Holy Angel University
School of Business and Accountancy
Management Department
6365 – Management Accounting
2nd Semester, S.Y. 2021-2022
Title of the Assignment
Module 2: The External Environment- Opportunities, Threats, Industry Competition
and Competitor Analysis
Submitted by:
De Jesus, Dianne Trisha B.
MA - 333
Submitted to:
Danzen B. Olazo
Date of Submission
January 22, 2022
1. Why is it important for a firm to study and understand the external environment?
- The future of industries as a whole, as well as the destiny of individual
businesses, is heavily influenced by the external environment. External
environment is important because they can affect a company's operations,
staffing, and income, among other things, both directly and indirectly. The firm's
understanding of the external environment is particularly advantageous when
information about the firm's internal environment is paired with knowledge of the
firm's exterior environment.
2. What are the differences between the general environment and the industry
environment? Why are these differences important?
- Overarching trends and events, such as social, technological, demographic,
and economic aspects, are referred to as the macroenvironment (or general
environment) in the context of a society's overarching trends and events. It is
made up of several firms that compete with one another by offering similar
products, services, or both. On the other hand, the industry (or competitive
environment) is made up of several businesses that compete with one another
by offering similar products, services, or both. Their differences are important
because each type of environment has its specific purpose and having their
differences will lead to more accurate description of what type of environment is
being implemented.
3. What is the external environmental analysis process (four parts)? What does the firm
want to learn when using this process?
- The four parts of external environmental analysis process are: scanning,
monitoring, forecasting and assessing. Firms uses this process to ensure and
learn that they can adopt the changes and remain in their competitive field.
4. What are the seven segments of the general environment? Explain the differences
among them.
- the general environment classified into differed seven segments are:
demographic, economic, political/legal, sociocultural, technological, global and
physical.
• Demographic: the size, age structure, geographic distribution, ethnic mix, and
economic distribution of a population are all factors to consider.
• Economic: which businesses operate is at the heart of the discussion.
• Political/Legal: field in which organizations and interest groups battle for control
over the body of laws and regulations that govern interactions between nations
and between businesses and various local government agencies by gaining
attention, resources, and a voice.
• Sociocultural: deals with the cultural value and attitudes of a society
• Technological: comprises all of the institutions and activities engaged in the
creation of new knowledge, its translation into new outputs, products, processes
and materials.
• Global: contains new worldwide markets that are relevant, changing global
markets, key international political events, and critical global market cultural and
institutional aspect.
• Physical: The physical environment section refers to the physical environment's
potential and current changes, as well as the business strategies that will be used
to respond to and cope with those changes in a constructive way. Environmental
challenges such as global warming, energy use, and sustainability are only a few
examples.
5. How do the five forces of competition in an industry affect its profitability potential?
Explain.
- It displays the industry forces that influence a company's long-term
sustainability and growth in a five-force model. Any company's profitability and growth
are influenced by a number of factors, including supply-side bargaining power, buyer
bargaining strength, new entrant threat, substitute threat, and industry competition.
Changing the balance will force the customer to move to a different product. This will
begin to have an impact on the potential revenue streams. A modest change in market
dynamics will have a major impact on revenues and profits if a company's revenues
and profit margins are largely dependent on external forces.
6. What is a strategic group? Of what value is knowledge of the firm’s strategic group
in formulating that firm’s strategy?
- A strategic group is formed when a company's management decides to
collaborate with other companies with the same goal of growing market value. A
common occurrence is when a group of organizations realizes the value of working
together rather than trying to achieve the same goal on their own. Businesses
commonly build strategic partnerships to share their knowledge with others in order to
overcome local effects and succeed in the market. Because expertise and information
are exchanged between partners, it is critical to collaborate and stay involved on a
regular basis. Having a good understanding of a company's strategic plan also helps
to ensure that when forging such agreements, the right decisions are made.
7. What is the importance of collecting and interpreting data and information about
competitors? What practices should a firm use to gather competitor intelligence and why?
- Lots of companies who work on things that are quite similar, and there will be a
lot of competition. A company's ability to keep an eye out for new products and services
that competitors are offering is crucial as a result. The most common way for a company
to gather competitor information is to rely on market research organizations to provide an
unbiased report and statistics on the competition to each corporation. Aside from that, the
annual and financial reports of businesses can be used to acquire the necessary data.
Businesses will be able to identify areas where they need to improve in order to gain
market domination by analyzing this data. You can get competitive information by looking
at business ads or visiting a competitor's website. A corporation can learn which business
operations people favor by reading customer feedback.
REFERENCEs:
https://www.google.com/search?q=1.+Why+is+it+important+for+a+firm+to+study+an
d+understand+the+external+environment%3F&rlz=1C1GCEU_enPH922PH922&sou
rceid=chrome&ie=UTF-8
https://2012books.lardbucket.org/books/strategic-management-evaluation-and-
execution/s07-01-the-relationship-between-an-or.html
https://www.google.com/search?q=What+is+the+external+environmental+analysis+
process+(four+parts)%3F+What+does+the+firm+want+to+learn+when+using+this+p
rocess%3F&rlz=1C1GCEU_enPH922PH922&sourceid=chrome&ie=UTF-8
https://bbs.binus.ac.id/management/2018/07/the-external-environment-of-
business/#:~:text=In%20this%20vein%2C%20the%20general,of%20environmental
%20changes%20and%20trends
