Identify and describe the three major parts of the external environment. What is the purpose for a firm to collect information about these aspects of its environment?
What will be an ideal response?
The external environment has three major parts. The first is the general environment, which is composed of dimensions in the broader society that influence an industry and the firms within it. These environmental segments are demographic, economic, political/legal, sociocultural, technological, global, and sustainable physical. The second part of the external environment is the industry environment, which involves five factors that influence a firm, its competitive actions and responses, and the industry's profit potential. These five factors are: the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry among competing firms. The competitor environment is the third part of the external environment. The firm must be able to predict competitors' actions, responses, and intentions. With the information collected about these aspects of its external environment, the firm can develop its vision, mission, and strategic actions.
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What will be an ideal response?
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