EXTERNAL ENVIRONMENT

ANALYSIS (EXTERNAL
ASSESSMENT)
Telkom UniversityDosen : Drs. HA. ROMADLON, MM, CTP

External Environment Analysis

2

Sometimes is called Environmental Scanning,

External Audit, or Industry Analysis, reveal
key opportunity and threats confronting an
organization so that managers can formulate
strategies to take advantage and avoids or reduce
the impact of threats.

Telkom Economic and Business S

Companys Environment
3

The FIRM

Operating
Env

Competitor
Creditor
Customers
Labor
Supplier

Industry Env
Global &
Domestic
Entry Barriers
Supplier
Power
Substitute
Competitive
Rivalry

Remote /
Macro Env
Economic
Social
Political

Technological
Ecological

Telkom Economic and Business S

Notable Quotes
4

The opportunities and threats existing in any situation

always exceed the resources needed to exploit the
opportunities or avoid the threats. Thus, strategy is
essentially a problem of allocating resources.
If
strategy is to be successful, it must allocate superior
resource against a decisive opportunity.
(William
Cohen)

If you are not faster then your competitor, you are in a

tenuous position, and if you are only half as fast, you
are terminal.
(George Salk)

Telkom Economic and Business S

Thinking Strategically
5

Thinking strategically about a Companys Industry and

Competitive Environment is using tools to get clear answer to
seven question :
1.
2.

3.

4.

What are the industrys strategy-shaping economic features ?

What kind of competitive forces are industry members facing, and
how strong is each force ?
What forces are driving change in the industry, and what impact will
these changes have on competitive intensity and industry
profitability ?
What market position do industry rivals occupy-who is strongly
positioned and who is not ?

5.

What strategic moves are rivals likely to make next ?

6.

What are the key factors for future competitive success ?

7.

Does the outlook for the industry present the company with
sufficiently attractive prospect for profitability ?

Telkom Economic and Business S

Economic Forces
6

Key Economic Variable to be Monitored

Availability of credit
Level of disposable income
Interest rate
Inflation rate
Money market rate
Government budget
GDP trend
Consumption [pattern
Unemployment trend
Worker productivity level
Value of the dollar in world market
Stock market trend
Foreign country economic condition

Import / export factors

Demand shift for different
categories of goods and services
Income different by region and
consumer groups
Price fluctuation
Export of labor and capital
Monetary policies
Fiscal policies
Tax rates
European Economic Community
policies
etc

Telkom Economic and Business S

Economic Forces (cont)

7

Advantage and Disadvantage of a Weak Dollar for US Firms

Advantage
Lead to more export

Lead to lower import

Make US goods cheaper to

foreign country
Stimulate worldwide recession

Forces foreign firms to raise

price

Reduce the US trade deficit

Encourages firms to globalize

Encourages foreigner to visit
the United States

Disadvantage

Can lead to inflation

Can cause raise in oil
prices

Can weaken US
government

Make it unattractive
for Americans to travel
globally

Can contribute to fall

in stock prices in long
run

Telkom Economic and Business S

Key Social, Cultural, Demographic, and

Environmental Variables.
8

Childbearing rates

Location of retailing,
manufacturing, and service
business.

Number of special interest

group

Number of marriage

Number of divorces

Attitude toward business

Number of birth

Lifestyle

Number of death

Traffic Congestion

Immigration and Emigration

rates

Inner-city environment

Average disposable income

Social security program

Trust in government

Life expectancy rates

Attitude toward government

Attitude toward work

etc

Per capita income

Telkom Economic and Business S

Political, Government, and Legal

Variables
9

Government regulation or
deregulation
Change in tax law

Special tariffs

Political action committee

Voter participation rates

Number, severity and

location of government
protests

Change in patent law

Environmental protection
law

Level of defense
expenditure

Legislation on equal
employment

Level of government
subsidies

Antitrust legislation

Number of patent

Telkom Economic and Business S

Technological Forces
10

Give the example of the impact of Wireless Technology in

certain industry (five industries)

Telkom Economic and Business S

Competitive Forces
11

Seven Characteristic describe the most competitive companies :

1. Market share matters
2. Understand and remember precisely what
business you are in ?
3. Whether its broke or not, fix it. Make it
better not just product but the whole
company if necessary
4. Innovate or evaporate, particularly in
technology-driven businesses
5. Acquisition is essential to growth\
6. People make a difference
7. There is no substitute for quality and no
greater threat than failing to be cost
competitive on a global basis.

Telkom Economic and Business S

Key Question about Competitors

12

1.

What are the major

competitors strength ?

2.

What are the major

competitors weaknesses

3.

What are the competitors

objective & strategies ?

4.

How will the major

competitors most likely
respond to current economic,
social, cultural, demographic,
environmental, political,
governmental, etc

5.

How vulnerable are the major

competitor to our companys
strategies ?

6.

7.

8.

9.

10.

How vulnerable are our

alternative strategies to
success ful counterattack by
our major competitors ?
How are our product or service
positioned relative to major
competitors ?
To what extend are new firms
entering and old firms leaving
this industry ?
What key factor have resulted
in our present competitive
position in this industry ?
What is the nature of suppliers
and distributors relationship ?

