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Assesing the External Environment


Submitted By tommi0506
Words 1422
Pages 6
Chapter 3- Analyzing the External Environment
Discussion Questions:
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1) To identify opportunities and threats is an important reason why firms study their external environment- general, industry and competitor. Opportunities are conditions in a firm’s external environment that enables the firm to use its core competencies to achieve its vision. Threats are conditions in a firm’s external environments that prevent the firm from successfully using its core competencies. Firms evaluate trends in their general environment, assess the effects of competitive forces in the industry in which they compete, and study competitors to identify the opportunities and threats they face.

2) The general environment is composed of the trends in the broader society that influence an industry and the firms in it. The seven factors: 1) Demographic Trends: changes in the population size, age structure, geographic distribution, ethnic mix, and income distribution. Analyze of these trends is important to determine whether the firm might be able to serve additional customer groups with its product. 2) Economic Trends: the direction of the economy in which a firm competes or may choose to compete. These include gross nation product, interest, and inflation rates, income growth or decline, savings rate, and currency exchange rates in countries across the globe are examples of economic factors that firms examine to understand current future economic trends. Economic trends affect customers’ purchasing decisions. Your current and expected income influences what you can buy. When facing less-than-favorable economic trends, firms must decide how to allocate their resources so they will be positioned to grow when domestic and/or global economies improve. 3) Political/Legal Trends: the changes in organizations and interest groups that compete for a voice in

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