Ch. 3 Assessing Opportunities and Threats Marsha Swink Jonathan McLaurin Paul Shirley
Feb 25, 2016
Ch. 3 Assessing Opportunities and ThreatsMarsha SwinkJonathan McLaurinPaul 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▫Amount of complexity- complex vs. simple
•Environment as a source of Resources▫Scarce and necessary resources▫Hostile= greater uncertainty
External Environmental Sectors•Specific Environment-
Customers, competitors, suppliers and other competitive factors.
•General Environment-Economic, Demographic,
Sociocultural, Political-Legal, and Technological.
Specific Environment•Porter’s Five-Forces Model
▫Rivalry▫Entrants▫Buyers▫Suppliers▫Substitutions
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•Economies of Scale- High or Low?
•Capital Requirements- Large or Small?
•Government Policies- In Place to Help or Harm?
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•Are Suppliers Concentrated or
Fragmented?
•Importance of the Industry Being Supplied▫Is our company important
•Product is an Important Input to Industry.
Substitute Products•Are There any Good Substitutes?
Specific Environment•Industry Profitability
▫What does the company have to achieve profitability?
▫What can it develop or create to progress?
General Environment•Includes:
▫Economic▫Demographic▫Sociocultural▫Political-Legal▫Technological
• Trends positive(opportunity)/negative(threats)
•Some Changes have no effect on organization
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• Age• Gender• Income• Ethnicity• Education• Geographic Location• Employment• Birth Rates
• Cross Examine
• Understand current and potential customers
• Hourglass Phenomenon
Peace Baby Boomers Today
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 •Understand Current
▫Culture▫Lifestyles
Kraft’s healthier food products▫Traditions▫Tastes▫Attitudes
•What’s “in”▫Apple’s iPods/Phones/Pads
CostCo’s Sociocultural Forces•U.S
▫Shopping convenient, ▫Deliverer organic options▫Awareness of food allergens
•Canada▫Many ethnic groups
•Japan▫Freshness▫Portability
Political-Legal•Taxation•Minimum wage•Product labeling/safety laws•International business•Trading
Technological•Look For
▫Scientific Innovation▫Technological Innovation
•Most Affected▫Product R&D▫Organizational Work Processes
•Computerization
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•Customer surveys•Trade journals•General news•External informational systems•Problems
▫Too much information
Responsibility for External Analysis•Small to Mid-size organizations
▫All should monitor changes
•Large organizations ▫Managers
•Everyone is involved
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•Changes are too rapid to evaluate
•Time consuming
•Forecast aren't perfect
Take Aways External Environment•Industry profitability
•Stay in line with environment
•Continually Assess opportunity and threats