainBargaining PowerIf buyers can inexpensively switchIf buyers are particularly importantIf sellers are struggling in the face of falling consumer demandIf buyers are informed about sellers products, prices, and costsIf buyers have discretion in whether and when they purchase the product 3-*Copyright 2013 Pearson Education


Industry Analysis: Competitive Profile Matrix (CPM)Identifies firms major competitors and their strengths & weaknesses in relation to a sample firms strategic positionsCritical success factors include internal and external issues





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03-06. the external assessment - 2 mar - 9 maret 2015

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