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Chapter 2 Review

The document discusses analyzing a company's business environment for competitive strategy. It describes (1) understanding the internal and external environments, including general, industry, and competitor analysis; (2) scanning, monitoring, forecasting, and assessing the external environment; (3) the six segments that make up the general environment; (4) analyzing the industrial environment using Porter's five forces; and (5) developing strategic actions based on industry analyses and competition. The key takeaway is learning how to identify business conditions, analyze different market segments and factors, and leverage insights to improve a company's position.

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217 views

Chapter 2 Review

The document discusses analyzing a company's business environment for competitive strategy. It describes (1) understanding the internal and external environments, including general, industry, and competitor analysis; (2) scanning, monitoring, forecasting, and assessing the external environment; (3) the six segments that make up the general environment; (4) analyzing the industrial environment using Porter's five forces; and (5) developing strategic actions based on industry analyses and competition. The key takeaway is learning how to identify business conditions, analyze different market segments and factors, and leverage insights to improve a company's position.

Uploaded by

Stibin ilibin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Steve Andre E Aquino

BSA - 3

The Business Environment for Competitive Strategy

 The Business Environment – Having to understand the business on an internal


level makes the executive see and understand the present and the future of the
company’s direction. Environment understanding can be achieved through
Competitive analysis, there are three important factors which the analysis is
focused on
 (1) The General Environment which focuses on foreseeing the
company’s future and how it affects present and future operations
 (2) The Industry Environment which shows the condition of profitability
within an industry
 (3) The Competitor which predicts the dynamics of the competition
Having to combine all the results of these analysis would result in an external
environment understanding useful in influencing strategics actions to better
improve or enhance business performance

 Analysis of the External Environment – The environment where the business


lives in is turbulent and uncertain, one must base their forecast on a complete set
of data and information to show better results in understanding the business
environment. Analysis of the External Environment includes four important
activities:
 (1) Scanning which is the process that entails the study of all the
segments in the general environment
 (2) Monitoring which is the process of carefully observing the changes in
the environment and seeing its effects
 (3) Forecasting which is simply the results of Scanning and Monitoring,
there are the results of the analysis
 (4) Assessing, is the process of determining the timing and significance
of the effects of environmental changes.

 Segmentation of the General Environment – the general environment is


composed of segments that are considered as external towards the firm, it must
identify changes, trends and opportunities to take advantage of the fast-
fluctuating environment. There are 6 Segments that affect the operation of the
firm:
 (1) Demographic Segment is the process of dividing your market into
segments based on things like ethnicity, age, gender, income, religion,
family makeup, and education
 (2) Economic Segment refers to the nature and direction of the economy
in which a company competes or may compete
Steve Andre E Aquino
BSA - 3
 (3) Political and Legal Segments is a combination of a lot of factors such
as the current political party in power, the degree of politicization of trade
and industry, etc.
 (4) Social and Cultural Segments
 (5) Advancement of technological Segments centers on improvements
in products and services that are provided by science
 (6) The World business segments which is the nation’s development of
industries and creation of investments.

 Analysis of the Industrial Environment – Industry is a group of firms producing


products that are similar or closely related to one another who are competing for
the share of their pie in the market, they’re simply racing towards the top. The
industry environment has more direct effect on the firm’s strategic competencies,
the traditional strategy makes firms concentrate on competitors’ products while
the strategic management has now changed the landscape of competition.

 The Five Forces that affect a firm’s Competitiveness

 The Threat of new Entrants, Ways to avoid these threats would be


(1) Economies of Scale (2) Product Differentiation (3) Capital
Requirements
 (4) Access to Distribution channel (5) Government Regulations
 Power of Suppliers, Power of supplier is powerful under (1) Dominated
by few large companies (2) when they are more concentrated (3) There is
no substitute available (4) Industry is not significant (5) When suppliers’
goods are critical to firm’s success (6) Poses threat to integrate forward
into buyer’s industry
 Buyer’s Bargaining power, Consumer group has bargaining power
under (1) When they purchase large volumes (2) There is an available
substitute (3) Sales are a significant portion (4) Dealer can be threat for
backward integration
 Threat of Substitute Product, this is based on (1) when substitute price
is lower (2) when quality is better than existing product (3) when product is
readily available (4) When service is available
 Power of Competition, Factors that intensify power competition (1)
Presence of balance competitors (2) Slow industrial growth (3) Higher
Fixed cost (4) High storage Cost (5) Low product differentiation

 Industry Analyses and Strategic Actions – The five forces of competition are
guidelines for firms to develop insights required to determine the firm’s potential
to earn return on investments
Steve Andre E Aquino
BSA - 3

 Analyses of the Industry Competition – The competitors’ environment is the


final stage in the analysis as it directly affects the firm’s position in the industry,
the firm must be able to seek the following:
o Competitors’ future objectives
o Competitors’ Current strategic Actions
o Competitors’ assumptions about the industry
o competitors’ strength and weaknesses
o Government policy for global market

Learning Insights:
Going through Chapter 2 which is “The Business Environment for Competitive
Strategy” I was able to identify the business conditions in external environments and
how it affects the business’ operations, understand the different segments in markets
and their significance towards attaining the firm’s success. Not only was I able
understand different parts in the environment of business but I also was able to Analyze
them internally and externally through the given factors on how to analyzed them, and
know what data should be used to forecast the needed results. I was also able to know
the strategic actions to avoid competitors’ underlying forces, know ways on how to
mitigate them and use them as an advantage to better improve and enhance the
business as a whole. This chapter somehow made me view business on a more in-
depth and at the same time broader perspective through internal and external
environments.

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