Kim Crista Elicanal Assignment #2

BSENTREP 2-2 April 13, 2023

1. Why is it important for a firm to study and understand the external environment? -
It is crucial for a company to investigate and comprehend its external environment since
doing so enables businesses to learn more about their rivals, customers, and other
stakeholders. Additionally, it is crucial to develop their skills and knowledge. The external
environment includes knowledge of the industry in which the company operates and the
rivals it will encounter in that area. The firm must thoroughly comprehend and analyze
the external environment because everything related to it will impact the decisions and
activities that a firm must do in order to strategically outperform their rivals and generate
returns above average.

2. What are the differences between the general environment and the industry
environment? Why are these differences important? - The demographic, economic,
legal, social, technological, international, and physical traits of society as a whole are
included in the general environment, which have an impact on the industries that are a
part of it. Additionally, it alludes to the larger context in which the job environment is
situated. The industrial environment of a corporation may be impacted by demographic
changes, lifestyle changes, and economic cycles. In conclusion, the differences
between the general and industry environments are mostly in their complexity and
variety. The general environment is broad, while the industry environment is confined.
The difference between the general environment, which is significant because it affects
the entire industry, and the industry environment, which affects a number of different
firms within that industry, is what the firms must analyze in order to learn more about
opportunities and threats.

3. What is the external environmental analysis process (four parts)? What does the
firm want to learn when using this process? - Scanning, monitoring, forecasting, and
assessing are the four processes that make up the external environmental analysis
process. The company's comprehension and awareness of early warning signs of
environmental changes and trends are improved via environmental scanning. The firm
will be able to get information about its performance and make key decisions if it actively
monitors environmental changes and trends. Making predictions about future events
based on observable patterns and changes is known as forecasting. The company will
then be able to establish the timing and impact of any environmental changes and trends
that may have an impact on the company's decision-making and plans by evaluating the
results.

4. What are the seven segments of the general environment? Explain the differences
among them. - The seven general environment segments are the components of the
general environment that are in charge of the various effects that organizations and
enterprises have when they enter a certain industry. A population's size, structure, age,
geographic distribution, ethnic diversity, and economic distribution are all factors that fall
under the category of demographics, so this part is essentially about the target market's
demographics. The type and direction of the economy in which a company competes are
referred to as its economic segment. Typically, businesses will want to compete in
Kim Crista Elicanal Assignment #2
BSENTREP 2-2 April 13, 2023

markets that are both economically stable and have significant room for expansion. The
political or legal segment is where various organizations, businesses, and firms compete
for resources, attention, and a voice in regulating the body of laws and regulations that
govern interactions between countries, businesses, and local government agencies.
Typically, it focuses on how businesses would attempt to influence governments and
how they will attempt to comprehend the effects that the same government could have
on their organizations and what steps or responses they would need to make in
response. A nation's or society's attitudes and cultural values are the focus of the
sociocultural segment, which is essential research for businesses because those
attitudes and values serve as the foundation for all other segments and propel them to
new developments. The institutions and activities involved in generating new information
and transforming it into novel outputs, products, processes, and materials are included in
the technological segment. Global Segment is interested in relevant existing markets
that are undergoing change, relevant new global markets and their crucial cultural and
institutional aspects, as well as significant global political events. In order to establish a
sustainable environment, the sustainable physical environment segment refers to
possible and existing changes in the physical environment and business activities that
are meant to favorably adapt to such changes.

5. How do the five forces of competition in an industry affect its profitability

potential? Explain. - By recognizing and evaluating each force, the five forces of
competition in an industry have an impact on the firm's profitability potential. Because
they will be sharing the market's demand, incumbent competitors will lose market share,
hence the threat of new entrants must be recognized. Supplier negotiating power may
have an impact on a product's pricing or quality. Whereas some businesses restrict
supplier power by building rapport and trust. The ability of the buyer to negotiate has a
significant impact on the company's potential for profitability because the buyer is the
source of the company's revenue. Threats of substitutes are another factor. If other
businesses offer substitute products, customers might switch to other businesses.
Therefore, the threat needs to be assessed. Furthermore, the intensity of competition
among competitors should be acknowledged, as rivalry grows when a company
discovers an opportunity to increase market share.

6. What is a strategic group? Of what value is knowledge of the firm’s strategic

group in formulating that firm’s strategy? - A group of businesses utilizing similar
tactics and highlighting comparable strategic characteristics is known as a strategic
group. The firm's understanding of the strategic group is extremely important to the
aforementioned firm because they would actually be aware of the procedures and
operations of businesses using similar business models and strategies. The degree of
technical leadership, product quality, pricing practices, distribution methods, and
customer service are some examples of strategic dimensions that businesses within the
same strategic group handle similarly.
Kim Crista Elicanal Assignment #2
BSENTREP 2-2 April 13, 2023
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? - Competitor analysis is the process of gathering and analyzing data and
information about a company's rivals. Firms should use this analysis to gather competitor
intelligence. It entails conducting a focused analysis of each company that they would
consider to be a direct competitor. To do this, they concentrate on learning the four
dimensions they need to know in order to be ready for the anticipated response of rival
firms. Future goals, existing tactics, presumptions, and vulnerabilities make up these four
categories. After utilizing these, the company would learn more about competition
intelligence, a collection of data and information obtained by the company to
comprehend and foresee the goals, tactics, and resources of their rivals.