Evaluating a Chapter Title Company’s External Environment
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Understanding the Factors thatDetermine a Company’s Situation
Diagnosing a company’s situation has two facets
Assessing the company’s external or macro-environment
Industry and competitive conditions Forces acting toreshape this environment
Assessing the company’s internal or micro-environment
Market position and competitiveness
Competencies, capabilities, resource strengths and weaknesses, andcompetitiveness
Fig. 3.1: From Thinking Strategically about the Company’s Situation to Choosing a Strategy
Thinking Strategically about aCompany’s Macro-environment
Relevant factors and influences outside its boundaries Strategically important factors that have a bearing on the decisions a company’s makes about its
Direction ObjectivesStrategy Business model
Scan the external environment to
Identify potentially important external developments Assess their impact and influence Adapt a company’s direction and strategy as needed3-5
Key Questions Regarding the Industry and Competitive Environment
What are the industry’s dominant economic traits?
How strong are competitive forces?
What market positions do rivalsoccupy? What moves will they make next?
What forces are driving change in the industry? What are the key factors for competitive success?
How attractive is the industry from a profitperspective?
Question 1: What are the Industry’s Dominant Economic Traits?
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Market size and growth rate Number of rivals Scope of competitive rivalry Buyer needsand requirements Degree of product differentiation Product innovation Supply/demand conditions Pace of technological change Vertical integration Economies of scale Learning and experience curve...