CHAPTER 3:

EXTERNAL ANALYSIS:
INDUSTRY STRUCTURE,
COMPETITIVE FORCES,
AND STRATEGIC GROUPS

Prepared by:
Ms. Chona B. Asoque
Learning Objectives:

 Apply the PESTEL model to organize and assess the

impact of external forces on the firm.

 Apply the structure-conduct-performance (SCP) model to

explain the effect of industry structure on firm
profitability.

 Apply the five forces model to understand the profit

potential of the firm’s industry.
1. OBJECTIVE:
Apply the PESTEL model to organize and assess the impact of external
forces on the firm.

THE PESTEL FRAMEWORK

2. OBJECTIVE:
Apply the structure-conduct-performance (SCP) model to explain the
effect of industry structure on firm profitability.

Industry
- A group of companies offering similar products and services.

Structure-Conduct-Performance (SCP) Model

- A theoretical framework that explains differences in industry
performance. It identifies four (4) different industry types:

1. Perfect Competition
2. Monopolistic Competition
3. Oligopoly
4. Monopoly
3. OBJECTIVE:
Apply the five forces model to understand the profit potential of the
firm’s industry.