The External Environmental

Think in terms of Opportunities and Threats -

the “O” and “T” of TOWS

Relate Strategic Objectives to “O” and “T”

• increased sales and/or market share (Cereal)
• new product offerings (Toys)
• processing technology innovation
(Semiconductors)
• decreased environmental impact (Chemicals)

Continually scan to identify “O’s” and “T’s”

 The External Environmental
• The Company should achieve Strategic Fit
– What is needed to respond to changes in the
external environment and what does the company
possess to respond to these changes?

– What does the company need and what does the

external environment possess to provide to the
company?
 The External Environmental
The General Environment
• Demographic: age, ethnicity, household size,
occupation
• Economic: income distribution, inflation,
interest rates, exchange rates, urbanization
• Political/Legal: consumer and environmental
protection, unions
 The External Environmental
The General Environment
• Social and Cultural: conservatism/ liberalism,
nesting, materialism
• Technological: e-tailing, intranets, diffusion
rates
• Global: nationalism, transnational
corporations, cultural differences
 The External Environmental
• What changes are going on in the General
Environment that you think businesses need
to pay attention to?
– Are these changes only short term? Are they
cyclical? Are they more long term and lasting?
 External Factor Analysis Summary
External Factors Weight Rating Weighted Comments
(from 1 - Score
poor to 5 (weight
very multiplied
good) by rating)

Opportunities What is the How well

What are the most relative is your (Describe how you
important opportunities importance company derived the
for your firm? of each of able to weighted score for
the respond each line)
Threats opportunities to the
What are the most and threats? opportunit
important threats to ies and
your company threats?

Total 1.00 ????

 External Factor Analysis Summary
• External Factors: List the 8 to 10 most important
opportunities and threats (developments in the General and
Industry environments) facing the company.
• Weight: Assign a weight to each External Factor from 1.0
(most important) to 0.0 (not important) based on the factor’s
probable impact on the company’s current strategic position.
All weights must sum to 1.00.
• Rating: Assign a rating to each factor from 5.0 (Outstanding)
to 1.00 (Poor) based on the company’s current response to
that particular factor.
 External Factor Analysis Summary
• Weighted Score: Multiply the weight times the rating to get
the weighted score for each factor.
• Comments: Describe (1) why you selected each External
Factor and (2) how you estimated the weight and rating.
• Total Weighted Score: Add the Weighted Scores for the
External Factors to get the Total Weighted Score. The Total
Weighted Score is useful as a comparison to other companies
in the industry group.