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bus490_w3_ch3 - BUS 490 Week 3 The External Assessment...

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BUS 490 Week 3: The External Assessment Slide # Topic Narration Slide 1 Intro Welcome to Lesson Three of Business Policy. This lesson will focus on external assessment. Please go to slide # 2 Slide 2 Objectives Upon completion of this lesson you will be able to: Describe how to conduct an external strategic-management audit; Discuss ten major external forces; Identify key sources of external information; Discuss important forecasting tools used in strategic management; Discuss the importance of monitoring external trends and events; Explain how to develop an E-F-E Matrix; Explain how to develop a Competitive Profile Matrix; Discuss the importance of gathering competitive intelligence; Describe the trend toward cooperation among competitors; and Discuss the global challenge facing American firms. Please go to slide # 3 Slide 3 Overview This lesson focuses on the tools and concepts needed to conduct an external strategic management audit. Let’s begin. Please go to slide # 4 Slide 4 The Nature of an External Audit The purpose of an external audit is to identify and evaluate trends and events beyond the control of a single firm. It reveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of opportunities and avoid or reduce the impact of threats. External forces can be divided into five broad categories: Economic forces; Social, cultural, demographic, and environmental forces; Political, governmental, and legal forces; Technological forces; and Competitive forces. External trends and events significantly affect all products, services, markets, and organizations in the world. Identifying and evaluating external opportunities and threats enables organizations to develop a clear mission, to design strategies to achieve long-term objectives, and to develop policies to achieve annual objectives.
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The process of performing an external audit must involve as many managers and employees as possible. To perform an external audit, a company must first gather competitive intelligence and information about economic, social, cultural, demographic, environmental, political, governmental, legal, and technological trends. Once information is gathered, it should be assimilated and evaluated. Key external factors can vary over time and by industry. A final list of the most important key external factors should be communicated and distributed widely in the organization. Both opportunities and threats can be key external factors. Please go to slide # 5 Slide 5 Economic Forces Economic factors have a direct impact on the potential attractiveness of various strategies. For example, when interest rates rise, funds needed for capital expansion become more costly. Also, trends in the dollar’s value have significant and unequal effects on companies in different industries and in different locations. There are numerous economic variables that often represent opportunities and threats for organizations including, but not limited to: Availability of credit,
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