Summary of RTB1 Chapter 2 and RM5

Beside from internal environtment, an industry can influenced by external environment. The industry must be aware for the negative effects of both internal and external environment, analyze the environmental situation, understand the condition, and then seek the strategic competitiveness. As Ireland said that :Firms understand the external environment by acquiring information about competitors, customers, and other stakeholders to build their own base of knowledge and capabilities. On the basis of new information, firms take actions, such as building new capabilities and core competencies, in hopes of buffering themselves from any negative environmental effects and to persue opportunities as the basis for better serving their stakeholders needs. A firms strategic actions are influenced by the conditions in three parts (general, industry and competitor) of external environment. (Ireland, 2008, page 33)Ireland stated the general environment as the composed of dimensions in the broader society that influence an industry and the firms within it. The general environment has 7 segments such as demographic, economic, political/legal, sociocultural, technological, global and physical environment segment. The differences between three parts of external environment can see on the focused of each parts; General environtment: focused on environmental trends. Identifying opportunities and threats is an important objective of general environtment Industry environtment : focused on the factors and conditions influencing an industrys profitability potential Competitors environtment : focused on predicting competitors actions, responses and intentions.Furthermore, to increase the understanding, firm engage in external environmental analysis. The analysis of external environtment has four components : Scanning : identifying early signals of environmental changes and trends Monitoring : detecting meaning through ongoing observations of environmental changes and trends Forecasting : developing proejctions of anticipated outcomes based on monitored changes and trends Assessing : determining the timing and importance of environmental changes and trends for firms strategies and their management.[footnoteRef:1] [1: Ireland. 2008. The Management of Strategy Concepts and Cases 10 edition. Canada : Cengage Learning]

The other way in order to get the competitive strategy, Porter suggest that it should be based on a deep analysis of the structure of an industry and its evolution. Porter created the five key forces model to analyze the competitiveness in an industry.Porters competitive force model is probably one of the most often used business strategy tools and has proven its usefulness on numerous occasions. The five forces model can be seen as one of two dimensions in maximasing corporate value creation. Porters five forces model is an outside-in business unit strategy tool that is used to analyse the attractiveness of an industry structure. The competitive forces analysis is made by the identification of five fundamental competitive forces :1. The entry of competitors2. The threat of subtitutes3. The bargaining power of buyers4. The bargaining power of suppliers5. The rivalry among existing playersThe actions of these five forces determine the long run profitability in any given industry. The intensity of these five forces depens on the structure of the industry as each industry has its specific structure. (Ghamdi & Sohail, Paper, 2006, page 10-11)