SM Chapter 2

Strategic Management 22MBA25
Module - 2
External Assessment
The Process of performing an external audit, Nature of an external audit, key external
forces, industry analysis, competitive forces, competitive analysis-porter’s five
forces model, key success factors.
External Assessment:
External assessment in strategic management refers to the process of evaluating factors and
conditions outside an organization that could impact its performance and competitiveness. It
involves analyzing the external environment to identify opportunities and threats that may affect
the organization's ability to achieve its strategic objectives. The goal of external assessment is to
gain insights into the company's position relative to its competitors and to make informed decisions
about its future direction.
Key components of external assessment include:

 Industry Analysis: Understanding the characteristics of the industry in which the
organization operates is crucial. This involves studying market trends, the competitive
landscape, and the overall attractiveness and growth potential of the industry.
 Competitive Analysis: Analyzing the organization's competitors to identify their

strengths, weaknesses, strategies, and market positions. Understanding competitive forces
helps the organization to devise strategies to gain a competitive advantage.
 Market Analysis: Assessing the target market, customer needs, preferences, and behavior.
This helps in tailoring the organization's offerings to meet customer demands effectively.
 Economic Factors: Evaluating economic conditions such as inflation, interest rates,

exchange rates, and overall economic stability. These factors can impact the organization's
cost structure, pricing decisions, and overall business outlook.
 Technological Factors: Identifying technological advancements and innovations that

could disrupt the industry or create new opportunities for the organization.
 Legal and Regulatory Factors: Understanding the relevant laws and regulations that the
organization must comply with. Changes in laws and regulations can affect operations and
may open up new opportunities or present challenges.
Asst. Prof. Chandana TC

Department of Management Studies
Sai Vidya Institute of Technology Page 1
 Social and Cultural Factors: Considering societal and cultural trends that may influence
consumer behavior, preferences, and the organization's reputation.
 Environmental Factors: Assessing the impact of environmental factors on the

organization's operations, sustainability efforts, and public perception.
Advantages of External Assessment:

✓ Insight into Market Opportunities: External assessment helps organizations identify
new market opportunities, potential customer segments, and emerging trends. This enables
them to develop strategies to tap into these opportunities and stay ahead of the competition.
✓ Risk Identification and Mitigation: By analyzing the external environment,

organizations can identify potential risks and threats early on. This allows them to take
proactive measures to mitigate these risks and minimize their impact on the business.
✓ Competitive Advantage: Understanding the competitive landscape through external

assessment enables organizations to identify their strengths and weaknesses relative to
competitors. This knowledge helps in developing strategies to gain a competitive
advantage in the market.
✓ Strategic Alignment: External assessment ensures that the organization's strategic

decisions are aligned with the external environment. It helps avoid making plans based
solely on internal factors, leading to more realistic and effective strategies.
✓ Informed Decision-Making: The insights gained from external assessment provide a

foundation for informed decision-making across various business functions, from
marketing and sales to product development and resource allocation.
✓ Adaptation to Change: Continuous external assessment allows organizations to adapt

quickly to changes in the external environment. This agility is essential in dynamic and
rapidly evolving industries.
Disadvantages of External Assessment:

✓ Time and Resource Intensive: Conducting a thorough external assessment requires
significant time, effort, and resources. For smaller organizations with limited resources,
this can be a challenge.
✓ Complexity and Uncertainty: The external environment is complex and can be difficult
to predict accurately. External assessment involves dealing with uncertainties, and
misinterpretation of data or trends can lead to flawed strategies.

✓ Data Overload: The abundance of information available in the external environment can
be overwhelming. Analyzing and prioritizing relevant data is crucial to avoid getting lost
in excessive information.
✓ Limited Control: While organizations can influence their internal factors, external factors
are often beyond their control. External assessment may highlight issues that the
organization cannot directly change or influence.
✓ Lack of Timeliness: The process of external assessment may not always yield real-time
insights. By the time the assessment is complete and strategies are formulated, some
external factors may have already changed.
✓ Overreliance on Data: Relying solely on external data may lead to overlooking internal
strengths and weaknesses. A balanced approach that considers both internal and external
factors is necessary for effective strategic decision-making.
The Process of Performing an External Audit:

