The External Environtment : Opportunities, Threats, Competition,

Competitor Analysis

The external environtment affects a firms strategic action, the firms strategic actions are
affected by conditions in other segments of it general environtment, such as the political/legal
and physical environtment segments. Firms understand the external environtment by acquiring
information about competitors, customers, and other stakeholders to build their own base of
knowledge and capabilities.
The General, Industry, and Competitor environtments
The general environtment is composed of dimensions in the broader society that
influence an industry and the firms within it. These dimensions consist of seven environtment
segments : demographic, economic, political/legal, sociocultural, technolical, global, and
physical.
How companies gather and interpret informations about their competitors is calles
competitor analysis. Analysis of the general environtment is focused on environmental trends
while an analysis of the industry environtment is focused on the factors and conditions
influencing and industrys profitability potential and an analysis of competitors is focused on
predicting competitors action, response, and intentions.
External environmental analysis
This external environment analysis consist of 4 element : scanning, monitoring,
forecasting, and assessing. Opportunity is a condition in the general environment that if exploited
effectively, helps company achieve strategic competitifness. A threat is a condition in the general
environment that may hinder a companys efforts to achieve strategic competitiveness.
Scanning
Scanning entails the study of all segments in the general environment. Through scanning,
firms identify early signals of potential changes in the general environtment and detect changes
that already under way.
Monitoring
When monitoring, analysis observe environmental changes to see if an important trend is
emerging from among those spotted through scanning. Critical to successful monitoring is the
firms ability to detect meaning in different environmental events and trends.
Forecasting
When forecasting, analysts develop feasible projections of what might happen, and how
quickly, as a result of the changes and trends detected through scanning and monitoring.
Forecasting events and outcomes accurately is challenging.
Assessing
The objective of assessing is to determine the timing and significance of the effects of
environmental changes and trends that have been identified.
Segments of the General Environment
The Demographic Segment
The demographic segment is concerned with a populations size, age structure, geodraphic
distribution, ethnic mix, and income distribution. Demographic segment consist of :
Population Size
While observing the population of different nations and regions of the world, firms also
want to study changes occurring within different populations to assess their strategic
implications.
The Political/Legal Segment
The political/legal segment is the arena in which organizations and interest groups
compete for attention, resources, and a voice in overseeing the body of laws and regulations
guiding interactions among nations as well as between firms and various local govermnet
agencies.
The Socialcultural Segment
This is concerned with a societys attitude and cultural values, because attitudes and
values form the cornerstone of a society, they often drive demographic, economic, political/legal.
And technologicak conditions and changes.
The Technological Segment
Technological changes affect many parts of societies, effects occur primarily
through new products, processes, and materials.the importance of these efforts is suggested by
the finding that early adoptersof new technology often achieve higher market shares and
earnhigher returns.
The Global Segment
 When studying the global segment, firms should recognize that globalization of business
markets may create opportunities to enter new market as well as threats that new competitors
from other economies may enter their market as well.
The Physical Environment Segment
This is refers to potential and actual changes in the physical environment and business
practices that are intended to positively respond to and deal with those changes.