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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 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


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


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


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

debt+preferred stock+common equity+retained earnings)


Components of an industry analysis

Components of an term Industry Analysis


1 market share analysis
1. Market Share Analysis term

  • 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 term

  • Sales

  • Net Income

  • Other Indicators

  • Ratios


3 overall assessment of competitiveness
3. Overall Assessment of termCompetitiveness

Potential

Entrants

  • Five Forces Model

Rivalry

Among

Firms

Buyers

Suppliers

Substitutes



Positioning within industries trucking industry roi 88 92
Positioning within Industries termTrucking Industry ROI ‘88-92

Industry Average

5.1%


Competitors1
Competitors term

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 term

  • The market leader (largest share)

  • The most profitable competitor

  • The competitor most like us

  • The fastest-growing competitor


What to analyze
What to analyze term

  • Sales

  • Profit Rankings

  • Objectives

  • Strategies

  • Capabilities


U s restaurant chain industry
U.S. Restaurant termChain 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 term

  • 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 term

  • 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 term

  • Processes:

    • Analyze Global Societal (Macro) Factors

    • Analyze Global Task (Micro) Factors

      • Industry

      • Competitors

  • Goal:

    • To identify opportunities and threats.


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