1. External Analysis
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External Analysis
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c.a.simmers

2. External Analysis
Monitoring, Evaluating, Forecasting, and Disseminating information from the external environment
Management tool to:
Avoid surprises
Work to ensure long-term health
Identify opportunities and threats
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3. OVERVIEW External Analyze Global Societal (Macro) Factors
Analyze Global Task (Micro) Factors
Industry
Competitors
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4. SOCIETAL (MACRO) TECHNOLOGICAL TASK (MICRO) Industry ECONOMIC
POLITICAL/
LEGAL
INTERNAL
Competitors
SOCIOCULTURAL
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5. Macro (Societal)
External Environment
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6. Economic Trends & Forecasts
Gross National Product (GNP)
Total market value all goods & services final consumption in nation
Gross Domestic Product (GDP)
Value all goods & services produced in nation
Disposable Personal Income (DPI)
Consumer Price Index (CPI)
Interest Rates
Import/Export Trends
Unemployment Trends
Inflation Rates
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7. Sociocultural Trends & Forecasts
Demographic trends
Life style changes
Level of education
Value placed on leisure time
Social responsibility
Environmental concerns
Buying habits
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8. U.S. Sociocultural trends shaping future
Increasing environmental awareness
Growth of the seniors market
New baby boomlet
Decline of the mass market
Pace and location of life
Changing households
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9. Political/Legal Antitrust legislation Environmental laws Tax laws
Trade regulations
Political stability
Contract laws
Intellectual property
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10. Technological Variables
New products and processes
Automation
Business-to-business
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11. Technological Variables
Information Age Developments
Selling on the Internet
In just 3 years, 90 million people swap information or do deals on the Internet.
It took 30 years for radio to reach 60 million
It took 15 years for TV to reach 60 million
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12. Societal (Macro) External Environment Analysis
WORKSHEETS
Societal (Macro)
External Environment Analysis
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13. Global Task (Micro) External Analysis
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Global Task (Micro) External Analysis
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c.a.simmers

14. SOCIETAL (MACRO) TECHNOLOGICAL TASK (MICRO) Industry ECONOMIC
POLITICAL/
LEGAL
INTERNAL
Competitors
SOCIOCULTURAL
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15. INDUSTRY Group of firms producing a similar product or service.
Often defined by sources such as:
government (SIC codes),
analysts (Valueline,Investment Analysts, Standard & Poor’s).
Trade Associations
Multiple segments
Worldwide, Global, Domestic
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16. Example of Importance of Industry Attractiveness
Average return on investment
Source: Compustat and Michael Porter’s analysis
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17. Return on Investment = net income/average investment (long term
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Return on Investment = net income/average investment (long term
debt+preferred stock+common equity+retained earnings)

18. Components of an Industry Analysis
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19. 1. Market Share Analysis Definition of “market”
Definition of competitors
Share Trends - Past, Present, Future
U.S. Widget Market
1993
U.S. Widget Market
1998
U.S. Widget Market
2003
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20. 2. Industry Financial Analysis
Sales
Net Income
Other Indicators
Ratios
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21. 3. Overall Assessment of Competitiveness
Potential
Entrants
Five Forces Model
Rivalry
Among
Firms
Buyers
Suppliers
Substitutes
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22. COMPETITORS
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23. Positioning within Industries Trucking Industry ROI ‘88-92
Industry Average
5.1%
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24. Competitors Who? Product Form - brands that directly compete
Product Category - products with similar characteristics
Generic Competition - products that satisfy the same customer needs
Budget Competition - products that compete for the customer’s budget
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25. Which Competitors to Analyze
The market leader (largest share)
The most profitable competitor
The competitor most like us
The fastest-growing competitor
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26. What to analyze Sales Profit Rankings Objectives Strategies
Capabilities
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27. U.S. Restaurant Chain Industry
Strategic Groups
High
Red Lobster
Olive Garden
Pizza Hut
Chi-Chi’s
IHOP
Bob Evans
Shoney’s
Denny’s
PRICE
McDonald
Burger King
Wendy’s
Low
Limited
Menu
Full
Menu
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Product-Line Breadth

28. Two Segment Questions External question: Internal question:
What share of the total market do we have?
Internal question:
How much does that market contribute to our:
Sales; Net Income; Assets
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29. Segments Geographic Segments Customer Segments Product Segments
U.S.; Europe; Pacific, etc.
Customer Segments
home market; business market; government market.
Product Segments
fruit-beverage market
alcoholic beverage market
Business Segments
Johnson Controls has 4
Auto; Controls; Plastic; Battery
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30. Concept: External Analysis
Processes:
Analyze Global Societal (Macro) Factors
Analyze Global Task (Micro) Factors
Industry
Competitors
Goal:
To identify opportunities and threats.
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