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EVALUATING A COMPANY'S EXTERNAL ENVIRONMENT - Coggle Diagram
EVALUATING A COMPANY'S EXTERNAL ENVIRONMENT
The External Environment
The Macro-Environment
Is the broad environmental context in which a firm's industry is situated
Includes strategically relevant components over which the firm has no direct control
-General economic conditions
-immediate industry and competitive environment
Question 1: Does the industry offer attractive opportunities for growth?
Defining growth
What is the current market size in units or sales
What is the past, current and expected rate of growth for the market or industry
Considerations
Different sectors or regions of a market grow at different rates
Growth varies with the industry' life cycle stage
Growth does not guarantee profitability
Question 2: What kind of competitive forces are industry members facing and how strong are they?
Five competitive forces
Competition from rival sellers
Competition from potential new entrants
Competition from substitute products producers
Supplier bargaining power
Customer bargaining power
Question 3: What factors are driving industry change and what impacts will they have
Strategic analysis of industry dynamics:
Identifying the drivers of change
Assessing whether the drivers of change are, individually or collectively, acting to make the industry more or less attractive
Determining what strategy changes are needed to prepare for the impacts of the anticipated change
Question 4: How are industry rivals positioned, who is strongly positioned and who is not?
A strategic group
-Have comparable product line breadth
-Sell in the same price or quality range
-Emphasize the same distribution channels
-Use the same products attributes to buyers
-Depend on identical technological approaches
-Offer similar services and technical assistance
Question 5: What strategic moves are rivals likely to make next?
Competitive Intelligence
-Information about rivals that is useful in anticipating their next strategic moves
Signals of the likelihood of strategic moves:
-Rivals under pressure to improve financial performance
-Rivals seeking to increase market standing
-Public statements of rivals intentions
-Profiles developed by competitive intelligence units
Question 6: What are the key factors for future competitive success?
Key success factor
-Are the strategy elements, product and service attributes, operational approaches, resources and competitive capabilities by any and all firms in an industry
-Vary from industry to industry and over time within the same industry, as drivers of change and competitive conditions change
Question 7: Does the industry offer good prospects for attractive profits?
Industry profitability considerations
-The industry's overall growth potential
-Effects of strong competitive forces
-Effects of prevailing drivers of change in the industry
-Competitive strength of the firm
-The success of the firm's strategy in delivering on the industry's key success factors