Unit 2: Discussion 2 MBA695 Week 2

Unit 2: Overview - Evaluating the External Environment

Introduction

By focusing on external events, managers are able to stay a step ahead of competitors by accurately anticipating and promptly responding to actions that can impact the organization. Evaluating the environment has three important processes—scanning, monitoring, and gathering competitive intelligence—which managers use to develop environmental forecasts.

Environmental scanning involves surveillance of the firm’s external environment to predict environmental changes to come and detect changes that are already underway. Environmental monitoring tracks the evolution of trends, events, or streams of activities in the external environment. A vital component to scanning is finding information; gathering competitive intelligence.

There are multiple tools used in external environment analysis. Some tools, like the SWOT (strengths, weaknesses, opportunities, and threats), provide a framework for analyzing both internal and external environments. It is important to note that the SWOT analysis and other analytical tools merely provide the “raw material”; they are a basic listing of conditions and factors inside and outside of a company. The managers of a company still need to formulate alternatives and best options from the information gathered.

The external environment includes watching and predicting actions that competitors may take and whether a reaction is warranted or required. Competitors may include not only products that directly compete but also products that could replace or move a current product into obsolescence (think 8-track tapes and DVD’s).