External Analysis - created from Mind Map

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The examination by a company of the things outside the company, such as the economy, the competition, and new opportunities, that might affect its success

The far or macro environment

The ‘near’ environment

The PEST factors

Government active areas include

Economic factors refer to

Social factors refer to

Technological factors

How to use the analysis tools:

Represents forces that affect all firms across all industries.

There are common issues such as the Polticial, Economic Social and Technological influences

+ Policies on healthcare, unemployment, exchange rates, inflation, economic growth. + Government employment and the public sector generally. + Fiscal policies on taxation.

GDP (gross national product) + Growth, + Inflation, + Central Bank lending rates. + Currency exchange rates. + Fiscal policy + Regional issues.

+ Attitudes, values and beliefs tastes of held by people including ethnic minorities. + Culture: Attitude to work. + Demography: Size and structure of the workforce, population shifts.

+ Goods and services. + Production processes. + Transport and distribution. Information technology, computing and associated implications for production.

1- Scan the macro-environment for actual or potential changes in the PEST factors. 2- Assess the importance of the changes for the market, industry and business. 3- Analyse each of the relevant changes in detail and the relationships between them. 4- Assess the potential impact of the changes on the market, industry and business.

Barriers to entry

This is the ‘Industry or competitive environment analysis.

Competitive rivalry

Supplier power

Buyer power.

Threat of substitutes

+ The capital requirement of entry. + Access to distribution channels. + Cost advantages independent of size. + Expected retaliation.

+ No industry leader, + A large number of competitors, + High fixed costs, + High exit barriers, + Little opportunity to practise product differentiation.

+ There are few suppliers. + The cost of switching to another supplier is high. + The brand of the supplier is powerful. + There is a possibility of forward integration by the supplier.

+ There is concentration of buyers. + There is a large number of small operators in the industry. + There are alternative sources of supply. + Material costs are high.

+ Product-for-product substitution. + Substitution of need. + Generic substitution. + Product not a necessity.