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External Analysis in Strategic Management

External Analysis is a crucial component of Strategic Management that helps businesses assess their standing and competition. It involves examining the general environment, industry environment, and competitor environment to identify opportunities and threats. This analysis aids in strategic planning, enabling companies to make informed decisions and achieve long-term success.

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11 views1 page

External Analysis in Strategic Management

External Analysis is a crucial component of Strategic Management that helps businesses assess their standing and competition. It involves examining the general environment, industry environment, and competitor environment to identify opportunities and threats. This analysis aids in strategic planning, enabling companies to make informed decisions and achieve long-term success.

Uploaded by

montonandriennelee
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

External Analysis: Industry and Competitive Analysis

Strategic Management have four components and one of it is Environmental scanning. The
Environmental scanning or External Analysis is a tool for the business to know their standing as well as to
their competitors. It is a strategy to create value for the customers, gain competitive edge among others
and thrive in the ever-changing environment.

The External environment has three major parts which are the general environment, industry
environment, and the competitor environment. The general environment has seven segments:
demographic, economic, political/legal, sociocultural, technological, global, and physical. These
segments
aims to determine the factors in these disciplines that could potentially impact the business
performance.
The opportunities and threats are being analyzed in this environment. On the other hand, the industry
environment directly affects a firm's strategic competitiveness and capacity to generate above-average
returns. There are five forces of competition that drives an industry’s profit potential which are the
threats posed by new entrants, the power of suppliers, the power of buyers, product substitutes, and the
intensity of rivalry among competitors.

In many ways, success in the business world is like playing chess which requires strategic
planning and to anticipate your opponent's next move. As a result, having an external analysis helps the
companies make smart decisions, overcome challenges, capitalize on opportunities, and succeed in the
long run.

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