External analysis
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External Analysis. External Analysis. Monitoring, Evaluating, Forecasting, and Disseminating information from the external environment Management tool to: Avoid surprises Work to ensure long-term health Identify opportunities and threats. OVERVIEW. External

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External Analysis

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External analysis

External Analysis


External analysis1

External Analysis

  • Monitoring, Evaluating, Forecasting, and Disseminating information from the external environment

  • Management tool to:

    • Avoid surprises

    • Work to ensure long-term health

    • Identify opportunities and threats


Overview

OVERVIEW

  • External

    • Analyze Global Societal (Macro) Factors

    • Analyze Global Task (Micro) Factors

      • Industry

      • Competitors


External analysis

SOCIETAL (MACRO)

TECHNOLOGICAL

TASK (MICRO)

Industry

ECONOMIC

POLITICAL/

LEGAL

INTERNAL

Competitors

SOCIOCULTURAL


External environment

Macro (Societal)

External Environment


Economic trends forecasts

Economic Trends & Forecasts

  • Gross National Product (GNP)

    • Total market value all goods & services final consumption in nation

  • Gross Domestic Product (GDP)

    • Value all goods & services produced in nation

  • Disposable Personal Income (DPI)

  • Consumer Price Index (CPI)

  • Interest Rates

  • Import/Export Trends

  • Unemployment Trends

  • Inflation Rates


Sociocultural trends forecasts

Sociocultural Trends & Forecasts

  • Demographic trends

  • Life style changes

  • Level of education

  • Value placed on leisure time

  • Social responsibility

  • Environmental concerns

  • Buying habits


U s sociocultural trends shaping future

U.S. Sociocultural trends shaping future

  • Increasing environmental awareness

  • Growth of the seniors market

  • New baby boomlet

  • Decline of the mass market

  • Pace and location of life

  • Changing households


Political legal

Political/Legal

  • Antitrust legislation

  • Environmental laws

  • Tax laws

  • Trade regulations

  • Political stability

  • Contract laws

  • Intellectual property


Technological variables

Technological Variables

  • New products and processes

    • Automation

    • Business-to-business


Technological variables1

Technological Variables

  • Information Age Developments

    • Selling on the Internet

      • In just 3 years, 90 million people swap information or do deals on the Internet.

      • It took 30 years for radio to reach 60 million

      • It took 15 years for TV to reach 60 million


Worksheets

WORKSHEETS

Societal (Macro)

External Environment Analysis


Global task micro external analysis

Global Task (Micro)External Analysis


External analysis

SOCIETAL (MACRO)

TECHNOLOGICAL

TASK (MICRO)

Industry

ECONOMIC

POLITICAL/

LEGAL

INTERNAL

Competitors

SOCIOCULTURAL


Industry

INDUSTRY

  • Group of firms producing a similar product or service.

  • Often defined by sources such as:

    • government (SIC codes),

    • analysts (Valueline,Investment Analysts, Standard & Poor’s).

    • Trade Associations

  • Multiple segments

  • Worldwide, Global, Domestic


Example of importance of industry attractiveness

Example of Importance of Industry Attractiveness

  • Average return on investment 1988-1992

  • Source: Compustat and Michael Porter’s analysis


External analysis

Return on Investment = net income/average investment (long term

debt+preferred stock+common equity+retained earnings)


Components of an industry analysis

Components of an Industry Analysis


1 market share analysis

1. Market Share Analysis

  • Definition of “market”

  • Definition of competitors

  • Share Trends - Past, Present, Future

U.S. Widget Market

1993

U.S. Widget Market

1998

U.S. Widget Market

2003


2 industry financial analysis

2. Industry Financial Analysis

  • Sales

  • Net Income

  • Other Indicators

  • Ratios


3 overall assessment of competitiveness

3. Overall Assessment of Competitiveness

Potential

Entrants

  • Five Forces Model

Rivalry

Among

Firms

Buyers

Suppliers

Substitutes


Competitors

COMPETITORS


Positioning within industries trucking industry roi 88 92

Positioning within IndustriesTrucking Industry ROI ‘88-92

Industry Average

5.1%


Competitors1

Competitors

Who?

  • Product Form - brands that directly compete

  • Product Category - products with similar characteristics

  • Generic Competition - products that satisfy the same customer needs

  • Budget Competition - products that compete for the customer’s budget


Which competitors to analyze

Which Competitors to Analyze

  • The market leader (largest share)

  • The most profitable competitor

  • The competitor most like us

  • The fastest-growing competitor


What to analyze

What to analyze

  • Sales

  • Profit Rankings

  • Objectives

  • Strategies

  • Capabilities


U s restaurant chain industry

U.S. RestaurantChain Industry

  • Strategic Groups

High

Red Lobster

Olive Garden

Pizza Hut

Chi-Chi’s

IHOP

Bob Evans

Shoney’s

Denny’s

PRICE

McDonald

Burger King

Wendy’s

Low

Limited

Menu

Full

Menu

Product-Line Breadth


Two segment questions

Two Segment Questions

  • External question:

    • What share of the total market do we have?

  • Internal question:

    • How much does that market contribute to our:

      • Sales; Net Income; Assets


Segments

Segments

  • Geographic Segments

    • U.S.; Europe; Pacific, etc.

  • Customer Segments

    • home market; business market; government market.

  • Product Segments

    • fruit-beverage market

    • alcoholic beverage market

  • Business Segments

    • Johnson Controls has 4

      • Auto; Controls; Plastic; Battery


Concept external analysis

Concept: External Analysis

  • Processes:

    • Analyze Global Societal (Macro) Factors

    • Analyze Global Task (Micro) Factors

      • Industry

      • Competitors

  • Goal:

    • To identify opportunities and threats.


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