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5.7: Developing Strategy Through External Analysis

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  • Learning Objectives

    1. Understand the basics of general environment analysis.
    2. See the components of microenvironment analysis that support industry analysis.
    3. Learn the features of Porter’s Five Forces industry analysis.

    In this section, you will learn about some of the basic external inputs for strategy formulation—the determinants of a firm’s opportunities and threats. We will focus on three aspects of external analysis here, though you recognize that these should be complemented by internal analysis as well. For the external environment, it is best to start with the general environment, and then work your way into the focal industry or industry segment.

    Figure 5.17


    External analysis tells the strategist what is outside the organization—helps answer the question, “what opportunities can we exploit?”

    johnhain – CC0 public domain.