1. Explain the objectives of analyzing the industry environment.

STRATEGIC MANAGEMENT TOOLS USED TO ANALYZE THE INDUSTRY ENVIRONMENT Strategic Factors of the Industry Environment The industry or task environment is the immediate environment surrounding a business. The strategic factors of the industry environment are as follows: 1. Customers 2, Suppliers 3. Creditors 4. Employees 5. The government 6. Competitors Objective of the Analysis When conducting an industry environment analysis, the objective is to determine the different forces that drive competition and the extent of the competition so a company can position itself in an industry. A company that knows where it stands in an industry and where it wants to go has a greater chance to withstand competition and become successful. Strategic Tool, Approach, or Model to Use in the Analysis The analysis of the industry environment requires the use of the three methods of collecting data for strategic analyses. In this case, there is a need to scan, monitor, and conduct competitive intelligence on the different forces that influence competition in an industry. Data used in the analysis come mainly from secondary sources. The commonly used tool to analyze the industry environment is Porter's five forces of competition model. Scanned with CamScanner 60 Unit 1 | Environmental Analysis Porter's Five Forces of Competition Model Porter's five forces of competition model evaluates the level of competition and assessed attractiveness of an industry itself. The model consists of the following strategic factors: 1. Rivalry among competing companies 2. Threats of new entrants 3. Bargaining power of buyers 4. Threats of substitute products 5. Bargaining power of suppliers To effectively use this model, the following steps should be performed: 1. Identify the barriers to the forces of competition. 2. Gather information about the barriers from reliable sources. 3. Assess the barriers as low, moderate, or high in terms of strength. 4. Rate the force whether it is a threat or not. 5. Assess the entire industry. is presented in Table 6.3.STRATEGIC MANAGEMENT TOOLS USED TO ANALYZE THE INTERNAL ENVIRONMENT Strategic Factors of the Internal Environment The strategic factors of the internal environment of a company are as follows: 1. Corporate culture 2. Organizational structure 3. Business resources Objective of the Analysis The objective of conducting an internal environment analysis is influenced by the type of strategic factor being analyzed and the strategic tool used in the analysis. Table 6.4 presents the objective of analyzing each internal strategic factor. Table 6.4 Internal Environment Strategic Factors and the Objective of the Analysis Strategic Factors Objective of the Analysis Corporate culture To determine how culture influences strategy formulation Organizational structure To determine what structure can effectively and efficiently achieve organizational goals Business resources To determine which business resource contributes to the achievement of competitive advantage Strategic Tool, Approach, or Model to Use in the Analysis Most strategic management tools used in analyzing the internal environment are intended to evaluate the business resource strategic factor of a company. The commonly used tools and their primary concerns to analyze a business resource are presented in Table 6.5. Table 6.5 Internal Environment Strategic Management Tools and Their Objectives Internal Environment Objective of the Tool Strategic Factor Being Strategic Management Tools Analyzed SWOT analysis To assess a company's strengths and weaknesses The strengths and so that opportunities are exploited and threats weaknesses of a company are avoided or minimized VRIO framework To identify a company's resource that is The resources of a considered valuable, rare, and difficult to imitate company and to assess if the company is organized to use it to sustain a competitive advantage. Scanned with CamScanner 62 Unit 1 | Environmental Analysis Strategic Factor Being Objective of the Tool Analyzed Internal Environment Strategic Management Tools Business activities To determine which activities create value and Value chain analysis model which create cost so that the profit margin is improved and competitive advantage is achieved The product portfolio To determine the status of a company's unit of BCG growth-share matrix product portfolio in terms of market share and model growthSTRATEGIC MANAGEMENT TOOLS USED TO ANALYZE THE SOCIETAL ENVIRONMENT Strategic Factors of the Societal Environment The following are the strategic factors of the societal or general environment: 1. Political or legal segment 2. Economic segment 3. Sociocultural segment 4. Technological segment Objective of the Analysis The objective of conducting a societal environment analysis is to determine the trends of the Strategic factors that are relevant to the growth of an industry. Businesses tend to join a growing. and promising industry where the strategic factors considerably contribute to its moderate or high growth. Scanned with CamScanner 58 Unit 1 | Environmental Analysis Strategic Tool, Approach, or Model to Use in the Analysis 10 gather, evaluate, and disseminate reliable and relevant information about the society environment, the approach used is an environmental scanning, and the specific strategic tool metal to scan the societal environment is the PESTEL or STEEP analysis. This approach is supported ed environmental monitoring. The data used in the analysis come from secondary sources. PESTEL or STEEP Analysis A PESTEL or STEEP analysis is not a mere identification and listing of variables, which are commonly done, under a particular segment or strategic factor. This procedure alone win not provide meaningful information to a management in making a strategic decision. Rathel it involves a deeper analysis of the collected data. To conduct an effective PESTEL analysis, the following steps should be performed: 1. Identify likely trends under each strategic factor. 2. Gather relevant data from reliable sources. 3. Assess the probability of occurrence (e.g., low, moderate, or high). 4. Measure the likely impact and risk to the company (e.g., low, moderate, or high). 5. Identify possible opportunities and threats brought by strategic factors. 6. Formulate strategies. 7. Incorporate any proposed action to the business plan. A template for the PESTEL analysis is shown in Table 6.2. Table 6.2 PESTEL Analysis Matrix Data and Impact on Likely Their Probability of and Risk to Key External Trends Strategic Segments of Sources Occurrence the Company of the the Social (Estimated (Low, (Favorable or Factors Remarks Elements Forces Revenue, Moderate, Unfavorable) (Opportunities Under the Costs, and or High) (High, Moderate, or Threats) Segment Losses) or Low) (A) (B) (C) (D) (E) (F) (G) Political segment Economic segment Sociocultural segment Technological segment