Mgt 400 Week 4 External Analysis Paper

MGT 400 Strategic Management
Ch. 3: External Analysis: The Identification of Opportunities & Threats
Personal Notes
Overview
• Starting point of strategy formulation is an analysis of the forces that shape competition in the industry; to do so must gain understanding of: o Opportunities – arise when a company can take advantage of conditions in its environment to formulate & implement strategies that enable it to become more profitable o Threats – arise when conditions in the external environment endanger the integrity & profitability of the company’s business
Analyzing Industry Structure
• Industry – defined as a group of companies offering products/services that are close substitutes for one another
• Competitors – its rivals; are those that serve the same basic customer need
• Starting point of
• Two forces in particular: risk of entry by potential competitors & rivalry among existing firms
• Indentifies five sequential stages in the evolution of an industry that lead to five distinct kinds of industry environments: embryonic, growth, shakeout, mature, & decline o Five Industry Environments
• Embryonic Industries – just beginning to develop
• Growth is slow; high prices; & poorly developed distribution channels
• Growth Industries – first-time demand is expanding rapidly as many new customers enter the market
• Grows with customer familiarity with product; price falls due to experience; distribution channels develop
• Industry