Telkom Economic and Business S

Competitive Intelligence Programs

13

Competitive Intelligence (CI), as formally defined by the

Society of Competitive Intelligence Professional (SCIP), is
a systematic and ethical process for gathering and analyzing
information about the competitions activities and general
businesses trend to further a businesss own goals
Three strong misperception about CI
1. Running an Intelligence program requires lot of
people, computer and other resources.
2. Collecting intelligence about competitors violate
antitrust laws, business intelligence equals espionage
3. Intelligence gathering is an unethical practices

Telkom Economic and Business S

Competitive Analysis : Porters Five

Forces Model
Rivalry Determinant
14

Industry growth
Entry Barriers
Fixed (or storage) cost /
Economic of scales
New Entrants
value added
Proprietary product
Intermittent over
Brand Identity
capacity
Switching cost

Product differences
Threat of
Capital requirement
Brand Identity
New Entrants Switching Cost
Access to distribution
Absolute cost
Concentration and
balance
advantage

Informational complexity
Governmental policy
Industry
Diversity of competitors
Expected Retaliation
Corporate Stakes
Bargaining PowerCompetit
Bargaining Power
Exit Barriers
ors

Suppliers

Of Suppliers

Determinant of Suppliers Power

Differentiation of inputs
Switching Cost
Presence of substitute inputs
Supplier concentration
Importance of volume to supplier
Cost relative to total purchase
Impact of inputs on cost or
differentiation
Threat of forward integration
relative to threat of backward
integration by firms in the industry.

Intensity
of
Rivalry

Of Buyers

Threat of
Substitutes
Subtitutes

Buyers

Bargaining

Price Sensitivity of Leverage

Determinant
Buyers Power
Price / Total
purchase
Product
difference
Brand Identity
Impact on quality
perf
Buyers profit
Decision maker
incentives

Relative price performance

of substitute, switching cost,
Buyer propensity to
Telkom
substitute

Bayer concent vs
firm concent
Buyer Volume
Buyer switching
cost vs firm
switching cost
Buyer information
Ability to backward
integrate
Substitute product

Economic and Business S

External Factors Evaluation (EFE)

15

EFE matrix allowed strategist to summarized and

evaluate the external factors.
5 steps to make EFE
1.
2.

3.

4.

5.

List key external factors as identified

Assign each factor a weight that range from 0 (not
important) and 1.0 (very important)
Assigned rating between 1-4 to indicate how effectively
the firms current strategies to response
Multiply each factors weight by its rating to determine
a weighted score
Sum the weighted score to determine the total
weighted score of the organization

Telkom Economic and Business S

EFE
16

Weigh
t

Rating

WxR

1. Growth of PDB

0,05

0,15

2. Growth of population

0,02

0,04

3. Growth of computer users

0,05

Key External Factors

Opportunities :

Pelajari buku
reff hal. 112
salaha satu
contoh EFE

4.
5.
Threats :
1. Purchasing power is low

0,05

0,20

2. Low switching cost for buyer

0,05

0,10

1,00

Telkom2,86
Economic and Business S

3.
4.
Total

External Threat and Opportunity

Profile
17

Environmental
Sectors
Economic

Impact of Each Sectors

+ Growth of Gross Domestic Product

Low purchasing power

+ Single digit inflation

Social
Technology
Government
Customer
Supplier
Competitor
International

Telkom Economic and Business S

Competitive Profile Matrix (CPM)

18

The CPM identifies a firms major competitor and

its particular strength and weaknesses.

CPM include both external and internal factors

the rating refer : 4 = major strength, 3 = minor
strength, 2 = minor weaknesses, 1 = major
weaknesses

The critical success factors are broader

Telkom Economic and Business S

An Example CPM
19

Company 1

Company 2

Company
3

Weig
ht

Rating

Scor
e

Rating

Score

Ratin
g

Scor
e

1. Advertising

0,20

0,20

0,80

0,60

2. Product Quality

0,10

0,40

0,30

0,20

3. Price Competitiveness

0,10

0,30

0,20

0,40

4. Management

0,10

0,40

0,30

0,30

5. Financial Position

0,15

0,60

0,30

0,45

6. Customer Loyalty

0,15

0,60

0,45

0,30

7. Market Share

0,20

0,80

0,20

0,40

Critical Success Factors

1,00

3,30

2,55

2,65

Pelajari CPM yang lain di hal. 114

Telkom Economic and Business S

Pembagian Case
20

Kelompok

Case Perusahaan

United Continental Holding, Inc 2011

E* Trade Financial Corp. 2011

Starbucks Corporation 2011

Merryland Amusement Park 2009

Yahoo! Inc. 2009

Wal-mart Stores Inc. 2009

Dell, Inc. 2011

Apple Inc. 2011

Telkom Economic and Business S

Tugas-3
21

A. Case
1. Pelajari case anda masing2 kelompok
2. Identifikasi faktor2 Makro Environment yang mempengaruhi
perusahaan tersebut
3. Identifikasi faktor2 Industry Environment yang mempengaruhi
perusahaan tersebut
4. Identifikasi faktor2 Operating Environment yang
mempengaruhi perusahaan tersebut
5. Buatlah ETOP untuk case tersebut
6. Tugas dikumpulkan pada H-1 pertemuan berikut dalam bentuk
power point melalui email.
B. Text Book
Pelajari buku wajib chapter 4 Internal Env. Analysis untuk
dipresentasikan
pertemuan berikut.

Telkom Economic and Business S