Performing an external audit involves an independent examination of an organization's financial
records, processes, and controls by an external auditing firm. The primary goal of an external audit
is to provide an unbiased assessment of the organization's financial position and compliance with
relevant accounting principles, standards, and regulations. Below are the typical steps involved in
conducting an external audit:

 Define the Scope and Objectives: Clearly define the scope of the external audit and the
specific objectives you want to achieve. Determine which aspects of the external
environment you want to assess, such as industry trends, competitive landscape, economic
factors, regulatory changes, etc.
 Gather Relevant Data: Collect data from various sources to gain insights into the external
environment. Sources may include market research reports, industry publications,
government publications, competitor websites, and other reliable data sources. The data
collected should be current, accurate, and relevant to the organization's industry and
market.
 PESTEL Analysis: Conduct a PESTEL analysis to examine the macro-environmental

factors that could affect the organization. PESTEL stands for Political, Economic, Social,
Technological, Environmental, and Legal factors. Assess the impact of each factor on the
organization's strategies and performance.
 Industry Analysis: Evaluate the industry's attractiveness and competitiveness using tools
like Porter's Five Forces model. Analyze the power of buyers, suppliers, competitors,
potential new entrants, and substitutes. This analysis will help identify the organization's
competitive position within the industry.
 Competitor Analysis: Identify and analyze key competitors in the industry. Understand
their strengths, weaknesses, market share, strategies, and competitive advantages. This
analysis will help the organization identify areas where it can gain a competitive edge.
 Market and Customer Analysis: Assess the organization's target market and customer
preferences. Understand customer needs, expectations, and buying behavior. Analyze
market trends and potential growth opportunities.
 Opportunity and Threat Analysis: Based on the data collected and analyzed, identify
potential opportunities and threats in the external environment. Opportunities are favorable
external factors that the organization can capitalize on, while threats are potential
challenges that may hinder its success.
 SWOT Analysis: Combine the findings of the internal audit (an assessment of the
organization's strengths and weaknesses) with the external audit to conduct a SWOT
analysis (Strengths, Weaknesses, Opportunities, and Threats). This analysis will provide a
holistic view of the organization's strategic position.
 Ranking and Prioritization: Rank the identified opportunities and threats based on their
potential impact on the organization. Prioritize the most significant ones that require
immediate attention and action.

 Strategic Implications and Recommendations: Finally, based on the external audit's

findings, derive strategic implications and formulate recommendations. These
recommendations should align with the organization's overall strategic goals and can be
used to guide the development of new strategies or the adjustment of existing ones.
 Presenting the Findings: Communicate the results of the external audit to key
stakeholders within the organization. This could be in the form of a formal report or a
presentation. Ensure that the findings are well-understood and serve as a basis for strategic
decision-making.
Nature of External Audit:
1. External Focus: Unlike internal audits that examine the organization's internal capabilities
and resources, the external audit looks outward. It assesses the external factors that are beyond
the direct control of the organization but can significantly influence its success or failure.
2. Environmental Analysis: The external audit involves a comprehensive analysis of the
organization's macro-environment, which includes political, economic, social, technological,
environmental, and legal factors (PESTEL analysis). Additionally, it includes an industry analysis
and competitor analysis to understand the competitive landscape.

3. Proactive Approach: An external audit is proactive in nature. It helps organizations anticipate

changes and trends in the external environment rather than just react to them. By identifying
opportunities and threats in advance, organizations can be better prepared to adjust their strategies
accordingly.
4. Complexity and Dynamism: The external environment is complex and dynamic, with multiple
factors interacting and evolving continuously. Performing an external audit requires gathering and
analyzing a wide range of data from diverse sources to capture the complexity and keep up with
the changes.
5. Opportunities and Threats: The primary focus of the external audit is to identify potential
opportunities that the organization can leverage and threats that it needs to address. Opportunities
are areas where the organization can gain a competitive advantage or capitalize on emerging
trends. Threats are challenges or risks that may hinder the organization's success.
6. Industry and Market Understanding: Understanding the industry and market dynamics is
crucial in an external audit. It helps organizations position themselves effectively, recognize
market trends, and adapt their strategies to meet customer needs and expectations
7. Strategic Alignment: The findings of the external audit should align with the organization's
overall strategic goals and objectives. The identified opportunities and threats should be considered
in the formulation or adjustment of the organization's strategic plan.
8. Holistic Perspective: The external audit complements the internal audit (which assesses the
organization's strengths and weaknesses) to provide a holistic view of the organization's strategic
position. This integrated approach helps in developing well-informed and effective strategies.
9. Ongoing Process: The external environment is subject to constant changes, such as
technological advancements, shifts in customer preferences, regulatory updates, and economic
fluctuations. Therefore, the external audit is an ongoing process to ensure the organization stays
responsive to new developments.
10. Data-Driven and Objective: An external audit relies on data-driven analysis and objective
evaluation. It involves gathering reliable and relevant data from various sources to make informed
decisions and recommendations.

