Chapter 2

Module 2
• What is external analysis?
• External analysis, also called environmental analysis, is the process by

which businesses objectively assess the changes in their industry and
the broader world that could affect their current business operations.
Companies do this to ensure they can adapt to changes and continue
to succeed within an industry.
• Key Terms in External Analysis
• To begin the discussion on external analysis, we must define two
terms:
• Industry is a group of companies offering products or services that are

close substitutes for each other. Examples of an industry include soft
drinks, mobile phones, and sportswear.
• Market segments are distinct groups of customers within a market
that can be differentiated from each other based on individual
attributes and specific demands. Market segments can be separated
by characteristics such as geography, demography, and behavior.
Porter’s 5-Forces Model
Product Life Cycle (PLC)
• What is an internal analysis?
• An internal analysis is the thorough examination of a

company's internal components, both tangible and
intangible, such as resources, assets and processes. An
internal analysis helps the company decision-makers
accurately identify areas for growth or revision to form a
practical business strategy or business plan. Often, those
creating the company's business strategy pair an internal
analysis with an external analysis to create a full picture of
how the company functions both as an individual entity and
as a part of the larger competitive industry.
• Gap analysis: A gap analysis identifies the gap between a business goal and the
current state of operations. Companies use gap analyses when they need to
identify weaknesses in the business.
• Strategy evaluation: A strategy evaluation is an ongoing internal assessment tool

used at regular intervals to establish if a company is meeting its objectives as
outlined in a business strategy or plan.
• SWOT analysis: A SWOT (Strengths, Weaknesses, Opportunities and Threats)

analysis helps to give companies a broad overview of all internal functions.
SWOT analyses are ideal for evaluating the full range of a company's abilities.
• Core competencies analysis: The core competencies analysis identifies the

unique combination of qualities that separates the business from competitors.
It's best used when determining ways to improve business operations over a
direct competitor.
• WT situation: Mini-Mini strategy- The company in this case has little development opportunities.
It operates in a hostile environment and its potential for change is small. It does not have
significant strengths, which could withstand threats. The aim of the Mini-Mini strategy is to
minimize both weaknesses and threats. Mini-Mini strategy boils down to a pessimistic scenario
such as the liquidation of a company or in an optimistic situation – to strive for survival by
merging with another organization.
• WO situation: Mini-Maxi strategy- In this situation the company has more vulnerabilities
(weaknesses), but its environment provides plenty of opportunities to resolve that. The Mini-
Maxi strategy attempts to minimize the weaknesses and to maximize the opportunities. The
strategy should include the exploitation of these opportunities while reducing or correcting
weaknesses within the organization. Outsourcing activities or acquiring another company with
the right resources could be an option for example.
• ST situation: Maxi-Mini strategy- In this case we see a strong company operating in a hostile
environment. The aim of a Maxi-Mini strategy is to maximize the strengths of a company while
minimizing the threats through these strengths. A company with strong financial capabilities and
cost-reducing skills, could lower its prices to drive out competition.
• SO situation: Maxi-Maxi strategy- Any company would like to be in a position where it can
maximize both strengths and opportunities. Such an enterprise can lead from strengths, utilizing
its resources to take advantage of the opportunities the market is offering. Companies in these
situations could think about expanding internationally or diversifying their product portfolio to
boost revenues.
• What is a sustainable competitive advantage?
• A sustainable competitive advantage is a long-term benefit a brand

has over its competition, usually because of a specific unique quality
of the product, service or company. As opposed to standard
competitive advantage, a sustainable one can outlive a temporary
boost in sales or popularity, curating a trustworthy reputation for the
brand that draws customers back. Sustainable competitive advantages
can be very beneficial for a business, as it helps build a loyal clientele
and brand esteem while also emphasizing the importance of
consistently creating quality products and services for consumers.
Importance:
• Market domination: Sustainable competitive advantage
can directly result in a company taking over a portion or an
entire market segment.
• New customers: A brand can attract individuals who are
new to their products, and these new customers can
eventually become loyal to the business, further growing the
brand.
• Consumer loyalty: A brand's clientele can become loyal
over time as the company's reputation for consistently
producing high-quality goods or services grows.

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Module 2

• What is external analysis?

• External analysis, also called environmental analysis, is the process by

• Industry is a group of companies offering products or services that are

• An internal analysis is the thorough examination of a

• Strategy evaluation: A strategy evaluation is an ongoing internal assessment tool

• SWOT analysis: A SWOT (Strengths, Weaknesses, Opportunities and Threats)

• Core competencies analysis: The core competencies analysis identifies the

• A sustainable competitive advantage is a long-term benefit a brand

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