AGUANTA, PRINCESS NICOLE ALLYSON

MA332

Module 2 Assignment
1. Why is it important for a firm to study and understand the external environment?
 It is important for a firm to study and understand the external environment simply
because it has a direct impact on the firm's performance. The external
environment contains both opportunities and risks. The possibilities are items
that the company can use to outperform its competitors. Because the company
will be aware of and prepared for the risks, knowing about them will give them an
advantage in planning and decision-making.

2. What are the differences between the general environment and the industry
environment? Why are these differences important?
 The most significant distinctions between the two are the specificity of the
boundaries and the directness with which the conditions affect the firm. For
example, the general environment includes all of society's conditions that affect
businesses, whereas the industry environment only includes the conditions of the
business's specific industry. Both are critical because they influence how the firm
operates in terms of pricing, customer willingness to buy, demand, and so on.

3. What is the external environmental analysis process (four parts)? What does the firm
want to learn when using this process?
 The external environmental analysis procedure consists of four steps: scanning,
monitoring, forecasting, and assessing. Essentially, the firm wants to know what
opportunities and risks exist and how they might affect the business during the
process.

4. What are the seven segments of the general environment? Explain the differences
among them.
 The seven segments of the general environment are demographic, economic,
political/legal, sociocultural, technological, global, and physical elements.
Demographics is concerned with population characteristics and statistics such as
income, age, gender, ethnicity, and geographic distributions in which the
business is located; Economic is concerned with the state of the economy;
Political/legal is concerned with relevant laws, policies, and regulations that affect
the industry in which the business is located; Sociocultural is concerned with
consumer traditions, culture, and behaviors that may influence their willingness to
purchase; Technological is concerned with technological advancements.
5. How do the five forces of competition in an industry affect its profitability potential?
Explain.
 The five forces of competition model helps to understand a company's
competitive position within a specific industry. It is a strong and comprehensive
framework because it considers not only immediate but also future and indirect
competition. It is now prepared for any threats and can make decisions based on
this information.

6. What is a strategic group? Of what value is knowledge of the firm’s strategic group in
formulating that firm’s strategy?
 A strategic group is a collection of companies in the same industry that have
similar competitive strategies, methods, and competitive positioning. Knowing
which strategic group your company belongs to can help you identify your most
immediate and formidable competitors. With this knowledge, your company will
be able to outperform its direct competitors. To put it another way, because
you're all using the same strategies, you'll be able to devise a new strategy to
distinguish yourself.

7. What is the importance of collecting and interpreting data and information about
competitors? What practices should a firm use to gather competitor intelligence and
why?
 Understanding one's competitive position, advantages, and disadvantages is
critical. Understanding this is critical for developing strategies to survive and
succeed in the industry. It is preferable for a corporation to invest in research to
gain competitive intelligence because it is ethical and entails systematic data
collection and analysis through surveys, online surveys, advertisements, direct
observations, and other marketing methods.

References
Lecture 3. External Analysis. (n.d.). Culture & Creativity. Retrieved February 3, 2022, from
https://www.culturepartnership.eu/en/publishing/strategic-planning-course/external-analysis