Professional Documents
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Analysing The External Environment
Analysing The External Environment
Analysing The External Environment
Analysing Corporate
External Strategies
Environment
Analysing
Functional
Internal
Strategies
Environment
• Market growth
• How fast that is changing?
• Attractive opportunity or saturated?
• Market share
• Dominant company? Or fragmented market?
Tool 2: Country-level (all industries) analysis: PESTEL
Analysis
■ Maturity of technology
– manufacturing maturity and capacity
■ New patents and products
■ Technology development
– Level of R&D on organisation’s rivals
– replacement technology/solutions
– Speed of change and adoption of new technology
■ Technology legislation
– technology access, licencing, patents
– intellectual property issues
Environmental and Legal factors
■ Environmental factors
– Sustainability and ”green” issues
– Level and types of fuels and energy consumption
– Depletion of natural resources
– Pollution
■ Legal factors
– Employment regulations
– Competition law
– Health and safety regulations
– Product safety regulations
– Antitrust laws
– Patent infringements
Tool 3: Five Forces Analysis (Porter, 1979)
Porter’s five forces framework is a powerful tool to analyse micro environment, which include bargaining
power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes and the extent
of competitive rivalry (Porter, 2008).
• Main function: analysing the competitiveness of the industry
• Underpinning logic: economic power in the market place
• Key question: how much bargaining power does a company have against the
five forces acting against it?
• The Five Forces: each with an example of their power
1. Suppliers – e.g. there are only a few suppliers
2. Buyers – e.g. may be large enough to dictate buying terms
3. Potential new entrants – e.g. could enter the market with new technology
and threaten the company’s existence
4. Substitutes for the company’s products – e.g. may be cheaper
5. Industry competitors – e.g. some may have differentiate products
Tool 3: Five Forces Analysis (Porter, 1979)
How to analyse the Five Forces:
Suppliers: have high, Customers: have high,
medium or low bargaining medium or low
power depending on what bargaining power
they supply – patented, based on size of order,
quality, etc. Industry competitors: etc.
high, medium or low
threat based on
competitors’
resources, plans, etc.