Key External Forces:
1. Economic factors: The overall economic conditions of a country or region can impact an
organization's operations. Factors like GDP growth, inflation rates, interest rates, and
unemployment levels can affect consumer spending, business investment, and the cost of
capital.
2. Technological advancements: Rapid developments in technology can disrupt industries
and create new opportunities. Organizations need to stay abreast of technological trends to
remain competitive and to leverage technology for operational efficiencies and innovation.
3. Political and legal factors: Government policies, regulations, and changes in political
landscapes can have a significant impact on business operations. These factors can
influence market entry barriers, trade agreements, tax policies, and environmental
regulations, among others.
4. Social and cultural factors: Societal values, lifestyle preferences, and cultural norms can
influence consumer behavior and demand for products or services. Understanding these
factors helps organizations tailor their offerings to meet customer needs effectively.
5. Demographic changes: Population shifts, such as aging populations or changes in birth
rates, can impact market dynamics and create opportunities or challenges for organizations.
6. Environmental factors: Increasing environmental concerns and sustainability
expectations can influence consumer preferences, product design, and supply chain
practices.

7. Competitive forces: The intensity of competition in an industry and the actions of

competitors can shape an organization's strategic choices. Analyzing competitors' strengths
and weaknesses helps in identifying market opportunities and threats.
8. Market trends: Keeping track of industry trends, market growth rates, and emerging
markets helps organizations identify new business opportunities and stay ahead of the
competition.
9. Globalization: The interconnectedness of economies and markets on a global scale can
create both opportunities and risks for organizations. Expanding into international markets
requires consideration of cultural, legal, and economic differences.
10. Technological risks: As organizations become more reliant on technology, they are
exposed to cybersecurity threats, data breaches, and disruptions from system failures.
11. Natural disasters and geopolitical events: Unforeseen events, such as earthquakes,
hurricanes, or geopolitical conflicts, can have a significant impact on business operations
and supply chains.
A Company’s Business Environment:

PESTEL ANALYSIS:
External environment Analysis:

 Political: government activity, types of laws, political stability.
 Economical: business cycles, inflation, interest rates, income levels, unemployment rates,
supply and demand rates.
 Social cultural: society, culture and beliefs.
 Technological: the technology imbibed in the organization.
 Ecological: environmental factors such as availability of raw materials, pollution, carbon
footprints etc.
 Legal: Discrimination laws, employment related laws, consumer protection related laws
etc.
Economic Environment:
It broadly describes the conditions of money market, manpower markets, buying power of
consumers, supply and demand for goods, etc.
It represents the size of market, income distributions, taste and preferences of consumers etc.
There are many economic indicators or factors to be considered for strategic planning such as;
(a) GDP size and growth rate

(b) Unemployment, Interest, Taxation and Inflation Rates

(c) Liquidity position and Monetary and Fiscal policies (SLR, CRR, etc)
(d) Income Distribution
(e) Consumption pattern and regional disparity
(f) Foreign exchange reserve, rates and policies
(g) Stock market conditions, etc.
Industry Analysis:
Industry analysis is the analysis of a specific branch of manufacturing, service, or trade.
Understanding the industry in which a company operates provides an essential framework for the
analysis of the individual company—that is, company analysis.
 Helps a company to realize it’s potential in the market amongst its’ competitors.
 It helps the company to invest in its strength, overcome the weakness, expand itself with
the prevailing opportunities in the market.
 This also let the company to know the forces, industry attractiveness, critical factors that
define company success.
Key Components of Industry Analysis in External Audit:

 Industry Overview: Start by providing a general overview of the industry, its size, scope,
and major players. Identify the main product or service offerings and any unique
characteristics that set the industry apart.

