THE EXTERNAL ASSESSMENT
The Nature of an External Audit
Social, Cultural, Demographic, and Environmental Forces
Political, Governmental, and Legal Forces
Competitive Analysis: Porter’s Five-Forces Model
Sources of External Information
Forecasting Tools and Techniques
The Global Challenge
Industry Analysis: The External Factor Evaluation (EFE) Matrix
The Competitive Profile Matrix (CPM)
Describe how to conduct an external strategic-management audit.
Discuss 10 major external forces that affect organizations: economic, social, cultural,
demographic, environmental, political, governmental, legal, technological, and competitive.
Identify key sources of external information, including the Internet.
Discuss important forecasting tools used in strategic management.
Discuss the importance of monitoring external trends and events.
Explain how to develop an EFE Matrix.
Explain how to develop a Competitive Profile Matrix.
Discuss the importance of gathering competitive intelligence.
Describe the trend toward cooperation among competitors.
Discuss the political environment in Russia.
Discuss the global challenges facing American firms.
This paper examines the tools and concepts needed to conduct an external strategic-management
audit (sometimes called environmental scanning or industry analysis). 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 the Sun Belt, an aging society, information technology, and
the computer revolution. An external audit reveals key opportunities and threats confronting an
organization, so managers can formulate strategies to take advantage of the opportunities and avoid
or reduce the impact of threats. This paper presents a practical framework and guidelines for
gathering, assimilating, and analyzing environmental information.
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