CH 3 Review - environmental scanning(p 60 This chapter...

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environmental scanning (p. 60) This chapter examines the tools and concepts needed to conduct an external strategic management audit (sometimes called environmental scanning or industry analysis) . external audit (p. 60) An external audit focuses on identifying and evaluating trends and events beyond the control of a single firm, such as increased foreign competition, population shifts to coastal areas of the USA, an aging society, and taxing Internet sales. An external audit reveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats. The purpose of an external audit is to develop a finite list of opportunities that could benefit a firm and threats that should be avoided. As the term finite suggests, the external audit is not aimed at developing an exhaustive list of every possible factor that could influence the business; rather, it is aimed at identifying key variables that offer actionable responses. actionable factors (p. 61) Important note: when identifying and prioritizing key external factors in strategic planning, make sure the factors selected are specific, (i.e. quantified to the extent possible); perhaps more importantly make sure the factors selected are actionable , (i.e. meaningful in terms of having strategic implications). external forces (p. 61) External forces can be divided into five broad categories: (1) economic forces; (2) social, cultural, demographic, and natural environment forces; (3) political, governmental, and legal forces; (4) technological forces; and (5) competitive forces. Relationships among these forces and an organization are depicted in Figure 3-2. External trends and events, such as rising food prices and people in African countries coming online, significantly affect products, services, markets, and organizations worldwide. Industrial Organization (I/O) (p. 63) The Industrial Organization (I/O) approach to competitive advantage advocates that external (industry) factors are more important than internal factors in a firm for achieving competitive advantage. I/O theorists contend that external factors and the industry in which a firm competes has a stronger influence on the firm’s performance than do the internal functional issues in marketing, finance, and the like. The I/O view has enhanced the understanding of strategic management. However, it is not a question of whether
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