What external forces need to be considered?
Neu-Ulm University of Applied Sciences
September 22, 2023
After this session, you should have a solid understanding of
Form small groups of 3 to 4 students, discuss your findings from reading Hallegatte (2009), and create a summary of the key findings concerning the importance of climate change for contemporary firms, uncertainties, robust decision-making, and economic evaluation and reflect their implications for strategic management on a few slides (20 minutes).
Be prepared to present your findings in a five-minute presentation.
Scanning the environment to identify key variables so that strategies can be formulated to take advantage of the opportunities and reduce the impacts of the threats.
External forces can be divided into five broad categories:
Economic; social, cultural, demographic, and environmental; political, governmental, and legal; technological; and competitive forces.
Form small groups and identify legal and ethical ways to obtain competitive intelligence.
The essence of strategy formulation is coping with competition.
A framework for competitive analysis of a specific industry based on five basic forces that determine the ultimate profit potential of that industry.
Tactics such as price competition, product introductions, advertising battles, etc. are often used by rivals jockeying for position.
Long-term, global, and transformative trends that bring about fundamental changes and transformations in various domains and at multiple levels.
The Zukunftsinstitut has identified 12 megatrends:
Gender shift, health, globalisation, connectivity, individualisation, mobility, security, new work, neo-ecology, knowledge culture, silver society, urbanisation.
An External Factor Evaluation (EFE) matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.
The EFE matrix shows how the organization responds to existing opportunities and threats in its industries. Or, in other words, how the firm’s existing strategies effectively take advantage of existing opportunities and minimize the potential adverse effects of external threats.
A total weighted score of 4.0 indicates that the organization is responding in an outstanding way to existing threats and opportunities in the industry.
EFE matrix for a Local 10-theater cinema complex
Key External Factors | Weight | Rating | Score |
---|---|---|---|
Opportunities | |||
1. Two new neighborhoods developing within 3 miles | 0.09 | 1 | 0.09 |
2. TDB University is expanding 6% annually | 0.08 | 4 | 0.32 |
3. Major competitor across town recently closed | 0.08 | 3 | 0.24 |
4. Demand for going to cinemas growing 10% | 0.07 | 2 | 0.14 |
5. Disposable income among citizens up 5% in prior year | 0.06 | 3 | 0.15 |
6. Rowan County is growing 8% annually in population | 0.05 | 3 | 0.15 |
7. Unemployment rate in county declined to 3.1% | 0.03 | 2 | 0.06 |
8. Unemployment rate in county declined to 3.1% | 0.03 | 2 | 0.06 |
Threats | |||
9. Trend toward healthy eating eroding concession sales | 0.12 | 4 | 0.48 |
10. Demand for online movies and DVDs growing 10% | 0.06 | 2 | 0.12 |
11. Commercial property adjacent to cinemas for sale | 0.06 | 3 | 0.18 |
12. TDB University installing an on-campus movie theater | 0.04 | 3 | 0.12 |
13. County and city property taxes increasing 25% | 0.08 | 2 | 0.6 |
14. Local religious groups object to R-rated movies | 0.04 | 3 | 0.12 |
15. Movies rented at local Red Box’s up 12% | 0.08 | 2 | 0.16 |
16. Movies rented last quarter from Time Warner up 15% | 0.06 | 1 | 0.06 |
Total | 1.00 | 2.58 |
Form small groups and develop an EFE matrix for the HNU.
The following questions are designed to review and consolidate what you have learned and are a good starting point for preparing for the exam.
Read Peteraf (1993) and make notes on following questions:
The external strategic management audit is sometimes also called environmental scanning or industry analysis.