CHALLENGING THE

EXTERNAL & INTERNAL

ENVIRONMENT

Prepared by:
JOVELYN A. SABAY MBA2-G22
THE EXTERNAL
ENVIRONMENT
All outside factors that may affect
an organization make up the
external environment. These are
largely beyond the control of a
single organization.
PARTS OF EXTERNAL
ENVIRONMENT

1) Directly interactive

2) Indirectly interactive
1) DIRECTLY INTERACTIVE

This environment has an immediate

and first hand impact upon the
organization.
DIRECTLY INTERACTIVE
FORCES…
• Customers demand satisfaction
with the products and services they
purchase and use.
• Suppliers require attentive
communication, payment, and a
strong working relationship to provide
needed resources.
DIRECTLY INTERACTIVE
FORCES…
• COMPETITORS present
challenges as they vie for customers
in a market place with similar
products or services.
2.) INDIRECTLY INTERACTIVE

This environment has a secondary

and more distant effect upon the
organization.
INDIRECTLY INTERACTIVE
FORCES…
• SOCIOCULTURAL is
important because it determines
the goods, services, and
standards that society values.
INDIRECTLY INTERACTIVE
FORCES…
• POLITICAL AND LEGAL
include regulatory parameters
within which an organization
must operate. Political parties
create or influence laws, and
business must abide by these
laws.
INDIRECTLY INTERACTIVE
FORCES…
• TECHNOLOGICAL impacts
the scientific process used in
changing inputs (resources,
labor, money) to outputs (goods
and services)
INDIRECTLY INTERACTIVE
FORCES…
• ECONOMIC reflects
worldwide financial conditions.
Certain economic conditions of
special concern to organizations
include interest rates, gross
domestic products.
CHALLENGES OF THE
EXTERNAL ENVIRONMENT
Challenges and uncertainty in the
external environment added another level
of difficulty and new challenges for the
organization. Additionally, the
uncertainty of the environment also
meant that the organization was also
uncertain about the sustainability of its
finances anymore.
SWOT ANALYSIS
SWOT ANALYSIS…
 Is a way to analyze competitive
position of the company.
 Assess both internal and external
aspects of the business.
 A tool for auditing an
organization and its
environment.
 STRENGTHS WEAKNESSES
 Unique product  Location of the
 Location of the business
business  Lack of quality and
 Worker’s unique skill customer service
 Quality of the product.  Poor marketing and
sales
 Undifferentiated
products/services
OPPORTUNITIES THREATS
 A new emerging or  New competition in the
developing market market
 Merger, joint venture  Price wars
or strategic alliance  Taxation
INDUSTRIAL ORGANIZATION
VIEW(I/0)
VS.
RESOURCE-BASED
VIEW(RBV)
THE INDUSTRIAL
ORGANIZATION (I/O)
VIEW
The Industrial Organization (I/O)
approach to competitive advantage
advocates that external factors are
more than important than internal
factors in a firm achieving
competitive advantage.
PORTER’S FIVE-FORCES
MODEL
PORTER’S FIVE-FORCES
MODEL
• Rivalry Among Competing
Firms
 Usually the most powerful of the five
competitive forces.
 The strategies pursued by one firm
can be successful only to the extent
that they provide competitive
advantage over the strategies pursued
by rival firms.
PORTER’S FIVE-FORCES
MODEL
• Potential Entry of New
Competitors
Whenever a new firms can easily enter a
particular industry, the intensity of
competitiveness among firms increases.
PORTER’S FIVE-FORCES
MODEL
• Potential Development of
Substitute Products
 In many industries, firms are in close
competition with producers of
substitute products in other industries.
 The presence of substitute products
puts a ceiling on the price that can be
charged before consumers will switch
to the substitute product.
PORTER’S FIVE-FORCES
MODEL
• Bargaining Power of Suppliers
The bargaining power of suppliers affects the
intensity of competition in an industry,
especially when there is a large number of
suppliers, when there are only a few good
substitute raw materials, or when the cost of
switching raw materials is especially costly.
PORTER’S FIVE-FORCES
MODEL
• Bargaining Power of
Consumer
 When customers are concentrated or large or
buy in volume, their bargaining power
represents a major force affecting the
intensity of competition in an industry.
 Rival firms may offer extended warranties or
special services to gain customer loyalty
whenever the bargaining power of consumers
is substantial.
THE RESOURCE-BASED
VIEW (RBV)
The Resource-Based View
(RBV)approach to competitive
advantage contends that internal
resources are more important for a
firm than external factors in
achieving and sustaining
competitive advantage.
RESOURCE-BASED VIEW
CATEGORIES…
1. Physical Resources
2. Human Resources
3. Organizational Resources
RESOURCE-BASED VIEW
CATEGORIES…
1. Physical Resources
This include all plant and
equipment, location, technology,
raw materials and machines.
RESOURCE-BASED VIEW
CATEGORIES…
2. Human Resources
These include all employees,
training, experience, intelligence,
knowledge, skills and abilities.
RESOURCE-BASED VIEW
CATEGORIES…
3. Organizational Resources
These include firm structure,
planning processes, information
systems, patents, trademarks,
copyrights, database, and so on.
The Resource-Based View (RBV)
asserts that it is advantageous for a
firm to pursue a strategy that is not
currently being implemented by
any competing firm.
THE INTERNAL
ENVIRONMENT
An organization’s internal
environment is composed of the
elements within the organization;
employees, management and
corporate culture.
EMPLOYEES
Paramount resource of all
organization.
FUNCTIONS OF MANAGEMENT
• Planning is the process by
which one determines whether to
attempt a task, works out the
most effective way of reaching
desired objectives, and prepares
to overcome unexpected
difficulties with adequate
resources.
FUNCTIONS OF MANAGEMENT
• Organizing means determining
who does what and who reports
to whom. The purpose of
organizing is to achieve
coordinated effort by defining
task and authority relationships
FUNCTIONS OF MANAGEMENT
• Motivating can be defined as
the process of influencing people
to accomplish specific
objectives.
FUNCTIONS OF MANAGEMENT
• Staffing includes activities such as
recruiting, interviewing, testing,
selecting, orienting, training,
developing, caring for, evaluating,
rewarding, disciplining, promoting,
transferring, demoting, and dismissing
employees, as well as managing union
relations.
FUNCTIONS OF MANAGEMENT
• Controlling function of
management includes all of
those activities undertaken to
ensure that actual operations
conform to planned operations.
ORGANIZATIONAL CULTURE
“A pattern of behavior that has been
developed by an organization as it learns
to cope with its problem of external
adaptation and internal integration, and
that has worked well enough to be
considered valid and to be taught to new
members as the correct way to perceive,
think, and feel.”
FOUR MAIN COMPONENTS OF
ORGANIZATIONAL CULTURE
• Values are the basic beliefs that
define employees successes in
an organization.
• Heroes an exemplary person
who reflects the image, attitudes,
or values of the organization and
serves as a role model to other
employees
FOUR MAIN COMPONENTS OF
ORGANIZATIONAL CULTURE
• Rites and rituals are routines
and ceremonies that the
company uses to recognize high-
performing employees.
• Social network informal means
of communication within an
organization.
EXTERNAL VS
INTERNAL
One cannot say with any degree of
certainty that either external or internal
factors will always or even consistently
be more important in seeking
competitive advantage. Understanding
both external and internal factors, and
more importantly, understanding the
relationships among them, will be the
key to effective strategy formulation