 Market Trends and Growth Drivers: Analyze current market trends, growth rates, and
factors that are driving or hindering growth within the industry. This can include
demographic shifts, technological advancements, changes in consumer behavior, or
economic conditions.
 Competitive Landscape: Assess the competitive structure of the industry, including the
number and size of competitors, market share distribution, and barriers to entry. Identify
any significant competitive advantages or disadvantages affecting the industry players.
 Regulatory and Legal Environment: Examine the regulatory framework governing the
industry. Understand how regulations impact the industry's operations, compliance
requirements, and potential risks for companies within the sector.
 SWOT Analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities,

Threats) of the industry. This analysis helps auditors and management understand the
internal and external factors that could influence the industry's future performance.
 Industry Outlook: Offer an outlook for the industry in terms of potential growth
opportunities, challenges, and future developments. This assessment should be supported
by relevant data and market research.
 Key Performance Indicators (KPIs): Identify and evaluate the critical KPIs for the
industry. Common KPIs may include revenue growth rates, profit margins, customer
retention rates, and market share changes.
 Peer Group Comparison: Compare the company being audited with its industry peers to
understand how it fares concerning financial performance and key metrics. This
comparison can help auditors gauge the company's relative position within the industry.
 Industry-specific Accounting Practices: Be aware of any industry-specific accounting

practices that may impact financial reporting and disclosure requirements.
Industry’s Driving Forces:

 Emerging new Internet capabilities and applications
 Increasing globalization
 Changes in an industry’s long-term growth rate
 Changes in who buys the product and how they use it.
 Product innovation

 Technological change and manufacturing process innovation

 Marketing Innovation
 Reduction in uncertainty and Business Risk.
 Regulatory Influence and government Policy Changes.
 Changing societal concerns, attitudes, and lifestyles.
Competitive Forces / Competitive Environment Analysis:

A competitive environment analysis is a process that
involves assessing and understanding the competitive
landscape in which a business operates. It is a crucial
part of strategic planning as it helps a company
identify its strengths, weaknesses, opportunities, and
threats relative to its competitors. By conducting a
thorough competitive environment analysis,
businesses can make informed decisions, develop effective strategies, and gain a competitive
advantage.
Competitive forces, also known as competitive factors or competitive pressures, refer to the
various influences and factors in the business environment that impact the competitiveness and
profitability of companies within an industry. These forces shape the level of competition within
the industry and affect how businesses operate, make decisions, and interact with each other and
their customers.
Competitive Analysis Typically Involves the following Key Steps:

External analysis involves assessing the external environment in which an organization operates
to understand the opportunities, threats, and dynamics that could impact its performance and
strategies. The key steps in external analysis are as follows:
Identify the Scope: Define the scope of your external analysis. Determine whether you're focusing
on a specific aspect of the external environment, such as industry analysis, macroeconomic factors,
or competitive analysis.
Gather Data: Collect relevant data and information from external sources. These sources may
include industry reports, market research, economic indicators, competitor data, customer
feedback, government publications, and social trends.
PESTEL Analysis: Conduct a PESTEL analysis to assess the macroeconomic factors that could
affect your organization:

 Political: Consider government policies, regulations, and geopolitical factors.

