Chapter 2.pdf - Chapter 2 Analyzing the external...

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Chapter 2 Analyzing the external environment of the firm
Introduction Gary Hamel & C. K. Prahalad- “every manager carries around in his or her head a set of biases, assumptions, and presupposition about the structure of the relevant ‘industry’, about how one makes money in the industry, about who the competition is and isn’t, about who the customers are and aren’t and so on. Peter Drucker labeled these interrelated sets of assumptions the ‘theory of the business. When management’s assumptions, premises, or beliefs are incorrect or when internal inconsistencies among them render the overall ‘theory of the business’ invalid.
Creating the environmentally aware organization Scanning, monitoring, and gathering competitive intelligence- used to develop forecasts.
Environmental Scanning Involves surveillance of a firm’s external environment to predict environmental changes and detect changes already under way. Helps to identify critical trends and events before changes develop a discernible pattern and before competitors recognize them. Leading firms in an industry can also be a key indicator of emerging trends.
Environmental monitoring Firms analysis of the eternal environment that tracks the evolution of environmental trends, sequences of events, or streams of activities. Monitoring enables firms to evaluate how dramatically environmental trends are changing the competitive landscape. Helps to determine a firm’s strategic direction and resource allocation.
Competitive intelligence A firms activities of collecting and interpreting data on competitors, defining and understanding the industry, and identifying competitors strength and weaknesses. Collecting data on competitors and interpreting such data. Helps to anticipating competitors moves and decreasing response time. Executives must be careful to avoid spending so much time and effort tracking the actions of traditional competitors that they ignore new competitors .
Environmental forecasting The development of plausible projections about the direction, scope speed, and intensity of environmental change. Its purpose is to predict change. It asks: How long will it take a new technology to reach the marketplace? Will the present social concern about an issue result in new legislation? Scenario analysis is a more in depth approach to forecasting that involves experts detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment.
SWOT analysis

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