STRAMA CHAPTER 7 SCRIPT

Hello, before I leave this house allow me to convince the viewers. Key external forces, External forces
can be divided into five broad categories: (1) economic forces, (2) social, cultural, demographic, and
natural environment forces, (3) political, governmental and legal forces, (4) technological forces, and (5)
competitive forces. External trends and events, such as rising food prices and people in African countries
learning about online services, significantly affect the products, services, markets, and organizations
worldwide. Take this as a note, when identifying and prioritizing key external factors in strategic
planning, make sure the factors selected are (1) specific meaning qualified to the extent possible; (2)
action-able meaning it should be meaningful in terms of strategic implications; (3) stated as external
trends, events or facts rather than as strategies the firm could pursue. Selecting factors that will be
helpful in deciding what to recommend the firm should do, rather than selecting nebulous factors that is
too vague for an actionable response.

To explain further, changes in external forces translate into the changes in consumer demand for both
industrial and consumer products and services. External forces affect the types of products developed,
the nature of positioning and market segmentation strategies, the type of services offered, and the
choice of businesses to acquire or sell. External forces have a direct impact on both suppliers and
distributors. Their role is to identify and evaluate external opportunities and threats that enables
organizations to develop a clear mission, to design strategies to achieve long term objectives, and to
develop policies to achieve annual objectives.

The increasing complexity of business today is evidenced by more countries developing the capacity and
will to compete aggressively in world markets. Foreign businesses and countries are willing to learn,
adapt, innovate, and invent to compete successfully in the marketplace. Fast growth worldwide,
recently reported by Alibaba and Samsung, are examples.

Next topic to be discussed is the process of performing an external audit. The process of performing an
external audit must involve as many managers and employees as possible. As emphasized in previous
chapters, involvement in the strategic-management process can lead to understanding and commitment
from organizational members. Individuals appreciate having the opportunity to contribute ideas and to
gain a better understanding of their firm’s industry, competitors and markets. Key external factors can
vary over time and by industry. To perform an external audit, a company first must gather competitive
intelligence and information about economic, social, cultural, demographic, environmental, political,
governmental, legal and technological trends. Individuals can be asked to monitor various sources of
information, such as key magazines, trade journals, and newspapers and use online sources. These
individuals can submit periodic scanning reports to the person or persons who coordinate the external
audit. This approach provides a continuous stream of timely strategic information and involves many
individuals in the external- audit process. Suppliers, distributors, salespersons, customers, and
competitors represent other sources of vital information.

After information is gathered, it should be assimilated and evaluated. Meeting or series of meetings of
managers is significant to collectively identify the most important opportunities or threats facing the
firm. A prioritized list of the factors must be obtained by requesting that all managers individually rank
the factors identified or instead of ranking factors, managers could simply place checkmarks by their
most important “top 10 factors.” Then, by summing the rankings, or the number of checkmarks, a
prioritized list of factors is revealed because Prioritization is definitely essential in strategic planning
because no organization can do everything that would benefit the firm; tough choices among good
choices have to be made.

Last topic to be discussed is the Industrial organization view or the I/O view. To start, the industrial
organization of strategic planning advocates that external industry factors are more important than
internal ones for gaining and sustaining competitive advantage. Porter’s five-forces model, that is
presented later in this chapter, is an example of the I/O perspective, which focuses on analyzing external
forces and industry variables as a basis for getting and keeping competitive advantage.

According to I/O advocates, Competitive advantage is determined largely by competitive positioning

within the industry. Managing strategically from the I/O perspective entails firms striving to compete in
attractive industries, avoiding or faltering industries and gaining a full understanding of key external
factor relationships within that attractive industry.

The I/O view has enhanced the understanding of strategic management. However, the authors contend
that it is not a question of whether external or internal factors are more important in gaining and
maintaining competitive advantages. On the other hand, effective integration and understanding of both
external and internal factors is the key to securing and keeping a competitive advantage. In fact, as
discussed in the next chapter, matching key external opportunities and threats with key internal
strengths and weaknesses provides the basis for the successful formulation.

For the next reporter, I am calling…