The Strategic Management Process The Strategic Management Process

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Chapter 2: The External Environment:
Opportunities, Threats, Industry Competition
and Competitor Analysis
Overview: Ove v e :
The firms external environment
External environmental analysis
General environmental segments
Industry environment (and analysis)
Porters 5 Competitive Forces
Strategic groups: Definition and influence
Competitors and competiti e intelligence Competitors and competitive intelligence
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External Environment Analysis External Environment Analysis
4 components 4 p
Scanning the study of all segments in the
general environment
M i i b i i l h Monitoring observing environmental changes to
see if an important trend is emerging
Forecasting the development of feasible g p
projections of what might happen and how
quickly as a result of the changes and trends
detected detected
Assessing determining the timing and
significance of the effects of environmental
changes and trends on the firm
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changes and trends on the firm
External Environment Analysis External Environment Analysis
Opportunity
General environment condition that, if exploited
ff i l h l h i effectively, helps a company achieve strategic
competitiveness
Threat Threat
General environment condition that may hinder a
company's efforts to achieve strategic competitiveness
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The External Environment:
General Industry and Competitor General, Industry, and Competitor
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The General Environment The General Environment
The General Environment
The broader society dimensions that influence an industry and
the firms within it
Grouped into 7 dimensions OR environmental segments p 7 g
Demographic populations size, age structure, geographic
distribution, ethnic mix, and income distribution
Economic nature and direction of economyy
Political/Legal laws and regulations
Sociocultural societys attitudes and cultural values
Technological newtechnologies and firms that create them Technological new technologies and firms that create them
Global new global markets, existing markets that are changing,
and their characteristics
Physical potential and actual changes in physical environment
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Physical potential and actual changes in physical environment
and business practices
The Industry Environment The Industry Environment
Industry Environment dust y v o e t
Set of factors directly influencing a firms competitive
actions/responses
Industry
Definition: Group of firms producing products that are
l b tit t close substitutes
Industry environment, in comparison to the general
environment, has more direct effect on firms ,
Strategic competitiveness and
Above-average returns
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Intensity of industry competition and industrys profit
potential are a function of 5 forces