STRATEGIC

ANALYSIS
Analyzing the External Environment of
the Firm
 “Educating the mind without
educating the heart is no education at
Quote for the all.”
day
- Aristotle
 1. Enhancing Awareness of the External Environment
a. The Role of Scanning, Monitoring, Competitive Intelligence,
and Forecasting

b. SWOT Analysis

Chapter
Outline 2. General Environment

3. Competitive Environment
a. Porter’s Five Forces Model of Industry Competition
Enhancing Awareness of
the External Environment
The Role of
Scanning,
Monitoring,
Competitive
Intelligence, and
Forecasting

● Gregory G. Dess, G. M.-H. (2019). Strategic Management text and cases. New
York: McGraw-Hill Education.
 ● Environmental scanning involves surveillance of a firm’s
external environment to predict environmental changes and
detect changes already underway.

The Role of ● Environmental monitoring tracks the evolution of

Scanning, environmental trends, sequences of events, or streams of
activities.
Monitoring,
Competitive ● Competitive intelligence (CI) helps firms define and
Intelligence, and understand their industry and identify rivals’ strengths and
Forecasting weaknesses.

● Environmental forecasting involves the development of

plausible projections about the direction, scope, speed, and
intensity of environmental change.
 ● a framework for analyzing a company’s internal and
external environments

● stands for strengths, weaknesses, opportunities, and

threats

SWOT Analysis ● The general idea of SWOT analysis is that a firm’s

strategy must:
• Build on its strengths.
• Remedy the weaknesses or work around them.
• Take advantage of the opportunities presented by
the environment.
• Protect the firm from the threats.
General Environment
 ● composed of factors that can have dramatic
effects on firm strategy

●six segments:
General ● Demographic
Environment ● Sociocultural
● political/legal
● Technological
● Economic
● Global
Six Segments
Six Segments

● Gregory G. Dess, G. M.-H. (2019). Strategic Management text and cases. New
York: McGraw-Hill Education.
Competitive
Environment
 1. The threat of new entrants.
Porter’s Five 2. The bargaining power of buyers.
Forces Model of 3. The bargaining power of suppliers.
Industry 4. The threat of substitute products and services.
Competition
5. The intensity of rivalry among competitors in
an industry.
Porter’s Five
Forces Model of
Industry
Competition

Sources: From Michael E. Porter, “The Five Competitive Forces That Shape Strategy,” Special Issue on HBS
Centennial. Harvard Business Review 86, No. 1 (January 2008), 78–93. Reprinted with permission of Michael E. Porter.
 ● Gregory G. Dess, G. M.-H. (2019). Strategic Management text and cases. New York:
Reference: McGraw-Hill Education.
End of Lesson 1 Part 2