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MGT 657 Strategic Management: The External Assessment
MGT 657 Strategic Management: The External Assessment
STRATEGIC MANAGEMENT
CHAPTER 3 :
THE EXTERNAL ASSESSMENT
1
3.1Nature of an External
Audit
Purpose: To develop a set list of opportunities that
could benefit a firm & threats that should be
avoided.
Not aimed at developing an comprehensive list of
every possible factor that could be influence the
business, rather;
Aimed at identifying key variables that offer actionable
responses.
Firms should be able to respond either offensively or
defensively to the factorsHOW??
By formulating strategies that take advantage of
external opportunities or that minimize the impact of
potential threats.
3.2The Process of Performing an
External Audit
Must involves as many managers &
employees
WHY ???
o Lead to understanding & commitment
from organizational members
o Appreciate having the opportunity to
contribute ideas
o To gain a better understanding of their
firms industry, competitors, and
markets
Cont. Process of
Performing
Measurable
3-9
Social, Cultural, Demographic, and
Natural Environmental Forces
Changes in social, culture, demography &
environmental tends are shaping the way
Somalilanders live, work, produce and
consume.
When new trends are creating a different
type of consumer and consequently, a
need for different product, services and
strategies.
3-10
Political, Governmental, and Legal Forces
The increasing global interdependence
among economies, markets, governments,
and organizations makes it very important
that firms consider the possible impact of
political variables on the formulation and
implementation of competitive strategies.
Represented a key of opportunities or
threats for both small & large organizations.
3-11
Technological Forces
The Internet has changed the very nature of
opportunities and threats by:
3-12
Competitive Forces
An important part of an external audit is identifying rival firms
and determining their strengths, weaknesses, capabilities,
opportunities, threats, objectives, and strategies
3-13
Competitive Intelligence Programs
3-15
POTENTIAL DEVELOPMENT OF 3
SUBTITUTE PRODUCT
POTENTIAL ENTRY OF NEW 2
COMPETITORS
RIVALRY AMONG COMPETING 1
FIRMS
Porters Five-Force Model
Competitive Analysis:
BARGAINING POWER OF 5
CUSTOMER
BARGAINING POWER OF 4
SUPPLIERS
1. Rivalry Among Competing firms
Strategies of one firm can be successful only
when they can provide competitive advantage
over the strategies of rival firms.
Rivalry among the competing firms will
increase when:
i. the numbers of competitors increase
ii. competitor become equal in size and capability
iii. demand for the product declines
iv. customer can switch brand easily