MBA.

TRẦN HOÀNG NAM

 Contents
1. Basic concepts of Strategic Management

2. The External Environment Analysis

3. The Internal Environment Analysis

4. Corporate strategy

5. Strategy Generation and Selection

6. Business & Functional Strategy

 Chapter 2. External Environment
Analysis
1. How to analyze the Macro Environment (PESTEL)?
2. How to analyze the Micro Environment (Porter’s 5
forces)?
3. How to analyze the International Environment?

4. How to build the matrix of external factors (EFE)?

 1.The importance of analyzing external environment forces
What do managers study the external environment for?

Identify Find out What for?

External Opportunities Take the
External
Environment opportunities
Forces
Threats
Avoid the
threats
 How many managerial environment are there?

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2. What is external environment?

All outside factors that may affect an organization make up the

external environment.

The external environment is divided into three environments

2. External Environment

Macro

External
Micro

International
2.1. Macro Enviroment

Political

Economic

Sociocultural
PESTLE
Macro Technical analysis
Legal

Environmental Nature
Macro Environment
Factors Find out
Opportunities:
1. …..
1. ….
2. …..
3. ….. 2. ….

4. ….. Threats:
5. …… 1. ….
2. …..

Evaluate information
Gathering information
2.2. Micro enviroment

Suppliers

Customers
5 forces
Micro
Current Competitors
of Porter
model
New Entrants/Potential Rivals

Substitute Products
 Porter's Five-Forces Model

Potiental entry of
new competitors / new entrants

Bargaining power of Rivalry among Bargaining power of

suppliers existing competitors consumers

Potential development of
substitute products
Example: Aviation industry
Micro Environment
Factors Find out
Opportunities:
1. …..
1. ….
2. …..
3. ….. 2. ….

4. ….. Threats:
5. …… 1. ….
2. …..

Evaluate information
Gathering information
Difference between macro and micro environment

Macro Micro / Industry

Broad, related to the general Narrow, related to each
Limit
condition of the country industry

Impact Indirect Direct

The speed of
Slow, long lasting Fast and dynamic
change
Complexity
High, many factors Recognizable

Affects the Major influence on corporate Influence on business and

strategic level level strategy functional level strategy
2.3 International Environment
Companies operating in the country
 Impact on the macro and micro environment
 Impact from suppliers (import activities)

Companies operating in the international market

- Domestic production - Foreign consumption
Analyzing & indentifying macro and micro environment facing in foreign
markets
- Foreign production & consumption
Analyzing & indentifying macro and micro environment in foreign
countries that directly affect overseas operations
3. The matrix of external factors (EFE)
(EFE - External Factor Evaluation)
Purpose
◦ Summary of main opportunities and threats
◦ Quantification of importance, level of influence
◦ Based for building QSPM matrix (Quantitative Strategic Planning Matrix)
Method
◦ List the factors (opportunities and threats)
◦ Evaluate the importance of factors
◦ Evaluate the impact of each factor
◦ Calculate critical score and total score
 Example of EFE matrix of
Seafood corporate X
TT Key External Factors Weight Rating Weighted
Score
1 Seafood products are popular in the 0,20 3 0,60 (0.2x3)
world

2 The goverment encourages export 0,15 3 0,45

activities

3 Lots of ingredients for production 0,40 4 1,60

4 Changing tastes of customers 0,05 1 0,05

5 Potential New Rivals 0,20 2 0,40

Total 1,00 3,10 (3.1/4)

TT Key External Factors Weight Rating Weighted
Score
Opportunities
1 Country is growing 8% annually in population 0.2 3 0.6

2 Major competitor across town recently closed 0.18 4 0.72

3 Demand for going to cinema growing 10% 0.2 2 0.4

annually
Example of EFE matrix of
4 Unemployement rate in country declined to 3% 0.15 1 0.15 Local cinema complex A

Threats
1 Demand for online movies and DVDs growing 0.12 4 0.48
10%
2 Commercial property adjaccent to cinema for 0.05 2 0.1
sales
3 Country property taxes increasing 25% this 0.1 3 0.3
year
Total 1.00 2.75
 Steps to build EFE matrix
Step 1:
Make a list of the opportunity and threat
factors that are critical to the success of the
industry and the business
Usually 10 - 20 factors
 Steps to build EFE matrix
Step 2:
Rate the importance from 0.0 (very unimportant) to
1.0 (very important) for each factor.
This classification shows the relative importance of
that factor to the success of the business industry.

The sum of the importance of all factors must be

equal to 1.0.
 Steps to build EFE matrix
Step 3:
Grade 1 to 4 for each element.
Where 4 is a good response, 3 is an above
average response, 2 is a moderate response, and 1 is
a poor response.
These levels are based on the influence of
factors on enterprises.
 Steps to build EFE matrix
Step 4:
Multiply the importance by its category to
determine the importance score for each factor
Step 5:
Add up the score for the importance of each
factor to determine the total importance score for
the business
 Steps to build EFE matrix
The total score of the matrix does not
depend on the number of elements in the
matrix, the highest is 4 points, the lowest is 1
point, the average score is 2.5.
A total score of 4 shows that businesses
are responding very well to opportunities and
threats