Chapter 2
The External Environment: Opportunities, Threats, Industry
Learning Objectives
Studying this chapter should provide you with the strategic
management knowledge needed to:
1. Explain the importance of analyzing and understanding the firm’s 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 environment’s seven segments.
5. Identify the five competitive forces and explain how they determine an
industry’s profitability potential.
6. Define strategic groups and describe their influence on firms.
7. Describe what firms need to know about their competitors and different
methods (including ethical standards) used to collect intelligence about
them.
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The External Environment
©2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
General Environment
The General Environment: Segments and
Elements
Industry Environment
•The set of factors directly influencing a firm and
its competitive actions and competitive
responses:
Competitor Analysis
External Environmental Analysis
Opportunities and Threats
•Opportunity
Segments of the General Environment
The
demographic
segment
Population
size
Age
structure
Geographic
distribution
Ethnic mix
Income
distribution
Segments of the General Environment
(cont’d)
•The Economic Segment
–Uncertainty in:
Segments of the General Environment
(cont’d)
Segments of the General Environment
(cont’d)
•The Technological Segment
Segments of the General Environment
(cont’d)
Critical
Segments of the General Environment
(cont’d)
•The Physical Environment Segment
Segments of the General Environment
(cont’d)
Industry Environment Analysis
•Industry Defined
The Five Forces of Competition Model
©2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
Threat of New Entrants: Barriers to Entry
•Economies of scale