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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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Presentation Transcript
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
slide4

SOCIETAL (MACRO)

TECHNOLOGICAL

TASK (MICRO)

Industry

ECONOMIC

POLITICAL/

LEGAL

INTERNAL

Competitors

SOCIOCULTURAL

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

slide14

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
slide17

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

debt+preferred stock+common equity+retained earnings)

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

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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