Chapter Three
Evaluating the
External Environment
Organizations & The Environment
Environment: Set of external conditions and forces
that have the potential to influence the organization
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General environment (macro environment): Overall
trends and events in a society such as - social trends,
technological trends, demographics, and economic
conditions (Chp 3)
Industry (competitive environment): Consists of
multiple organizations that collectively compete with
one another by providing similar goods, services, or
both (Chp 6)
3-2
Strategic Groups
The analysis of the strategic
groups in an industry can offer
important insights to executives
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Closest rivals
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Alternative paths to success
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Untapped opportunities
3-3
Porter’s Five Forces
Competitive rivalry is high when:
• Numerous competitors, roughly equal in size
and power.
• Growth is slow
• Little differentiation
• Excess capacity
Porter’s Five Forces
Barriers to Entry are high when:
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Economies of scale
Capital requirements
Government requirements
High differentiation and loyalty
Switching costs
Porter’s Five Forces
Availability of substitute products
• Supplier power is high
(and buyer power is low) when
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Suppliers are concentrated
There are no substitutes
Switching suppliers is costly
Supplier products are unique
Supplier can threaten to compete
Porter’s Five Forces
3-7
PESTEL Analysis
PESTEL Analysis
PESTEL Analysis
PESTEL Analysis
PESTEL Analysis
PESTEL Analysis