Chapter 2 StratMan
complex, and global conditions that make
General Environment- composed of dimensions in
the broader society that influence
Seven environmental segments:
• Demographic
• Economic
• Political/legal
• Sociocultural
• Technological
• Global
• Sustainable physical
Industry Environment- set of factors that directly
influences a firm and its competitive actions and
responses:
• the threat of new entrants
• the power of suppliers
• the power of buyers
• the threat of product substitutes
• the intensity of rivalry among competing
firms
Competitor Analysis
- how the companies gather and interpret
information about their competitors
- understanding the firm’s competitor
environment
External Environmental Analysis- turbulent,
interpreting those environments difficult
Four parts:
1. Scanning
2. Monitoring
3. Forecasting
4. Assessing
Opportunity
- helps a company reach strategic
competitiveness
Most companies, and certainly large ones-
continuously encounter multiple opportunities as
well as threats.
Threat- may hinder a company’s efforts to achieve
strategic competitiveness
Scanning
- entails the study of all segments in the
general environment
- to understand trends in the general
environment and to predict their implications
Monitoring- analysts observe environmental
changes to see if an important trend is emerging
Forecasting- analysts develop feasible projections
of what might happen, and how quickly
Assessing- to determine the timing and
significance of the effects of environmental
changes
7 Segments of General Environment:
1. Demographic segment
- concerned with a population’s size, age
structure
- commonly analyzed on a global basis
2. Economic segment- nature and direction of
the economy in which a firm competes or may
compete
3. Political/legal segment
- groups compete for attention, resources,
and a voice in overseeing the body of laws
- to influence governments and how they try
to understand the influences
4. Sociocultural segment- concerned with a
society’s attitudes and cultural values
5. Technological segment- includes the Strategic Groups
institutions and activities involved in creating
- set of firms emphasizing similar strategic
new knowledge
6. Global segment- includes relevant new global dimensions and using a similar strategy
markets, existing markets that are changing - useful for analyzing an industry’s
competitive structure
7. Sustainable physical environment segment-
potential and actual changes in the physical Competitor Analysis- focuses on each company
environment against which a firm competes directly
Industry Environment Analysis Ethical Considerations- firms must follow relevant
- companies use a rich mix of different laws and regulations as well as carefully articulated
ethical guidelines
competitive strategies to pursue above-
average returns
- has a more direct effect on the
competitive actions and responses a firm
takes to succeed
Industry- group of firms producing products that
are close substitutes
Five Forces of Competition Model

1. Threat of New Entrants- they bring

additional production capacity
2. Bargaining Power of Suppliers-
increasing prices and reducing the quality of
their products
3. Bargaining Power of Buyers- buyers want
to buy products at the lowest possible price
4. Threat of Substitute Products- Substitute
products are goods or services from outside
a given industry that perform similar or the
same functions as a product that the
industry produces
5. Intensity of Rivalry among Competitors-
industry’s firms are mutually dependent,
actions taken by one company usually invite
responses