Importance of Analyzing the External Environment - Answer--Managers can mitigate threats.
-Managers can leverage opportunities.
-Gain understanding of potential impacts.
-Understand the source / proximity of factors.
The PESTEL Model - Answer--Groups environmental factors into six segments:
...
MNG3701 - Strategic Planning - LU3
External Environments. 2 Exam
Questions and Answers
Importance of Analyzing the External Environment - Answer--Managers can mitigate
threats.
-Managers can leverage opportunities.
-Gain understanding of potential impacts.
-Understand the source / proximity of factors.
The PESTEL Model - Answer--Groups environmental factors into six segments:
--Political
--Economic
--Sociocultural
--Technological
--Ecological
--Legal
These factors can create:
--Opportunities
--Threats
Political Factors - Answer--Processes & actions of government bodies
-Firms can shape this factor through:
--Lobbying
--Public Relations
--Contributions
--Litigation
Example: Tesla
-Has a build-to-order sales model
-Cuts out dealers
-Dealers are lobbying for new legislation
Sociocultural Factors - Answer-Society's cultures, norms, and values
-Are constantly in flux
, -Differ across groups
Demographic trends
-Present opportunities and threats
-Population characteristics related to age, gender, family size, ethnicity, sexual
orientation, religion, and socioeconomic class
Technological Factors - Answer-Application of knowledge
-To create new processes
-To create new products
Innovations in process technology:
-Lean manufacturing, Six Sigma quality, and biotechnology
Innovations in product technology:
-Smartphones, computer tablets, and high-performing electric cars such as the Tesla
Model S
Legal Factors - Answer-Official outcomes of political processes:
-Laws
-Mandates
-Regulations
-Court decisions
Industry deregulations affect multiple industries:
- Airlines, telecom, energy, and trucking
Governments can achieve desired outcomes:
-To buy electric vehicles the government offers a £2000 subsidy.
Porters five forces - Answer-Analyses the nature of competition in the industry in terms
of how much power a firm enjoys over consumers, competitors and suppliers.
Threat of Entry - Answer-The risk that potential competitors will enter an industry
Lowers industry profit potential:
-Incumbents lower prices
Incumbents spend more to satisfy existing customers.
Entry barriers:
-Obstacles blocking others from entering
-A significant predictor of industry profit potential
Types of Entry Barriers (6) - Answer-1. Economies of scale
2. Customer switching costs
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