Evaluating

Powerful Essays
Chapter 3: Evaluating a Company’s External Environment

Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

“Analysis is the critical starting point of strategic thinking.”
Kenichi Ohmae
Consultant and Author

“Things are always different – the art is figuring out which differences matter.”
Laszlo Birinyi
Investments Manager

Chapter Learning Objectives
1. To gain command of the basic concepts and analytical tools widely used to diagnose a company’s industry and competitive conditions.

2. To become adept in recognizing the factors that cause competition in an industry to be fierce, more or less normal, or relatively weak.

3. To learn how to determine whether an industry’s outlook presents a company with sufficiently attractive opportunities for growth and profitability.

4. To understand why in-depth evaluation of specific industry and competitive conditions is a prerequisite to crafting a strategy well matched to a company’s situation.
3-4

Chapter Roadmap
 The Strategically Relevant Components of a

Company’s External Environment  Thinking Strategically About a Company’s Industry and Competitive Environment
 Question 1: What Are the Industry’s Dominant Economic Features?  Question 2: How Strong Are Competitive Forces?  Question 3: What Forces Are Driving Industry Change and What Impacts Will They Have?  Question 4: What Market Positions Do Rivals Occupy— Who Is Strongly Positioned and Who Is Not?  Question 5: What Strategic Moves Are Rivals Likely to Make Next?  Question 6: What Are the Key Factors for Future Competitive Success?  Question 7: Does the Outlook for the Industry Offer the Company a Good Opportunity to Earn Attractive Profits?
3-5

Understanding the Factors that Determine a Company’s Situation
 Diagnosing a company’s situation has

two facets
 Assessing the company’s external or

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