 Economic: Analyze economic indicators, inflation rates, exchange rates, and consumer
spending patterns.
 Social: Examine demographic trends, cultural shifts, lifestyle changes, and consumer
preferences.
 Technological: Evaluate technological advancements, innovation, and potential disruptive
technologies.
 Environmental: Assess environmental concerns, sustainability practices, and their impact
on the organization.
 Legal: Consider legal regulations, compliance requirements, and potential legal risks.
Porter's Five Forces Analysis: Apply Porter's Five Forces framework to analyze the industry's
competitive dynamics:
 Threat of New Entrants: Assess the barriers to entry for new competitors.
 Bargaining Power of Suppliers: Evaluate the influence suppliers have on the industry.
 Bargaining Power of Buyers: Analyze the power customers have to influence prices and
demand.
 Threat of Substitutes: Consider the availability of substitute products or services.
 Competitive Rivalry: Evaluate the intensity of competition among existing competitors.
Competitor Analysis: Study your key competitors to understand their strengths, weaknesses,
strategies, and market positioning. Identify potential areas of competitive advantage or
vulnerability.
Market Trends and Opportunities: Identify and analyze current and emerging trends in the
industry and market. Look for opportunities that your organization can leverage to gain a
competitive edge.
SWOT Analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to
summarize the internal strengths and weaknesses of your organization, as well as external
opportunities and threats.
Scenario Analysis: Consider different scenarios of how the external environment could evolve in
the future. This helps you prepare for potential changes and uncertainties.
Strategic Implications: Based on the analysis, identify the strategic implications for your
organization. Determine how the external factors could impact your business model, strategies,
and goals.
Prioritize Issues: Rank and prioritize the most significant external factors that could affect your
organization. Focus on those with the highest impact and feasibility.
Develop Strategies: Formulate strategies to capitalize on opportunities and mitigate potential
threats. Align these strategies with your organization's strengths and competitive advantages.

Implementation Plan: Create a detailed plan for implementing the identified strategies. Define
action steps, allocate resources, and set timelines.
Monitoring and Review: Continuously monitor the external environment, track changes in
relevant factors, and reassess your analysis periodically. Make adjustments to your strategies as
needed.
Communication: Communicate the findings of your external analysis and recommended
strategies to key stakeholders within the organization, such as senior management, board members,
and relevant departments.
Key components of competitor analysis:

Porter’s Five Forces Model:

Porter's Five Forces is a widely used framework for analyzing the competitive forces within an
industry. Developed by Michael E. Porter in his book "Competitive Strategy" in 1979, the model
helps businesses understand the attractiveness and profitability of an industry and identify key
factors that influence competition.
1. Threat of New Entrants: This force examines the ease with which new competitors can
enter the industry. Factors such as barriers to entry, economies of scale, access to
distribution channels, and government regulations play a role in determining the level of
threat. When barriers are low, new entrants can easily establish themselves, intensifying
competition and potentially reducing profitability for existing companies.
2. Threat of Substitutes: This force examines the potential of alternative products or services
outside the industry that could fulfill the same customer needs. When there are readily
available substitutes, customers can easily switch, reducing demand for the industry's
products or services. The availability and pricing of substitutes influence the industry's
attractiveness and competitiveness.
3. Bargaining Power of Buyers: This force evaluates the power and influence that customers
have over the industry. If buyers are concentrated and purchase in large volumes, they can
demand lower prices and better terms from companies. On the other hand, when buyers
have limited choices or are not as significant to the industry's sales, the bargaining power
of buyers is weaker.

4. Bargaining Power of Suppliers: This force looks at the power that suppliers hold over
the industry. Suppliers with unique or critical resources can demand higher prices or
favorable terms, impacting the profitability of companies within the industry. When there
are few alternative suppliers or high switching costs, the bargaining power of suppliers
increases.
5. Rivalry Among Existing Competitors: This force assesses the intensity of competition
among existing companies in the industry. Factors like the number of competitors, industry
growth rate, level of product differentiation, and exit barriers contribute to the level of
rivalry. Intense competition can lead to price wars, reduced profitability, and increased
efforts to differentiate products or services.
By considering these five forces, businesses can identify the key drivers of competition in their
industry and develop effective strategies to position themselves favorably and thrive in the market.
The analysis helps decision-makers make informed choices, adapt to changing conditions, and
build sustainable competitive advantages.
To apply Porter's Five Forces Analysis, organizations typically follow these steps:
 Identify the industry or market you want to analyze.
 Assess each of the five forces individually, considering the relevant factors and their impact
on the industry's competitive structure.
 Determine the overall strength of each force. A stronger force generally indicates a less
attractive industry in terms of profitability.
 Combine the assessments to understand the overall competitive environment of the
industry.
This analysis helps organizations make informed strategic decisions, identify areas of competitive
advantage or vulnerability, and develop strategies to navigate and succeed in their respective
industries. It's important to note that the strength of each force can change over time due to shifts
in market conditions, technology advancements, regulatory changes, and other external factors.
Key Success Factors Concept and Implementation:

