Chapter 2

1. Identify and describe the three major parts of the external environment.

2. What are the four components of the external environmental analysis? Describe the purpose of
each of these stages.

3. What are some of the sources of information that can be used to analyse the general environment?

4. Identify and describe the six segments of general environment analysis.

5. Identify the five competitive forces and explain how they determine industry profit potential.

Chapter 2
1. Identify and describe the three major parts of the external environment.
 The three major parts of the external environment are the remote environment, the
industry environment, and the operating environment.
 Physical environment; energy consumption, practices used to develop energy
sources, renewable energy efforts, minimising a firm’s environment footprint.
 Demographic; Population size, age structure, geographic distribution.
 Economic; inflation rates, interest rates, trade deficits or surpluses, budget deficits
or surpluses
The three major parts of the external environment are:
1. Remote Environment: This includes factors such as economic, social, political,
technological, and ecological influences that affect the organization indirectly.
2. Industry Environment: This encompasses the competitive forces and the overall
structure of the industry in which the organization operates.
3. Operating Environment: This refers to the immediate competitive and regulatory
conditions that directly affect the day-to-day operations of the organization.
Understanding and analyzing these three parts of the external environment is crucial for
organizations to adapt and thrive in their respective industries.

2. What are the four components of the external environmental analysis?

Describe the purpose of each of these stages.
 The four components of the external environmental analysis are scanning,
monitoring, forecasting, and assessing.
 Scanning: Involves identifying early signals of environmental changes and trends.
 Monitoring: Involves tracking environmental changes and trends.
 Forecasting: Involves developing projections of anticipated outcomes based on
monitored changes and trends.
 Assessing: Involves determining the timing and significance of environmental
changes and trends for the firm.
3. What are some of the sources of information that can be used to analyze the
general environment?
 Sources of information for analysing the general environment include government
publications, industry and trade association publications, academic and
professional journals, and commercial databases.
4. Identify and describe the six segments of general environment analysis.
 The six segments of general environment analysis are
 Demographic; population size, age structure. Geographic distributions
 Economic; inflation rates, interest rates, trade deficits or surpluses, budget deficits
or surpluses
 political/legal; antitrust laws, taxation, deregulation philosophies
 Sociocultural; women in the workforce, workforce diversity, attitudes about the
quality of work life
 Technological; product innovations, applications of knowledge
 global segments; important political events, critical global markets.

5. Identify the five competitive forces and explain how they determine industry
profit potential.
 The five competitive forces are the threat of new entrants, bargaining power of
buyers, bargaining power of suppliers, threat of substitute products or services, and
intensity of competitive rivalry. These forces collectively determine the industry's
profit potential by influencing the prices, costs, and required investment of firms
within the industry.