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INTRODUCTION
The interaction of the four environmental dimensions creates further sub-dimensions
such as political and economic environments that act as a filter between the internal and
external environment and profoundly affect the performance of the corporation. Culture
here refers to transmitted patterns of behaviour shared by members of a group which
provide them with effective mechanisms for interaction (Krefting & Krefting, 1991). Culture
can be thought of as an overriding concept (eg. western cultures and indigenous cultures)
that directs the sociocultural specificity of group environments each with its own beliefs
and rituals that are used to determine behavioural norms.
Learning Objectives
After learning this unit you must be able to:
Analyze the external environment influencing the industry as well as strategy
Understand the porter’s five forces model and its uses in strategic management
Know the competitive changes and the stages of industrial analysis
Predict the changes in the industry structure due to the globalization
Analyze the importance of capabilities and competencies in gaining competitive
Advantage
Implement the porter’s model on Gaining Competitive Advantage
Planning for the sustainability of competitiveness.
2.1 EXTERNAL ENVIRONMENT
The external environment is all the conditions surrounding a person, and has been
classified in various ways. Any organization before they begin the work of strategy
formulations, it must scan the external environment to identify possible opportunities and
threats and its internal environment for strengths and weaknesses. Environmental scanning
is the monitoring , evaluating, and disseminating of information from the external and internal
environment to key people within the corporation.
The major four environmental dimensions are as follows
1. Economical factors
2. Technological factors
3. Political factors
4. Socio-cultural factors
B Technological factors:
Government spending for R&D
Technological efforts
Patent protection
New products
Technology transfer
Automation
Internet availability
Infrastructure
D Socio-Cultural factors
Life style changes
Career expectations
Consumer Activism
Rate of family formation
Growth rate of population
Age distribution of population
Regional shifts in population
Life expectancies
Birth rates