Key Success Factors:
 Key success factors (KSFs) are those competitive factors that most affect industry
members’ ability to prosper in the marketplace
 Key success factors are the product attributes competencies, competitive capabilities, and
market achievements with the greatest impact on future competitive success in the
marketplace

The concept of Key Success Factors (KSFs) and their implementation is a strategic management
approach used by organizations to identify and focus on the critical factors that are most important
for achieving success in a specific industry or market. KSFs are those areas, activities, or
capabilities that directly contribute to a company's competitive advantage, market position, and
overall performance. Implementing KSFs involves aligning resources, strategies, and efforts to
excel in these crucial areas. Here's how the concept works and how it's implemented:
Concept of Key Success Factors (KSFs):

Identification: KSFs are specific elements that have a significant impact on a company's ability
to succeed in its industry. They can be related to product quality, customer service, distribution
channels, technology, innovation, cost management, branding, etc.
Impact on Competitive Advantage: KSFs are not equally important for all organizations; they
vary based on industry dynamics and competitive landscape. Excelling in KSFs provides a
competitive advantage by distinguishing a company from its rivals.
Strategic Focus: By identifying and focusing on KSFs, organizations prioritize their resources
and efforts on the areas that truly matter for their success. This helps prevent spreading resources
too thin across less critical aspects.
Implementation of Key Success Factors (KSFs):

Industry Analysis: Understand the industry's competitive structure, key trends, and drivers of
success. This analysis helps identify the critical factors that determine success within the industry.
Internal Assessment: Evaluate your organization's strengths and weaknesses in relation to the
identified KSFs. Assess your current capabilities, resources, and performance in each key area.
Selection of KSFs: Based on the industry analysis and internal assessment, choose the specific
KSFs that are most relevant to your organization's success. These should align with your strengths
and address your weaknesses.
Develop Strategic Initiatives: Create strategic initiatives or action plans for each KSF. Define
how you will enhance or leverage your capabilities to excel in these critical areas.
Resource Allocation: Allocate resources, including budget, manpower, technology, and time, to
support the strategic initiatives aimed at improving KSFs.
Performance Measurement: Establish key performance indicators (KPIs) to measure progress
and success in each KSF. Regularly monitor and track these indicators to ensure you're on the right
path.

Continuous Improvement: Continuously review and refine your strategies and actions related to
KSFs. Adapt to changing market conditions and emerging trends to maintain your competitive
advantage.
Employee Alignment: Ensure that employees at all levels understand the importance of KSFs and
how their roles contribute to achieving success in these areas. Foster a culture of commitment to
KSFs.
Flexibility: Be open to adjusting your KSFs and strategies if market conditions or competitive
dynamics change significantly.
Communication: Effectively communicate the chosen KSFs and strategic initiatives to
stakeholders, both internal and external, to create alignment and support.
Implementing KSFs requires a clear understanding of your organization's unique strengths,
weaknesses, and competitive landscape. It's a dynamic process that requires continuous
monitoring, evaluation, and adaptation to remain effective as your industry evolves. By focusing
on the critical success factors, organizations can enhance their competitiveness, improve
performance, and achieve sustainable growth.
Common Types of Industry Key Success Factors:

1. Technology-related KSFs:
 Innovation and R&D Capabilities: The ability to develop and introduce new products,
services, or technologies to the market faster than competitors.
 Technological Infrastructure: Having state-of-the-art IT systems, software, and
hardware that enhance operational efficiency and customer experiences.
 Intellectual Property: Ownership and protection of valuable patents, trademarks,
copyrights, and trade secrets.
 Adoption of Emerging Technologies: Quick integration of emerging technologies like
artificial intelligence, machine learning, IoT, and blockchain to gain a competitive edge.
2. Manufacturing-related KSFs:
 Quality Control: Maintaining consistent product quality and adherence to strict quality
standards.
 Cost Efficiency: Efficient production processes that reduce manufacturing costs without
compromising product quality.
 Supply Chain Management: Effective management of suppliers, inventory, and logistics
to ensure timely production and delivery.
 Capacity and Scalability: Ability to scale production capacity up or down based on
market demand.

