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Unformatted text preview: Chapter 2: The External Environment Chapter 2 The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis KNOWLEDGE OBJECTIVES 1. Explain the importance of analyzing and understanding the firms external environment. 2. Define and describe the general environment and the industry environment. 3. Discuss the four activities of the external environmental analysis process. 4. Name and describe the general environments seven segments. 5. Identify the five competitive forces and explain how they determine an industrys profit potential. 6. Define strategic groups and describe their influence on the firm. 7. Describe what firms need to know about their competitors and different methods (including ethical standards) used to collect intelligence about them. CHAPTER OUTLINE Opening Case Phillip Morris International: Effects of Its External Environment THE GENERAL, INDUSTRY, AND COMPETITOR ENVIRONMENTS EXTERNAL ENVIRONMENTAL ANALYSIS Scanning Monitoring Forecasting Assessing Strategic Focus Consumers Desire to Receive Additional Value When Purchasing Brand-Name Products SEGMENTS OF THE GENERAL ENVIRONMENT The Demographic Segment The Economic Segment The Political/Legal Segment The Sociocultural Segment The Technological Segment The Global Segment The Physical Environment Segment Strategic Focus Firms Efforts to Take Care of the Physical Environment in Which They Compete INDUSTRY ENVIRONMENT ANALYSIS Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products Intensity of Rivalry among Competitors INTERPRETING INDUSTRY ANALYSES STRATEGIC GROUPS COMPETITOR ANALYSIS ETHICAL CONSIDERATIONS SUMMARY REVIEW QUESTIONS EXPERIENTIAL EXERCISES VIDEO CASE NOTES 2-1 Chapter 2: The External Environment LECTURE NOTES Chapter Introduction: This chapter can be introduced with a general statement regarding the importance of understanding what is happening outside of the firm itself and how what is happening can affect the firms ability to achieve strategic competitiveness and earn above- average returns. This importance is illustrated by the Opening Case , which discusses the impact events in the external environment can have on a firms performance, despite efforts to adjust to industry dynamics. OPENING CASE The Opening Case highlights how Philip Morris International (PMI) incorporates conditions in the general environment into its strategic decisions. PMI is the leading international tobacco company by market share. It has the largest market share in 11 of the top 30 cigarette markets. Examples of how PMI utilizes external information in making strategic decisions includes its decision to focus on global markets where rules and regulations regarding the selling of tobacco products are less restrictive, However, PMI is not just looking at present conditions, they are implementing strategies in anticipation of future conditions as well. For example, they are working with governments and other stakeholders to advocate for a comprehensive, consistent and...
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This note was uploaded on 10/21/2011 for the course ACCOUNTING 101 taught by Professor Fenjimo during the Spring '11 term at College of Southern Idaho.
- Spring '11