THE EXTERNAL ENVIRONMENT: OPPORTUNITIES, THREATS, INDUSTRY COMPETITION AND COMPETITOR ANALYSIS.
“It is not the strongest species that survive, nor the most intelligent, but the one most responsive to change.” Charles Darwin Today, two types of strategies exist: proactive/reactive. Anticipation, change, adaptability is necessary nowadays so the proactive strategy (ex: Coca Cola). External environment conditions create both threats and opportunities for firms that have major implications for their strategic actions. Regardless of the industry, the external environment is critical to a firm’s survival success. The firm’s understanding of the external environment is matched with knowledge ...view middle of the document...
Firms cannot directly control the general environment’s segments and elements. Firms were challenged to understand the effects of the major general environment events on their current and future strategies. The industry environment is the set of factors that directly influences a firm and its competitive actions and competitive response: - the threat of new entrants, - the power of suppliers, - the power of buyers, - the threat of product substitutes, - and the intensity of rivalry. Focused on factors and conditions influencing a firm’s profitability within an industry. The interactions among these five factors determine an industry’s attractiveness and profit potential (cf. Competitor analysis). The competitors firms operating in the same market, offering similar products and targeting similar customers. Focused on predicting the dynamics of competitors’ actions, responses and intentions.
In combination, the result of the three analyses of the general environment, the firm uses to understand its external environment influence its strategic intent, strategic mission and strategic actions.
II. External environmental analysis.
An important objective of studying the general environment is identifying opportunities and threats. An opportunity is a condition in the general environment that, if exploited, helps a company achieve strategic competitiveness. (=opportunité) A threat is a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness. (= menace)
Through scanning, firms identify early signals of environment changes and trends. (=déchiffrer) When scanning, the firm often deals with ambiguous, incomplete or unconnected data information. Environment scanning is critically important for firms competing in highly volatile environment. Example: Many websites and advertisers on the Internet use “cookies” to obtain information from those who visit their sites.
When monitoring, analysts detect meaning through ongoing observations of environmental changes and trends. (=surveillance) Critical to successful monitoring is the firm’s ability to detect meaning in different environmental events ad trends. By monitoring, firms can be prepared to introduce new good and services at the appropriate time to take advantage of the opportunities identified trends provide. Like scanning, monitoring is particularly important when a firm competes in an industry with high technological uncertainty. Also, scanning and monitoring not only can provide the firm with information, they also serve as a means of importing new knowledge about markets and about how to successfully commercialise new technologies that the firms has developed. Example: The number of immigrants from Asia continues to grow in Australia, which represents an opportunity as a new consumer market.
When forecasting, analysts develop projections of anticipated outcomes based...