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Lecture # 3

The External Assessment

Nature Of External Audit   List of opportunities Finite      Key variable offering actionable response Offensive or Defensive Response Formulating Strategy Maximize Opportunities Minimize Potential Threats .

Magazines etc) Periodic Reports Assessment & Evaluation Series of meetings for identification of opportunities & threats.Process Of External Audit         Involvement of Managers & Employees Idea Sharing Understanding of Company affairs & Competition Information regarding major trends. . Sources of Information (Journals.

Process Of External Audit    Listing of factors Ranking of factors Key External factors should be (1) relevant to long term objective (2) Measureable (3) applicable to all competing firms (4) hierarchical  Communication & Distribution .

Effective Integration.Industrial Organization (I/O View)     Importance of External Factors Micheal Porter Competitive advantage depends upon positioning Economies of Scale. . Product Differentiation    20% variance in profitability due to external factors 36% variance in profitability due to internal factors. Barriers to entry.

Economic forces      Recession. consumer debt Two Income household Premium on time Limits inconvenience Dollar’s value   Petroleum Prices Job insecurity Table 3-1 . unemployment.

Cultural. Demographic & Environmental forces     Change is continuous Globalization Marriages and separation Mexico v/s China Table 3-2 .Social.

Political. Governmental & Legal Forces     Regulators Exchange rates Dollar v/s Euro Multinationals Table 3-3 .

Technological Forces      Discoveries Internet Information Technology Chief Information Officer Chief Technology Officer .

Competitive Forces    Strengths & Weaknesses of Rival Firms Internet as source of information Cutthroat competition .