Strategy Formulation: External Assessment
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Questions and Answers

Which of these are external stakeholders? (Select all that apply)

  • Clients (correct)
  • Donors (correct)
  • Volunteers
  • Staff
  • Which of the following are internal stakeholders? (Select all that apply)

  • Board members (correct)
  • Volunteers (correct)
  • Clients
  • Community leaders
  • What is the goal of an external audit?

    To identify opportunities and hazards for the company.

    Which of these is NOT a key external factor?

    <p>Internal policies</p> Signup and view all the answers

    Which forces are included in key external factors?

    <p>Political Forces</p> Signup and view all the answers

    Higher interest rates make loans more ___.

    <p>expensive</p> Signup and view all the answers

    What are some examples of economic forces?

    <p>Interest rates, disposable income, tax rates.</p> Signup and view all the answers

    Internal stakeholders include clients.

    <p>False</p> Signup and view all the answers

    What must businesses do as social and cultural changes occur?

    <p>Adapt to meet new demands.</p> Signup and view all the answers

    Which of the following best describes external stakeholders?

    <p>People or entities impacted by the organization without direct employment</p> Signup and view all the answers

    What is a primary purpose of conducting an external audit?

    <p>To identify opportunities and risks facing the company</p> Signup and view all the answers

    Which of the following is NOT considered a category of key external factors?

    <p>Competitive strategies</p> Signup and view all the answers

    During the process of performing an external audit, what is the final output?

    <p>A comprehensive analysis of external factors and their ranking</p> Signup and view all the answers

    Which of these groups would be classified as internal stakeholders?

    <p>Staff members</p> Signup and view all the answers

    What is the primary focus of the Industrial Organization (I/O) approach to competitive advantage?

    <p>Analyzing external industry issues</p> Signup and view all the answers

    Which of the following best describes the impact of economic forces on businesses?

    <p>They shape demand for products and can affect business growth.</p> Signup and view all the answers

    What role do social and cultural changes play in business strategy according to the content?

    <p>They create both opportunities and challenges for businesses.</p> Signup and view all the answers

    Which of the following is a key example of an economic force impacting businesses?

    <p>Interest rate fluctuations</p> Signup and view all the answers

    Why is it important for businesses and investors to understand economic forces?

    <p>To make informed decisions and respond to economic changes.</p> Signup and view all the answers

    Study Notes

    Types of Stakeholders

    • External Stakeholders: Do not work directly for the organization but are impacted by its activities.
      • Clients
      • Donors
      • Partner organizations
      • Community leaders
    • Internal Stakeholders: Individuals who work directly for the company.
      • Staff
      • Board members
      • Volunteers

    Nature of an External Audit

    • Objective: Identify opportunities that could benefit the company and hazards to avoid.

    Key External Factors

    • Economic Forces: Influence business operations, especially consumer demand.
    • Social, Cultural, Demographic, and Environmental Forces: Affect businesses based on lifestyle and societal behaviors.
    • Political, Governmental, and Legal Forces: Regulatory impacts on business activities.
    • Technical Forces: Technological advancements influencing industry standards.

    Process of Performing an External Audit

    • Compile intelligence on relevant political, societal, environmental, legal, and technical developments.
    • Analyze the collected information for critical elements.
    • Disseminate a final ranking of significant external factors within the company.

    Industrial Organization (I/O) View

    • Competitive advantage is achieved by focusing primarily on external industry issues rather than internal aspects.

    Economic Forces

    • Key factors impacting business operations include:
      • Interest Rates: Higher rates can slow growth and reduce spending.
      • Investment Preparation: Businesses must adapt to changing economic conditions.
      • Disposable Income and Price Changes: Affect purchasing decisions.
      • Gross Domestic Product (GDP): Indicates economic health and consumer behavior.
      • Tax Rates and Unemployment Policies: Influence operational costs and hiring.

    Social, Cultural, Demographic, and Environmental Forces

    • Changing lifestyles and societal expectations create opportunities and challenges for businesses.
    • Cultural Factors: Influence organizational operations and marketing strategies.
    • Demographic Factors: Key variables include birth rates, immigration trends, and societal attitudes toward government.

    Types of Stakeholders

    • External stakeholders: Individuals or groups not directly employed by the organization but affected by its actions, including clients, donors, partner organizations, and community leaders.
    • Internal stakeholders: Employees and individuals directly involved with the company, such as staff, board members, and volunteers.

    Purpose of an External Audit

    • An external audit identifies opportunities for improvement and potential hazards for the organization.

    Key External Factors

    • Economic forces: Impact business operations and demand for products.
    • Social, cultural, demographic, and environmental forces: Affect market trends and consumer behavior.
    • Political, governmental, and legal forces: Influence business regulations and operations.
    • Technological forces: Drive innovation and alter market dynamics.

    Economic Forces

    • Interest rates affect loan costs and consumer spending.
    • Understanding economic trends helps businesses make informed decisions.

    Social, Cultural, Demographic, and Environmental Forces

    • Changes in societal behaviors create both challenges and new market opportunities.
    • Key variables include cultural attitudes, demographic shifts, and environmental issues.
    • Government policies can either facilitate or hinder business operations.
    • Political stability affects industry regulations, global trade relations, and potential for business success.

    Technological Forces

    • Innovations impact competitive advantage by affecting production and marketing strategies.
    • Technology can create new markets and change consumer expectations.

    Competitive Forces

    • Evaluating competing companies is essential to understanding market positioning.
    • Competitive analysis includes assessing strengths, weaknesses, opportunities, and threats.

    Industry Analysis Importance

    • An industry analysis helps firms develop competitive strategies, identify strengths and weaknesses (SWOT analysis), and pinpoint strategic improvement areas.

    Opportunities and Threats

    • Opportunities represent favorable external conditions to exploit.
    • Threats pose risks that need to be managed to reduce vulnerabilities.

    External Factor Evaluation (EFE) Matrix

    • An analytical tool to rank external opportunities and threats impacting a company.
    • Helps identify critical external factors and informs strategic decision-making.

    Complexity Profile Matrix

    • This matrix visualizes the complexity of various factors or projects within an organization.
    • Components include weighting (importance), scoring (performance), and total score (overall complexity measure).

    Advantages and Disadvantages of Complexity Profile Matrix

    • Advantages: Provides clarity, supports decision-making, and simplifies analysis.
    • Disadvantages: Risk of oversimplification, potential subjectivity in scoring, and static representation of data.

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    Description

    This quiz focuses on the external assessment of strategy formulation, emphasizing the role of external stakeholders. Participants will explore various types of stakeholders and their impact on organizations. Perfect for those studying strategic management or related fields.

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