This document discusses analyzing a company's external environment and competitors. It describes performing a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. It also explains Porter's Five Forces model to evaluate competitive pressures from new entrants, suppliers, buyers, substitutes, and rivalry. Competitor analysis involves understanding a competitor's assumptions, strategies, objectives, capabilities, and likely responses to changes in the competitive environment. The purpose is to develop strategies that leverage a company's advantages relative to competitors.

1. The External Environment:Opportunities, Threats, Industry Competition, and Competitor Analysis

2. Components of the General EnvironmentEconomicDemographicSocioculturalIndustry EnvironmentCompetitiveEnvironmentPolitical/LegalGlobalTechnological

3. SWOT AnalysisStrengthsWeaknessesOpportunities Threats

4. The purpose of SWOT AnalysisIt is an easy-to-use tool for developing an overview of a company’s strategic situationIt forms a basis for matching your company’s strategy to its situation

5. SWOT is the starting pointIt provides an overview of the strategic situation.It provides the “raw material” to do more extensive internal and external analysis.

6. OpportunitiesAn OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.Possible Opportunities:Emerging customer needsQuality ImprovementsExpanding global marketsVertical Integration

7. ThreatsA THREAT is a factor in your company’s external environment that poses a danger to its well-being.Possible Threats:New entry by competitorsChanging demographics/shifting demandEmergence of cheaper technologiesRegulatory requirements

8. Opportunities and Threats form a basis for EXTERNAL analysisBy examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification.By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.

9. The purpose of Five-Forces AnalysisThe five forces are environmental forces that impact on a company’s ability to compete in a given market.The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

10. Porter’s Five Forces Model of CompetitionThreat of New EntrantsThreat of New Entrants

11. Economies of ScaleProduct DifferentiationBarriers to EntryCapital RequirementsSwitching CostsAccess to Distribution ChannelsCost Disadvantages Independent of ScaleGovernment PolicyThreat of New EntrantsExpected Retaliation

12. Porter’s Five Forces Model of CompetitionBargaining Power of SuppliersThreat of New EntrantsThreat of New Entrants

13. Supplier industry is dominated by a few firmsSuppliers exert power in the industry by:Suppliers’ products have few substitutes* Threatening to raiseprices or to reduce qualityBuyer is not an important customer to supplierPowerful suppliers can squeeze industry profitability if firms are unable to recover cost increasesSuppliers’ product is an important input to buyers’ productSuppliers’ products are differentiatedSuppliers’ products have high switching costsSupplier poses credible threat of forward integrationBargaining Power of SuppliersSuppliers are likely to be powerful if:

14. Porter’s Five Forces Model of CompetitionBargaining Power of BuyersThreat of New EntrantsThreat of New EntrantsBargaining Power of Suppliers

15. Buyers are concentrated or purchases are large relative to seller’s salesBuyers compete with the supplying industry by:Purchase accounts for a significant fraction of supplier’s salesProducts are undifferentiated* Bargaining down prices* Forcing higher qualityBuyers face few switching costs* Playing firms off ofBuyers’ industry earns low profitseach otherBuyer presents a credible threat of backward integrationProduct unimportant to qualityBuyer has full informationBargaining Power of BuyersBuyer groups are likely to be powerful if:

16. Porter’s Five Forces Model of CompetitionThreat of Substitute ProductsThreat of New EntrantsThreat of New EntrantsBargaining Power of BuyersBargaining Power of Suppliers

17. Products with similar functionlimit the prices firms can chargeProducts with improving price/performance tradeoffs relative to present industry productsExample:Electronic security systems in place of security guardsFax machines in place of overnight mail deliveryThreat of Substitute ProductsKeys to evaluate substitute products:

18. Porter’s Five Forces Model of CompetitionRivalry Among Competing Firms in IndustryThreat of New EntrantsThreat of New EntrantsBargaining Power of BuyersBargaining Power of SuppliersThreat of Substitute Products

19. Intense rivalry often plays out in the following ways:Jockeying for strategic positionUsing price competitionStaging advertising battlesIncreasing consumer warranties or serviceMaking new product introductionsOccurs when a firm is pressured or sees an opportunityPrice competition often leaves the entire industry worse offAdvertising battles may increase total industry demand, but may be costly to smaller competitorsRivalry Among Existing Competitors

20. Numerous or equally balanced competitorsSlow growth industryHigh fixed costsHigh storage costsLack of differentiation or switching costsCapacity added in large incrementsDiverse competitorsHigh strategic stakesHigh exit barriersRivalry Among Existing CompetitorsCutthroatcompetition is more likely to occur when:

21. The Five Forces are Unique to Your IndustryFive-Forces Analysis is a framework for analyzing a particular industry.Yet, the five forces affect all the other businesses in that industry.

22. Industry EnvironmentCompetitiveEnvironmentCompetitor AnalysisThe follow-up to Industry Analysis is effective analysis of a firm’s Competitors

23. AssumptionsWhat assumptions do our competitors hold about the future of industry and themselves?ResponseCurrent StrategyWhat will our competitors do in the future?Does our current strategy support changes in the competitive environment?Where do we have a competitive advantage?Future ObjectivesHow will this change our relationship with our competition?How do our goals compare to our competitors’ goals?CapabilitiesHow do our capabilities compare to our competitors?Competitor Analysis

24. Competitor AnalysisFuture ObjectivesWhat Drives the competitor?How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?What is the attitude toward risk?

25. Competitor AnalysisFuture ObjectivesWhat is the competitor doing?How do our goals compare to our competitors’ goals?What can the competitor do?Current StrategyWhere will emphasis be placed in the future?How are we currently competing?What is the attitude toward risk?Does this strategy support changes in the competitive structure?

26. Future ObjectivesHow do our goals compare to our competitors’ goals?Current StrategyWhere will emphasis be placed in the future?How are we currently competing?What is the attitude toward risk?Does this strategy support changes in the competition structure?Competitor AnalysisWhat does the competitor believe about itself and the industry?AssumptionsDo we assume the future will be volatile?What assumptions do our competitors hold about the industry and themselves?Are we assuming stable competitive conditions?

27. Future ObjectivesHow do our goals compare to our competitors’ goals?Current StrategyWhere will emphasis be placed in the future?How are we currently competing?What is the attitude toward risk?AssumptionsDoes this strategy support changes in the competition structure?Do we assume the future will be volatile?What assumptions do our competitors hold about the industry and themselves?Are we operating under a status quo?Competitor AnalysisWhat are the competitor’s capabilities?CapabilitiesWhat are my competitors’ strengths and weaknesses?How do our capabilities compare to our competitors?

28. Future ObjectivesHow do our goals compare to our competitors’ goals?Current StrategyWhere will emphasis be placed in the future?How are we currently competing?What is the attitude toward risk?AssumptionsDoes this strategy support changes in the competition structure?Do we assume the future will be volatile?What assumptions do our competitors hold about the industry and themselves?CapabilitiesWhat are my competitors’ strengths and weaknesses?Are we operating under a status quo?How do our capabilities compare to our competitors?Competitor AnalysisResponseWhat will our competitors do in the future?Where do we have a competitive advantage?How will this change our relationship with our competition?