The External Environment:
Opportunities, Threats, Competition,
and Competitor Analysis
The external environment affects a firm’s strategic actions. For the example, when Philip Morris International (PMI) joint venture with Swedish Match AB, PMI distribute smokeless tobacco in multiple global market. A firm’s external environment creates the opportunities (opportunities PMI to enter the smokeless tobacco market) and threats (the regulation in its market reduces the consumption of PMI’s tobacco products). Collectively, opportunities and threats affect a firm’s strategic actions. The external environment influences firm as they seek strategic competitiveness and the earning of above-average returns. The external environment is filled with uncertainty. Firms must be aware of and fully understand the different segments of the external environment to handle this uncertainty. Firms have to acquiring information about competitors, customers, and other stakeholders to build their own base of knowledge and capabilities.
External Environmental Analysis
The external environmental analysis has four parts: scanning, monitoring, forecasting and assessing. Scanning is identifying early signals of environmental changes and trends. Monitoring is detecting meaning through ongoing observations if environmental changes and trends. Forecasting is developing projections of anticipated outcomes based on monitored changes and trend. Assessing is determining the timing and importance environmental changes and trends for firms’ strategies and their management. Identifying the opportunities and the threats is an important objective of studying the general environment. An opportunity is a condition in the general environment that if exploited effectively, helps a company achieve strategic competitiveness. A threat is a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness. The General Environment
The general environment is...
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