External Analysis

Question 1

define the term external analysis.

Answer 1

analysis of past developments and also forecasting of the environment

Question 2

why do companies need external analyses?

Answer 2

to identify external strategic factors (threats and opportunities)

Question 3

what does external analysis comprise of? (2) how is it conducted?

Answer 3

1. analysis of general env. - PEST(EL)
   +
2. # analysis of industry env. - P5Fexternal factors = all external opportunities and threats
   ↓
   issues priority matrix = probablity of occurence + strength of impact
   ↓
   external strategic factors = external factors that can influence the company’s competitive position and performance

Question 4

which industry is attractive by P5F? (has high profit potential) (4)

Answer 4

1. weak supplier and buyer positions
2. weak threats from substitutes
3. moderate rivalry
4. high entry barriers

Question 5

why does rivalry amongst competitors increase when fixed costs (in the whole industry) are high?

Answer 5

because higher FC in the industry mean that it takes companies longer to reach the breakeven point and make a profit

Question 6

what is expected retailiation in terms of barriers of entry?

Answer 6

= incumbants increasing the price to squeeze out the newcomers