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Lecture 4

MGCR 423 Lecture 4: Strat Lecture 4
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7 Pages
97 Views
Fall 2017

Department
Management Core
Course Code
MGCR 423
Professor
Moore
Lecture
4

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STRATEGY LECTURE 4: EXTERNAL ENVIRONMENT
Analysis: Enabling the Right Decision
Analysis supports the decision making process, it should no hinder the decision making but
make it stronger
Key objectives of the analysis
o Ensure key facts are being brought forward
o Ensure the right issues and opportunities are being addressed
o Create a level knowledge playing field for strategic planning participants
o Select the correct strategies to achieve the vision
o Create buy in
External Environmental Analysis (insert graph)
General environment:
o Focused on elements in the broader society than can indirectly influence an industry an
the firms within the industry
o Influenced by demographic, economic, political/legal, sociocultural, technological,
global and sustainable physical.
o Firms cannot directly control these environmental elements, but can analyze and predict
trends
Industry environment:
o Focused on factors and conditions influencing a firm’s profitability within an industry
such as threat of new entrants, power of suppliers, power of buyers, the threat of
substitutes and intensity of rivalry among competing firms
Competitor environment:
o Focused on predicting the dynamics of competitor’s actions, responses and intentions
o How companies gather and interpret information about competitors is called competitor
analysis
o Combination of the two prior analyses
Market and Customers (4th) not in text
Four Components of the External Environmental Analysis
1. Scanning- identifying early signs of environmental changes and trends
o Often reveals ambiguous, incomplete data that requires careful analysis
o Internet provides a lot of opportunity for scanning
2. Monitoring detecting meaning through ongoing observations of environmental changes and
trends
o Requires a firm to identify important stakeholders and understand its reputation with these
stakeholders
o Scanning and monitoring are very important when a firm competes in an environment with
high technological uncertainty
3. Forecasting- developing projections of anticipated outcomes based on monitored changes and
trends
4. Assessing- determining the timing and importance of environmental changes and trends for
firm’s strategies and their management
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o The previous 3 allow you to understand the general environment. Intent of assessing is
to find the implications of your understanding
SWOT Analysis: Good For a First Pass
Valuable for starting discussions it is not enough to make real strategic decisions
External components:
o Opportunity: a condition in the general environment that, if exploited effectively, helps a
firm achieve strategic competitiveness
o Threat: a condition in the general environment that may hinder a firm’s efforts to
achieve strategic competitiveness
Areas you want to look at when performing a SWOT
General Environment: 7 Dimensions
Seven dimensions in the broader society that influence an industry and the firms within it:
o Demographic
o Economic
o Political/legal (sometimes divided into separate categories)
o Sociocultural
o Technological
o Global
o Physical (also sometimes called environmental)
Important to look at both trends in the general environmental and what is driving those trends
(“drivers”)
PESTEL, similar but different
The General Environment: Segments and Elements
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Description
STRATEGY LECTURE 4: EXTERNAL ENVIRONMENT Analysis: Enabling the Right Decision Analysis supports the decision making process, it should no hinder the decision making but make it stronger Key objectives of the analysis o Ensure key facts are being brought forward o Ensure the right issues and opportunities are being addressed o Create a level knowledge playing field for strategic planning participants o Select the correct strategies to achieve the vision o Create buy in External Environmental Analysis (insert graph) General environment: o Focused on elements in the broader society than can indirectly influence an industry an the firms within the industry o Influenced by demographic, economic, politicallegal, sociocultural, technological, global and sustainable physical. o Firms cannot directly control these environmental elements, but can analyze and predict trends Industry environment: o Focused on factors and conditions influencing a firms profitability within an industry such as threat of new entrants, power of suppliers, power of buyers, the threat of substitutes and intensity of rivalry among competing firms Competitor environment: o Focused on predicting the dynamics of competitors actions, responses and intentions o How companies gather and interpret information about competitors is called competitor analysis o Combination of the two prior analyses th Market and Customers (4 ) not in text Four Components of the External Environmental Analysis 1. Scanning identifying early signs of environmental changes and trends o Often reveals ambiguous, incomplete data that requires careful analysis o Internet provides a lot of opportunity for scanning 2. Monitoring detecting meaning through ongoing observations of environmental changes and trends o Requires a firm to identify important stakeholders and understand its reputation with these stakeholders o Scanning and monitoring are very important when a firm competes in an environment with high technological uncertainty 3. Forecasting developing projections of anticipated outcomes based on monitored changes and trends 4. Assessing determining the timing and importance of environmental changes and trends for firms strategies and their management
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