PART 1:

STRATEGIC
MANAGEMEN
T INPUTS
CHAPTER 3
THE EXTERNAL
ENVIRONMENT:
OPPORTUNITIES,
THREATS, INDUSTRY
COMPETITION, &
COMPETITOR ANALYSIS

Authored by:
Marta Szabo White. Ph.D
Georgia State University
 THE EXTERNAL
ENVIRONMENT
A firms external environment creates:
OPPORTUNITIES
e.g., the opportunity for METRO to enter
other global markets, and

THREATS
e.g., the possibility that additional
regulations in its markets will reduce
opportunities for METRO to open more stores

Collectively, opportunities and threats affect

a firms strategic actions.
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 THE EXTERNAL
ENVIRONMENT

G
EXTERNAL

N
ENVIRONMENT

HI
UNDERSTANDING
TC
INTERNAL
MA

ENVIRONMENT
KNOWLEDGE

VISION, MISSION,
AND STRATEGY

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS
External environments are:
Turbulent

Complex

Global

Uncertain

Ambiguous

Incomplete

Firms engage in external environmental

analysis to better understand and cope with
their environments.
This analysis has four parts:
scanning, monitoring, forecasting, and
assessing.
2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS
SCANNIN Identifying
Identifying early
signals of
signals of
early
environmental
G environmental
changes
changes and
and trends.
trends.
Detecting
Detecting meaning
meaning
MONITORI through ongoing
through ongoing
observations
observations of of
NG environmental
environmental
changes and
and trends.
ing changes
Developing
trends.
z
ly h e
Developing
A n a t
al
FORECAST projections
projections of
anticipated
of
anticipated outcomes
outcomes
n
e
ext onm
r
ING based
changes
changes
on monitored
based on monitored
and trends.
and the
Determining
Determining trends.
the
v ir
is a ASSESSIN
n timing
timing and
and importance
importance
e t of environmental
en ult, of environmental
changes
changes and
and trends
d i f c
y et G for firms
trends
strategies
for firms strategies
and
and management.
fic an management.
i g ni t,
s
i v ity.
act
2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS
Identifying opportunities and threats
is an important objective of studying
the general environment.

OPPORTUNITY is a condition in the

general environment that if exploited
effectively, helps a company achieve
strategic competitiveness.
EXAMPLE: Procter & Gamble (P&G) is
reorienting beauty products to better serve
both men and women.
2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS

THREAT is a condition in the

general environment that may hinder
a companys efforts to achieve
strategic competitiveness.

EXAMPLE: Microsoft is experiencing a

severe external threat as smart phones are
expected to surpass personal computer (PC)
sales in the near future.

2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS
Firms use several sources to analyze the general
environment:
trade publications
newspapers
business publications
academic research
public polls
trade shows
suppliers
customers
employees

People in boundary-spanning positions can obtain a great deal

of this type of information.

Examples: salespersons, purchasing managers, public relations

directors, and customer service representatives, each of whom
interacts with external constituents
2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS: SCANNING

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS: MONITORING

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS: FORECASTING

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 EXTERNAL ENVIRONMENTAL
ANALYSIS: ASSESSING

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 COMPETITOR
ANALYSIS
COMPETITOR INTELLIGENCE
Set of data and information the firm gathers to better
understand and anticipate competitors' objectives,
strategies, assumptions, and capabilities
The ethical and legal gathering of needed information
and data that provides insight into:
What drives competitors
Shown by organization's future objectives
What the competitor is doing and can do
Revealed in organization's current strategy
What the competitor believes about the industry
Shown in organization's assumptions
What the competitors capabilities are
Shown by organization's strengths and weaknesses

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 COMPETITOR ANALYSIS
COMPONENTS
FIGURE 2.3
Competitor
Analysis
Components

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.