THE UNIVERSITY OF THE SOUTH

PACIFIC

MG309: STRATEGIC MANAGEMENT

ASSIGNMENT 1

SEMESTER 2, 2020

Full Name: Tebetieta Irooti Tetoa

Student ID #: S11151218
Mode of Study: Print mode
“Explain the importance of analyzing and understanding the firm’s external environment” 

Analyzing and understanding the firm’s external environment is vital for the business strategies
to be effective and predictive towards the outlook of the firm’s successful future. The external
environment involves a combination of all factors coming from the outside of a firm that may
affect its performances throughout (Study.com, 2003). External comes in three major parts
known as; the general, industry, and competitor environments (Hitt, Ireland, & Hoskisson, 2007).
However, analyzing is important also to understand its methods as it depends totally on the level
of gravity of the development for the manager and his analysis of the opportunities and threats.
In analyzing, scanning, monitoring, forecasting, and accessing are components involving an
activity significant successful towards a firm (Hitt, Ireland, & Hoskisson, 2007). Throughout, the
essay and it will specifically elaborate first external environment components and then analyzing
dimensions, to adjust their importance.

The general environment contains dimensions and elements in the broader society which may
affect industries and the competing firm inside. In this type of environment, it includes six
different types of dimensions such as; demographic, economic, political/legal, sociocultural,
technological, and global (Hitt, Ireland, & Hoskisson, 2007). Demographic, deals with
population size, age group, ethnic mix, geographic distribution, and income distribution. For
economic, it deals with money rates such as; inflation rates, personal/business saving rates, and
many more. Political /legal are government policies that include off, taxation laws, labor training
laws, and many others. Sociocultural is how the consumer behaves, for example, they chose to
use fast vehicles like cars rather than bikes as bikes are slower and tiring, which could impact the
sale of bikes. Technologies are ideas that create new favorable outputs or materials involving
consumer’s tastes, for example, new communication technologies, application knowledge, and
many more. Lastly, for the global dimension, it could be referred to as the daily existing changes
in the global markets such as; newly industrialized countries, important political events and so
much more. These six dimensions are vital to be considered and must be learned to be controlled
well as they influence the actions of the firm may take. Hence, as managers aware and flexible to
control all six dimensions towards their strategic goals, their firms may be successful in the end,
as they understands all the situations and are prepared for certain challenges to be faced in the
future.
 
Moreover, the industrial environment has a more direct effect on the firm’s competitive actions
and responses compared with the general environment. By means, the industrial environment
must involve in the use of five forces of competition, to achieve strategic competitiveness and
earn higher-average feedback. These five include, the threat of new entrants, the power of
suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry
among competitors are factors that directly influences a firm (Hitt, Ireland, & Hoskisson,
2007). Threats of new entrants deal with barriers for industries to enter the other. In this type of
force, it is very serious for the industry to play as the higher barriers to entry, the smaller the
threat for making the players exist. For example, high customer loyalty for existing brands, and
many other aspect skills to business growth can avoid players to be intruding their level. The
power of suppliers involves measuring power and control towards their goods and services,
either to raise the prices or to reduce its quality purchase goods and services (Jurevicius, 2013).
For example, the increase of the supply prices reveals that the suppliers are powerful than the
buyers where they usually experience high-income potential. The power of buyers is the buyers
themselves perception of a specific product (Jurevicius, 2013). For example, if the brand is
quality and is expensive, buyers still intend to buy, as it is beneficial than non-quality products.
Their bargaining power, however, on the other hand, it may be powerful if the product has less
quality and is expensive. The threat of product substitutes involves buyers switching from one
product or service to another leaving the firms with little cost. This causes concerning the
attractive prices and product quality of other substitutes have (Jurevicius, 2013). For example,
consumer switches their interest from buying Samsung to Apple smartphones in terms of quality
differences. The intensity of rivalry among competitors deals with the number of competitors
having the same service and product with them. They compete to beat the other and give their
best services to buyers for them to be attracted, where the firm’s power is weak. On the other
hand, when competitive rivalry is low, companies have greater power than consumers in
charging higher prices, in terms of achieving their sales and profits (Jurevicius, 2013). For
example, Samsung gives affordable prices with good products, while Apple products are
expensive with high-quality products. As a result, more go for Apple than Samsung. This can be
evidenced by nowadays marketing share that Apple has 19% of the global share while Samsung
grabbing 18% (Looper, 2020). Hence, when all of these five forces are weak, the firm can easily
be in a negative state, like bankruptcy or dead overall.       

Competitor Environment's main role is to compete with each other company, for not losing
against the other (Hitt, Ireland, & Hoskisson, 2007). Their competing came in a form of direct
competition and in an indirect way. Direct competitors are firms that are purchasing the same
product and service with the other (Study.com, 2003). For example, Burger King's direct
competitor is McDonald's. Indirect competitors are firms that have different brands/outputs
materials and services to sell out to consumers but still compete to get the buyers' attention and
make their firms profitable at the end (Study.com, 2003). For example, in consideration of
traveling, we have the option of which to choose either to take a bus, ship, taxi, train, or plane
(assuming travels, not to another country). Consumers might differentiate high-quality service or
cheap fares. Their perceptions and taste boost the firm’s consideration in competing while they
have different products or services, as they do not want to lose their customers over the other
firm product or service. Therefore, direct and indirect competitor ability is hard to be understood
if the firm does not know well how to play in a competitor environment. As a result, it could
drag firms towards failures and corruption throughout.  

