Chapter 2 - Analyzing the external environment of the firm: Creating competitive advantages. After reading this chapter, you should be able to: the importance of developing forecasts of the business environment; why environmental scanning, environmental monitoring, and collecting competitive intelligence are critical inputs to forecasting; why scenario planning is a useful technique for firms competing in industries characterized by unpredictability and change;. | Analyzing the External Environment of the Firm: Creating Competitive Advantages chapter 2 Creating the Environmentally Aware Organization 2- Exhibit Inputs to Forecasting So how do managers become environmentally aware? By doing scanning, monitoring, and gathering competitive intelligence, and using these inputs to develop forecasts. Then scenario planning and SWOT analysis can be used to help anticipate major future changes in the external environment, preparing the firm to do more extensive analysis of the forces in the general environment and the industry or competitive environment. Environmental Scanning & Monitoring Environmental scanning involves surveillance of a firm’s external environment Predicts environmental changes to come Detects changes already under way Allows firm to be proactive Environmental monitoring tracks evolution of environmental trends Hard trends – measurable facts/events Soft trends – estimated, probable events 2- Environmental scanning = . | Analyzing the External Environment of the Firm: Creating Competitive Advantages chapter 2 Creating the Environmentally Aware Organization 2- Exhibit Inputs to Forecasting So how do managers become environmentally aware? By doing scanning, monitoring, and gathering competitive intelligence, and using these inputs to develop forecasts. Then scenario planning and SWOT analysis can be used to help anticipate major future changes in the external environment, preparing the firm to do more extensive analysis of the forces in the general environment and the industry or competitive environment. Environmental Scanning & Monitoring Environmental scanning involves surveillance of a firm’s external environment Predicts environmental changes to come Detects changes already under way Allows firm to be proactive Environmental monitoring tracks evolution of environmental trends Hard trends – measurable facts/events Soft trends – estimated, probable events 2- Environmental scanning = surveillance of a firm’s external environment to predict environmental changes and detect changes already under way. Is a BIG PICTURE viewpoint of the industry/competition, looking for key indicators of emerging trends – what catches your eye? Alerts the firm to critical trends before changes have developed a discernible pattern and before competitors recognize them. Environmental monitoring = a firm’s analysis of the external environment that tracks the evolution of environmental trends, sequences of events, or streams of activities. Monitor the trends that have the potential to change the competitive landscape – what do you want to track? Firms need to CHOOSE the trends identified via the scanning activity, and regularly monitor or track these specific trends to evaluate the impact of these trends on their strategy process, . Johnson & Johnson tracking % of GDP spent on health care, or # of active hospital beds. Hard trends = a projection based on measurable facts, events, or .
