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ASSESSING EXTERNAL ENVIRONMENT

ASSESSING EXTERNAL ENVIRONMENT. PURPOSE OF ASSESSING ENVIRONMENT IS TO ENABLE MANAGE UNCERTAINTY MANAGING UNCERTAINTY INVOLVES SEEKING THE RELEVANT TYPES OF INFORMATION SELECTING ACTIONS THAT REDUCE UNCERTAINTY SELECTING ACTIONS THAT HAS LEAST UNCERTAINTY TYPES OF UNCERTAINTY

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ASSESSING EXTERNAL ENVIRONMENT

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  1. ASSESSING EXTERNAL ENVIRONMENT • PURPOSE OF ASSESSING ENVIRONMENT IS TO ENABLE MANAGE UNCERTAINTY • MANAGING UNCERTAINTY INVOLVES • SEEKING THE RELEVANT TYPES OF INFORMATION • SELECTING ACTIONS THAT REDUCE UNCERTAINTY • SELECTING ACTIONS THAT HAS LEAST UNCERTAINTY • TYPES OF UNCERTAINTY • STATE UNCERTAINTY • EFFECT UNCERTAINTY • RESPONSE UNCERTAINTY

  2. Key External Forces & the Organization Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Labor Unions Special Interest Groups Products Services Key External Forces Opportunities & Threats

  3. Political, Government & Legal Forces Globalization of Industry • Worldwide trend toward similar consumption patterns • Global buyers and sellers • E-commerce • Technology for instant currency transfers • Regionalization • Transition of Malaysian economy

  4. Competitive Forces Identifying Rival Firms • Identify competitors and their strengths, • weaknesses and capabilities • Assess extent of market commonality and • resource similarity • Assess possibility of collusion/cooperation • among competitors • Develop competitive intelligence to monitor the • above

  5. DEALING WITH UNCERTAINTIES • EXTENT AND TYPE OF UNCERTAINTIES CAN BE MANAGED BY ADJUSTING INFORMATION SEARCH • STATE UNCERTAINTY: • INCREASE AND ADJUST SCANNING BEHAVIOUR • EFFECT UNCERTAINTY: • ENHANCE MONITORING BEHAVIOUR • RESPONSE UNCERTAINTY: • DVLP BETTER FORECASTING CAPABILITIES • IMITATE SUCCESSFUL MOVES

  6. ANTICIPATORS EARLY RECOGNITION OF CRISIS QUICK RESPONSE SCANNED MACRO-ENVIRONMENT NON-ANTICIPATORS LATE RECOGNITION OF CRISIS SLOW RESPONSE SCANNED MICRO-ENVIRONMENT ADAPTATION IN UNCERTAINTY: THE CASE OF MALAYSIAN FINANCE COMPANIES

  7. The Five-Forces Model of Competition Potential development of substitute products Rivalry among competing firms Bargaining power of suppliers Bargaining power of consumers Potential entry of new competitors

  8. Industry Analysis: The External Factor Evaluation (EFE) Matrix and Competitive Profile Matrix • BOTH ARE TECHNIUQES THAT ATTEMPT TO DEVELOP A MEASURE • OF A FIRM’S COMPETITIVE ENVIRONMENT AND RIVALS’ • COMPETITIVE CAPABILITIES • USES WEIGHTAGE AND RATING • APPEARS TO GIVE ACCURATE ASSESSMENT • IN THE END RATINGS AND WEIGHTAGE ARE STILL SUBJECTIVE • SHOULD BE TREATED AS ESTIMATES

  9. WHAT YOU SHOULD HAVE UNDERSTOOD? • ASPECTS OF THE EXTERNAL ENVIRONMENT THAT AFFECTS A BUSINESS • WHAT IS UNCERTAINTY AND HOW TO DEAL WITH THEM? • HOW TO ASSESS COMPETITIVE CLIMATE? • HOW TO USE PORTER’S FIVE FORCES MODEL OF COMPETITION TO ASSESS COMPETITIVE CLIMATE?

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