Major components of the external environment are wise to understand for a firm success
however, target goals and strategies cannot be achieved if analyzing components are not in an act
in running a firm. They must be considered and to be understood well when running a business
for avoiding disasters and negative occurrences may affect a firm.

Scanning was the first step in analyzing, where it refers to processing the act of gathering all
information, where general environment dimensions are involved, to detect the presence and
ongoing changes. Daily changes must be aware of by firms in order, to be flexible to what will
be happening in the future. This step is challenging in other ways, as data and information are
unconnected and are not clear, but whatsoever, they still have opportunities by internet and news
updates for the scanning to be significant and effective. For example, on internet news and
nowadays marketing share that Apple has is 19% of the global share while Samsung grabbing
18% (Looper, 2020). Due as I am a Samsung marketer I must boost the qualification of my
product and services to be more satisfying than before so it could take over the Apple product.
As a result, scanning is playing well in its role for a firm. 

Monitoring is a second step where analysis is critically observed through scanning. From here,
analysis checks the progress and quality of their firm’s interaction with other stakeholders over a
while. Changes daily must be monitored with scanning help to make a firm never be backdated
and never be failed to achieve its strategic aims [ CITATION Hit07 \l 1033 ]. For example, in
Kiribati, and youth population exceeds other groups where they are pursuing investment options
(National Statistics Office Ministry of Finance, 2016). However, by the report monitoring and
companies may be aware of what type of product and services they must outcast, to take
advantage that the feedback trend had been identified. Not just customers are focused here, but
also to be able to identify important stakeholders, as stakeholders play a vital part in the firm
strong survival cycle. Hence, monitoring can be effective when all of these understandings are
easy to be interpreted by a manager. 

On a third stage and Forecasting is to be developed aside scanning and monitoring as to help the
firm specifically point out what might happen and when will be the exact time feedback or
output to be faced and done [ CITATION Hit07 \l 1033 ]. This is an advanced qualification of
techniques and knowledge that could help a firm building it in good and successful shape. For
example, analysts may forecast when the exact time a type of technology that had is being
bought for their firm’s employee to be experiencing easier work and for a firm to produce a
product in a quick time. Before the arrival, analysts calculate the days and make use of the days
before the arrival in training the employees on how to use a certain type of technology, so that
employees have a quick response to technology by the time it arrives. As a result, there will be
no time wasting where a firm is taking more advantages by it.           

Moving onwards the last stage is Assessing. For assessing stage it is where everything is being
screened. Which are essential for a firm to use and which are not? Identifying the trends of which
impacts a firm, and understanding well scanning, monitoring, and forecasting feedbacks, so that
the firm can be able to identify its weaknesses and strengths [ CITATION Hit07 \l 1033 ].
Without assessing stage and there will be no accurate understandings of what best strategic plans
must be in action and what must be screened out. For example, after scanning, monitoring, and
forecasting, Apple product is overtaking the global market by 19% while Samsung has only 18%
[ CITATION Chr20 \l 1033 ]. For a Samsung firm, we must find and assess well what our
weaknesses that make the Apple products overtake our product and then start working on those
weaknesses to make it a strength. Towards the end, there will be no doubt our Samsung
Company will take over the Apple product. 

In conclusion, it is clearly understood that a firm must understand analyzing skills and external
environments very well as it is vital for a firm’s victory over a global market nowadays. Big
opportunities can be experienced if the firm knows well how to control all of their aim strategies.
However, threats, on the other hand, can be faced anytime when they are out of control in their
analyzing skills and knowledge about the external environment. It may be challenging for a firm
to achieve its strategic goals, but going forward along with skillful and clear understandings on
how to control firms' engagement with the external environment, and without giving up is a key
to success.   

Bibliography
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic Management (7th Edition ed.).
United States of America: Thomson Corporation.

Jurevicius, O. (2013, 05 27). Strategic Mangement Insight. Retrieved 08 31, 2020, from Porter's
Five Forces: https://strategicmanagementinsight.com/tools/porters-five-forces.html

Looper, C. d. (2020, 01 30). Apple overtakes Samsung as the biggest smartphone vendor.
Retrieved 08 31, 2020, from digiteltrends: https://www.digitaltrends.com/mobile/apple-
overtook-samsung-smartphone-sales-q4-2019/

National Statistics Office Ministry of Finance . (2016). 2015 POPULATION AND HOUSING
CENSUS. Bairiki, Tarawa: National Statistics Office Ministry of Finance .

Study.com. (2003). Competitive Environment: Definition. Retrieved 08 31, 2020, from What Is a
Competitive Environment in Business? - Definition, Examples, Advantages &
Disadvantages: https://study.com/academy/lesson/what-is-a-competitive-environment-in-
business-definition-examples-advantages-disadvantages.html#:~:text=A%20competitive
%20environment%20is%20the,from%3B%20the%20competition%20is%20high.

Study.com. (2003). What is an External Environment in Business? - Definition, Types & Factors.
Retrieved 8 30, 2020, from Definition of an External Environment:
https://study.com/academy/lesson/what-is-an-external-environment-in-business-
definition-types-factors.html#:~:text=Definition%20of%20an%20External
%20Environment,up%20its%20flow%20of%20operations.