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Ch. 3 Assessing Opportunities and Threats. Marsha Swink Jonathan McLaurin Paul Shirley. External Analysis. What is External Analysis? Opportunities Threats. Open Systems-Two Perspectives. Environment as a source of Information Amount of change - dynamic vs. stable

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ch 3 assessing opportunities and threats

Ch. 3Assessing Opportunities and Threats

Marsha Swink

Jonathan McLaurin

Paul Shirley

external analysis
External Analysis
  • What is External Analysis?
    • Opportunities
    • Threats
open systems two perspectives
Open Systems-Two Perspectives
  • Environment as a source of Information
    • Amount of change- dynamic vs. stable
    • Amount of complexity- complex vs. simple
  • Environment as a source of Resources
    • Scarce and necessary resources
    • Hostile= greater uncertainty
external environmental sectors
External Environmental Sectors
  • Specific Environment- Customers, competitors, suppliers and other competitive factors.
  • General Environment- Economic, Demographic, Sociocultural, Political-Legal, and Technological.
specific environment
Specific Environment
  • Porter’s Five-Forces Model
    • Rivalry
    • Entrants
    • Buyers
    • Suppliers
    • Substitutions
rivalry among existing firms
Rivalry Among Existing Firms
  • Competitors- Few or Many?
  • Sales Growth- Slowing or Progressing
  • Diversity Among Competitors.
    • How similar is your competition to you?
potential entrants to the industry
Potential Entrants to the Industry
  • Economies of Scale- High or Low?
  • Capital Requirements- Large or Small?
  • Government Policies- In Place to Help or Harm?
bargaining power of buyers
Bargaining Power of Buyers
  • Purchases Large or Small Volumes?
  • Products Purchased are Standard or Unique?
  • Buyer’s Profits- High or Low?
bargaining power of suppliers
Bargaining Power of Suppliers
  • Are Suppliers Concentrated or Fragmented?
  • Importance of the Industry Being Supplied
    • Is our company important
  • Product is an Important Input to Industry.
substitute products
Substitute Products
  • Are There any Good Substitutes?
specific environment1
Specific Environment
  • Industry Profitability
    • What does the company have to achieve profitability?
    • What can it develop or create to progress?
general environment
General Environment
  • Includes:
    • Economic
    • Demographic
    • Sociocultural
    • Political-Legal
    • Technological
  • Trends positive(opportunity)/negative(threats)
  • Some Changes have no effect on organization
economic
Economic
  • Rising cost of energy and fuels
    • Retailers- consumers lose appetite of spending
    • Exception: Wal-Mart
    • CostCo’s greatest struggle
  • Macroeconomic data
    • Interest rates, GDP, Unemployment levels
  • Global Business analysis won’t change much
    • Biggest challenge is reliable statistics
demographics
Demographics
  • Age
  • Gender
  • Income
  • Ethnicity
  • Education
  • Geographic Location
  • Employment
  • Birth Rates
  • Cross Examine
  • Understand current and potential customers
  • Hourglass Phenomenon

Peace

Baby Boomers

Today

demographics1
Demographics
  • U.S.
    • 24.7 million small businesses
    • 24.6 million people married w/children
    • Avg Inc. $48,201 per person
  • CostCo
    • Small Businesses
    • Upper/Middle Class Families
    • Avg. Inc. Target Market
      • 100,000
sociocultural
Sociocultural
  • Understand Current
    • Culture
    • Lifestyles
      • Kraft’s healthier food products
    • Traditions
    • Tastes
    • Attitudes
  • What’s “in”
    • Apple’s iPods/Phones/Pads
costco s sociocultural forces
CostCo’sSociocultural Forces
  • U.S
    • Shopping convenient,
    • Deliverer organic options
    • Awareness of food allergens
  • Canada
    • Many ethnic groups
  • Japan
    • Freshness
    • Portability
political legal
Political-Legal
  • Taxation
  • Minimum wage
  • Product labeling/safety laws
  • International business
  • Trading
technological
Technological
  • Look For
    • Scientific Innovation
    • Technological Innovation
  • Most Affected
    • Product R&D
    • Organizational Work Processes
  • Computerization
costco s technological facts
CostCo’s Technological Facts
  • Track purchases of members
    • Know which products sell more
    • Restocking inventory
    • Memberships connected w/credit cards
finding info on external environment
Finding Info on External Environment
  • Customer surveys
  • Trade journals
  • General news
  • External informational systems
  • Problems
    • Too much information
responsibility for external analysis
Responsibility for External Analysis
  • Small to Mid-size organizations
    • All should monitor changes
  • Large organizations
    • Managers
  • Everyone is involved
what s the point
What's the point?
  • Align the organization with the environment
  • Understand what the environment has to offer
  • Ever increasing dynamic environment
  • Makes a difference in performance results
  • Promotion and raises
challenges
Challenges
  • Changes are too rapid to evaluate
  • Time consuming
  • Forecast aren't perfect
take aways external environment
Take Aways External Environment
  • Industry profitability
  • Stay in line with environment
  • Continually Assess opportunity and threats