Tutorial 2

QUESTIONS

1. Explain the importance of analyzing and understanding the firm’s external environment.

The primary reason for the understanding and analysis of the firm's external environment is to
evaluate the threats and opportunities in the industry. These threats and opportunities are
determined to have growth, profitability, and volatility in a business.

An internal analysis looks at factors within your business such as your strengths and
weaknesses. Examining your internal and external analyses together gives you a complete
picture of your current situation and the steps you can take to plan your marketing.

What is the importance of environmental analysis in business environment?

Business environment analysis is important because it helps organizations better prepare for
changes in their environments. By monitoring environmental factors, managers can anticipate
threats and opportunities. Business environment analysis also empowers managers to capitalize
on strengths and address weaknesses

2. Discuss the four components or activities of the external environmental analysis process.

The external environmental analysis process includes four steps: scanning, monitoring,
forecasting and assessing.

3. Name and describe the general environments six segments.

We group these dimensions into six segments: political, economic, social, technical or
technological, environmental, and legal. You can use the simple acronym, PESTEL, to help
remind you of these six general environment segments. PESTEL

4. There are three different types of External Environmental Analysis. Name each and discuss.

In general, there are three major parts of external environment in business includes the general
environment, the industrial environment and the competitor's environment.

The general environment, which includes an array of external influences, such as the
environment, technology, economic conditions, demographics, socio-cultural forces, and
political or legal factors.

An industrial environment is a term used to describe working conditions that may be outside of
optimal. Industrial environments are usually more harsh than normal work environments, such

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 as an office. In an industrial environment, people and equipment are exposed to more extreme
conditions.

A competitive environment is one in which companies compete with each other. The more
businesses that provide a similar product or service, the more competitive the environment.

5. Critically discuss the five forces that influence the industry environment. Draw a model to
illustrate (use the white board).
Porter's Five Forces include: Competitive Rivalry, Supplier Power, Buyer Power, Threat of
Substitution, and Threat of New Entry. The model encourages organizations to look beyond
direct competitors and, instead, consider broader environmental forces.

6. Name and discuss on the two major elements of the Internal Environment of a firm.
Elements of the internal environment are; Owners and Shareholders.
7. Identify and discuss the components of internal analysis and explain the need for firms to study
and understand the internal environment.
There are five main components of an Internal Analysis, including resources, capabilities, core
competencies, competitive advantage, and strategic competitiveness. Each component is the
basis of next one in turn.

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 Resources are the organization's assets, knowledge and skills. Capabilities can be defined as the
organization's ability to effectively make use of its resources.
8. Discuss how a sustainable competitive advantage of a firm can be achieved.
9. Define ‘value’ and discuss the importance of creating value.
Value is measured by a product’s performance characteristics and by its attributes for which
customers are willing to pay. Firms create value by innovatively bundling and leveraging their
resources to form capabilities and core competencies. Firms with a competitive advantage create
more value for customers than do competitors. Walmart uses its “every day low price” approach to
doing business (an approach that is grounded in the firm’s core competencies, such as information
technology and distribution channels) to create value for those seeking to buy products at a low
price compared to competitors’ prices for those products. The stronger these firms’ core
competencies, the greater the amount of value they’re able to create for their customers.
Ultimately, creating value for customers is the source of above-average returns for a firm.

10. Identify and discuss four tangible resources and three intangible resources firms must have.
Tangible resources – financial resouures – the firm borrowing capacotiy
Orgainsational resources – the firm formal reporting structure and its formal planning controlling
Physical resouces pg 18,19

11. Differentiate between a firms, resources,

capabilities, capabilities are used to complete the organizational tasks required to produce,
distribute, and service the goods or services the firm provides to customers for the purpose of
creating value for them
and core competencies. . Core competencies distinguish a company competitively and reflect
its personality. Core competencies emerge over time through an organizational process of
accumulating and learning how to deploy different resources and capabilities