CHAPTER 3 : Evaluating A Company's External Environment

Let’s pray for our friend Kak Nazifah so that the operation goes smoothly and everything will be fine. Al-fatihah.

For the third class, we learn chapter 3 which is EVALUATING A COMPANY’S EXTERNAL ENVIRONMENT. Basically this chapter tell us to thinking strategically about the company’s situation to choosing the best strategy. There are two important core concepts that should be focused which are the macro-environment and the PESTEL. PESTEL analysis focuses on the six principal components of strategic significance in the macro-environment:

Competitive pressure from rivals ;D 

After that, we have to know the five competitive force. For example competition from rival sellers, potential new entrants, producers of substitute products, supplier bargaining power and customer bargaining power.In business it is common situation of competitive pressures that increase rivalry among competing sellers. For instance buyer demand is growing slowly or declining, it is becoming less costly for buyers to switch brands and many more.

But, there must be solutions for every problem. Business should use the ‘weapon’ for competing the rivals like price discounting, clearance sale, using ads to enhance a company image or maybe building a bigger, better dealer network.Besides that, in a business operation they have to know competitive pressures from the sellers of substitute products, stemming from supplier bargaining power and also stemming from buyer bargaining power and price sensitivity. 

A company’s strategy is increasingly effective the more it provides some insulation from competitive pressures, shifts the competitive battle in the company’s favor, and positions firms to take advantage of attractive growth opportunities.

In addition, we have to know what is strategic group is. Strategic group is a cluster of industry rivals that have similar competitive approaches and market positions. Strategic group mapping is a technique for displaying the different market or competitive positions that rival firms occupy in the industry. There are typical variables used in creating group maps such as price/quality range, geographic coverage and so on.

In order to build a success business, of course we have to know the key success factors are the strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities that are essential to surviving and thriving in the industry.

"Life is the continuous adjustment of internal relations to external relations."

--Herbert Spencer