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21download_doc-5.php - J370 Session 4 Evaluating a Firms...

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J370 Session 4 Evaluating a Firm’s External Environment o Class Session #4 o Dr. Siri Terjesen Administration o Thanks for asking good questions of John Wisneski! o Schedule next week: John Wisneski (Tuesday – Internal Analysis), Toyah Miller (Thursday – Cost Leadership) o Next Homework Quiz due in one week o Personal Review Questions are available online (work on individually or in groups)- not graded, just to help you prepare for mid-term and final o Jason Pierce’s PhD research- participation opportunity (end of class) Why External Analysis? o External analysis allows firms to: o Discover threats and opportunities o See if above normal profits are likely in an industry o Better understand the nature of competition in an industry o Make more informed strategic choices The Macro-Environment: Segments and Elements o The general environment is composed of elements in the broader society that can indirectly influence an industry and the firms within the industry. But firms cannot directly control the general environment’s segments and elements. Table 2-1 lists elements that characterize each of the six segments of the general environment: demographic, economic, political/legal, sociocultural, technological, and global. Each of these segments will be discussed in more detail later in this chapter, following a discussion of the external environmental analysis process. Macro Environment: Questions to Ask o For each component, what are the threats to my organization? o How can I protect my organization against these threats? o For each component, what are the opportunities to my firm? o How can I enable my organization to seize these opportunities? o Overall, how important is each component? Interpreting Industry Analyses o Unattractive Industry Low entry barriers Suppliers and buyers have strong positions Strong threats from substitute products Intense rivalry among competitors
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Low profit Potential
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