3. Distribution-related KSFs:
 Efficient Logistics: Streamlined distribution and delivery processes that minimize lead
times and reduce costs.
 Wide Distribution Network: Extensive reach and accessibility through a well-established
network of retail outlets, e-commerce platforms, or distributors.
 Effective Channel Management: Successful management of various distribution
channels (wholesalers, retailers, online platforms) to ensure product availability and
visibility.
4. Marketing-related KSFs:
 Brand Recognition: Establishing a strong brand identity that resonates with customers
and differentiates your products/services.
 Customer Segmentation: Accurately identifying and targeting specific customer
segments with tailored marketing strategies.
 Effective Marketing Communication: Clear and compelling messaging that effectively
communicates product benefits and resonates with the target audience.
 Digital Presence: Strong online presence through websites, social media, and digital
marketing to reach and engage customers.
5. Skills and Capability related KSFs:
 Talent Acquisition and Development: Attracting and retaining skilled employees, and
providing continuous training and development.
 Innovative Culture: Fostering a culture that encourages creativity, innovation, and
adaptability among employees.
 Cross-functional Collaboration: Facilitating collaboration and communication across
different departments or teams to drive collective success.
It's important to note that these categories are not exhaustive, and KSFs can vary widely based on
the specific industry, competitive landscape, and market conditions. Organizations need to identify
the KSFs that are most relevant to their particular context and tailor their strategies and efforts
accordingly.
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Strategic Management 22MBA25

Key components of external assessment include:

 Competitive Analysis: Analyzing the organization's competitors to identify their

 Economic Factors: Evaluating economic conditions such as inflation, interest rates,

 Technological Factors: Identifying technological advancements and innovations that

Asst. Prof. Chandana TC

 Environmental Factors: Assessing the impact of environmental factors on the

Advantages of External Assessment:

✓ Risk Identification and Mitigation: By analyzing the external environment,

✓ Competitive Advantage: Understanding the competitive landscape through external

✓ Strategic Alignment: External assessment ensures that the organization's strategic

✓ Informed Decision-Making: The insights gained from external assessment provide a

✓ Adaptation to Change: Continuous external assessment allows organizations to adapt

Disadvantages of External Assessment:

Asst. Prof. Chandana TC

The Process of Performing an External Audit:

Asst. Prof. Chandana TC

 PESTEL Analysis: Conduct a PESTEL analysis to examine the macro-environmental

Asst. Prof. Chandana TC

 Strategic Implications and Recommendations: Finally, based on the external audit's

Nature of External Audit:

Asst. Prof. Chandana TC

3. Proactive Approach: An external audit is proactive in nature. It helps organizations anticipate

Asst. Prof. Chandana TC

Key External Forces:

Asst. Prof. Chandana TC

7. Competitive forces: The intensity of competition in an industry and the actions of

A Company’s Business Environment:

Asst. Prof. Chandana TC

External environment Analysis:

Asst. Prof. Chandana TC

(b) Unemployment, Interest, Taxation and Inflation Rates

Key Components of Industry Analysis in External Audit:

Asst. Prof. Chandana TC

 SWOT Analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities,

 Industry-specific Accounting Practices: Be aware of any industry-specific accounting

Industry’s Driving Forces:

Asst. Prof. Chandana TC

 Technological change and manufacturing process innovation

Competitive Forces / Competitive Environment Analysis:

Competitive Analysis Typically Involves the following Key Steps:

Asst. Prof. Chandana TC

 Political: Consider government policies, regulations, and geopolitical factors.

Asst. Prof. Chandana TC

Key components of competitor analysis:

Asst. Prof. Chandana TC

Porter’s Five Forces Model:

Asst. Prof. Chandana TC

Key Success Factors Concept and Implementation:

Asst. Prof. Chandana TC

Concept of Key Success Factors (KSFs):

Implementation of Key Success Factors (KSFs):

Asst. Prof. Chandana TC

Common Types of Industry Key Success Factors:

Asst. Prof. Chandana TC

Asst. Prof. Chandana TC

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