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Lecture Crafting and executing strategy (15/e): Chapter 3 - Arthur A. Thompson, A. J. Strickland III, John E. Gamble

Chapter 3 - Evaluating a company’s external environment. After studying this chapter you will be able: to gain command of the basic concepts and analytical tools widely used to diagnose a company’s industry and competitive conditions; to become adept in recognizing the factors that cause competition in an industry to be fierce, more or less normal, or relatively weak;. | Evaluating a Company’s External Environment Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University-Florida Region 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 Understanding the Factors that Determine a Company’s Situation Fig. 3.1: From Thinking Strategically about the Company’s Situation to Choosing a Strategy Fig. 3.2: The Components of a Company’s Macro-environment Thinking Strategically about a Company’s Macro-environment A company’s macro-environment includes all relevant factors and influences outside its boundaries Diagnosing a company’s external situation involves assessing strategically important factors that have a bearing on the decisions a company’s makes about its Direction Objectives Strategy Business model Requires that company managers scan the external environment to Identify potentially important external developments Assess their impact and influence Adapt a company’s direction and strategy as needed Key Questions Regarding the Industry and Competitive Environment What are the industry’s dominant economic traits? How strong are competitive forces? What forces are driving change in the industry? What market positions do rivals occupy? What moves will they make next? What are the key factors for competitive success? How attractive is the industry from a profit perspective? Market size and growth rate Number of rivals Scope of competitive rivalry Buyer needs and requirements Degree of product differentiation Product innovation Supply/demand conditions Pace of technological change Vertical integration Economies of scale Learning and experience curve effects Question 1: What are the Industry’s Dominant Economic Traits? Question 2: What | Evaluating a Company’s External Environment Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University-Florida Region 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 Understanding the Factors that Determine a Company’s Situation Fig. 3.1: From Thinking Strategically about the Company’s Situation to Choosing a Strategy Fig. 3.2: The Components of a Company’s Macro-environment Thinking Strategically about a Company’s Macro-environment A company’s macro-environment includes all relevant factors and influences outside its boundaries Diagnosing a company’s external situation involves assessing strategically important factors that have a bearing on the decisions a company’s makes .