The external environment includes the areas of General, Industry and Competitor environment. The general environment is the broader society dimensions that influence an industry and the firms within it. It is grouped into seven dimensions or ‘environmental segments’ which cannot be controlled or manipulated. However, segment intelligence of each of these can help reorient strategy to mitigate influence in the long
term. The industry environment is a set of factors which directly influence a firm’s competitive actions and responses. These factors can be analyzed using Porters Five forces model. Competitor Analysis is used to gather and interpret competitor information. The Competitor environment gives information about a firms direct and indirect competitor and the competitive dynamics expected to impact a firm’s efforts to generate an above average return. External Environment Analysis.An Opportunity is a general environment condition that is exploited helps a company achieve strategic competitiveness. A threat is a general environmental condition that may hinder a company’s efforts to achieve strategic competitiveness. There are four components of external environmental analysis namely
General Environment - 7 Segments & Elements Industry environmental analysisAn industry is defined as a group of firms producing products that are close substitutes the industry environment has a higher impact on a firm’s general competitiveness and ability to earn above average return compared to the general environment. The intensity of competition and profit potential are a function of Porters Five forces analysis. The five forces of competition Porters Five Forces
Intensity of Rivalry is high if
Intensity of Rivalry is Low if
Competitor AnalysisCompetitor intelligence is the data and information that a firm gathers to better understand and anticipate its competitor’s objectives, strategies, assumptions, and capabilities. When gathering competitive intelligence firms must pay specific attention to complementors who add value to the focal firms’ products and strategies. E.g. Microsoft and Intel are complementors. Competitor Intelligence collection needs to follow ethical practices which can be through obtaining and analyzing public information or attending trade fairs, obtaining brochures etc. What is a set of firms emphasizing similar strategic dimensions and using a similar strategy quizlet?A set of firms emphasizing similar strategic dimensions and using a similar strategy is called a strategic group. The competition between firms within a strategic group is greater than the competition between a member of a strategic group and companies outside that strategic group.
Which of the following is an element of economic segment?The economic segment centers on the economic conditions within which organizations operate. It includes elements such as interest rates, inflation rates, gross domestic product, unemployment rates, levels of disposable income, and the general growth or decline of the economy (Figure 3.5 “Economic Factors”).
What is it important for a firm to study and understand the external environment?External environment factors are important because they can cause direct and indirect effects on business operations, personnel and revenue. The external environment of a company changes constantly in ways beyond the company's control, but executives and managers can track these changes and minimize their consequences.
Why is it important for a firm to study and understand external environment quizlet?Why is it important for a firm to study and understand the external environment? Affects the competition action and responses firms take to outperform competitors and earn above average returns.
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