Mohammed Walid Zourob . University ID / 120100075
Ch 3:The External Assessment
1. Explain how to conduct an external strategic-management
An effective approach for conducting an external strategic-
management audit consists of four basic steps:
(1) select key variables,
(2) select key sources of information,
(3) use forecasting tools and techniques, and
(4) construct an EFE Matrix.
2. What are the mine Forces to Gather competitive
Gather competitive intelligence –
3. What are the Sources of Information to do External
4. Identify a recent economic, social, political, or
technological trend that significantly affects financial
Economic—Interest rates remain low.
Social—Many states are passing no smoking ordinances.
Political—Eastern European countries are experiencing
Technological—Use of the Internet is doubling every 100
5. Identify the Osasco Telecom (OT) or any company to the
business you wrote vision & mission. What are the Key
1. Economic: $ value, per capita income, available of
credit at banks.
2. Social, Cultural, Demographic, and Environmental
Forces: population age and size, level of education to
3. Political, Governmental, and Legal Forces: Tax rates,
political stability, law and order.
4. Technological Forces: internet, communication
6. Discuss the following statement: Major opportunities and
threats usually result from an interaction among key
environmental trends rather than from a single external
event or factor?.
This statement is accurate. It reveals how complex the
external audit part of strategy formulation can be. There are
an infinite number of interactions among key external
7. Use Porter’s five-forces model to evaluate competitiveness
within the Gaza banking industry?
Porter identifies five competitive forces that determine the
intensity of competition in an industry and the total value of
profits created in a particular industry. The five forces are
1) new entrants,
2) substitute products or services,
3) bargaining power of suppliers,
4) bargaining power of buyers, and
5) rivalry among existing firms.
A key to selecting appropriate generic strategies is to analyze
these competitive forces in terms of trends, opportunities,
and threats facing the firm.
8. What major forecasting techniques would you use to
1. Economic opportunities and threats and
2. Demographic opportunities and threats?.
3. Why are these techniques most appropriate?
With the advent of sophisticated computers, simultaneous systems
of regression equations have become the most widely used approach
for forecasting economic variables. Scenario development is the
most popular of all techniques for social and demographic
forecasting, although surveys.
9. Give some advantages and disadvantages of cooperative
versus competitive strategies?.
Cooperative strategies are generally less costly than
competitive strategies. Cooperative strategies between
domestic and foreign companies can facilitate entry into
world markets. However, competitive strategies recognize
that survival of the fittest is an underlying philosophy of
business not only in the United States, but also in most of the
world. Identifying competitors’ strengths and weaknesses is,
thus, an integral and vital part of the external audit.
10. Let’s say your boss develops an External Factor
Evaluation (EFE) Matrix that includes 62 factors. How would
you suggest reducing the number of factors to 20?.
Answer: Let a group of knowledgeable individuals in the
organization evaluate the relative importance of each
factor by assigning a 1 = not important, 2 = somewhat
important, and 3 = very important. Then add the ratings
each factor receives. The 20 factors with the highest sum
score should be included in the EFE Matrix.
11. Do you agree with Industrial Organization (I/O) theorists
that external factors are more important than internal
factors in a firm achieving competitive advantage?. Explain
both your and their position?
While I/O theorists claim that industry factors are more
important than internal factors, research findings suggest
that only 20% of a firm’s profitability can be explained by
industry factors and 36% explained by internal factors.
Regardless, it is not a question of whether external or
internal factors are more important. Rather, effective
integration and understanding of both external and internal
factors is the key to securing and keeping a competitive
12. List the 9 external areas that give rise to opportunities
Answer: The ten external areas are economic, social,
cultural, demographic, environmental, political,
government, legal, and technological.
13. Identifying rival firms of competitive forces?
14. What are the Five-Forces Model of firms Competition?.
Rivalry Among Competing Firms.
Potential Entry of New Competitors.
Potential Development of Substitute Products.
Bargaining Power of Suppliers.
Bargaining Power of Consumers.