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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.
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.
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Chapter Roadmap
The Strategically Relevant Components of a Company’s External Environment
Thinking Strategically About a Company’s Industry and Competitive Environment
Question 1: Features?
Question 2: Question 3:
What Are the Industry’s Dominant Economic
How Strong Are Competitive Forces?
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: Make Next?
Question 6:
What Strategic Moves Are Rivals Likely to
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?
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Understanding the Factors that Determine a Company’s Situation
Diagnosing a company’s situation has two facets
Assessing the company’s external or macro-environment
Industry and competitive conditions Forces acting to reshape this environment
Assessing the company’s internal or micro-environment
Market position and competitiveness
Competencies, capabilities, resource strengths and weaknesses, and competitiveness
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Figure 3.1: From Thinking Strategically About the Company’s Situation to Choosing a Strategy
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