Blog #4: Analyzing External Factors

The readings highlighted external factors that companies need to consider to succeed in today’s dynamic market. As a result of globalization and continuously developing technologies, the impact of competition grew significantly. As highlighted in “The Global Forces Inspiring a New Narrative of Progress”, the impact of geography is decreasing as the internet is conveniently enabling access to information, products, and services. The previous feature of the internet provides significant value to businesses such as but not limited to reduced costs and greater potential. The previous benefits are demonstrated through the internet’s ability to eliminate the need for physical stores and by enable companies to appeal to various markets simultaneously. As a result, the nature in which companies operate changed significantly with the development of the internet as they are now capable of controlling factors regarding their strategy and operations.

However, the benefits of the internet are accompanied with risks that have a significant impact on business performance. As Porter mentioned, two of the driving forces of strategy are “threats of new entrants” and “threats of substitutes for products or services”. With technology, it is very easy for a small, new company to monitor strategies adopted by its competitors and analyze their performance to leverage them into its offerings. By doing so, this newly introduced competitor successfully entered the market as it addressed the customers’ needs at minimal cost while building a strong reputation. The previous dilemma, addresses the two factors that Porter touched on as it shows how a new competitor would arise and present an alternative solution that customers need. As a result, this would cause a company to implement reactive measures rather than proactive ones, hence impeding with its ability to advance since it would be investing time and effort into catching up with the industry rather than innovating valuable solutions. That being said and as highlighted in the articles, a competitive analysis is essential because it allows companies to determine the baseline that it should deliver in order to have a competitive advantage in the industry. Additionally, a competitive analysis would allow companies to have a clearer vision of potential threats that could impede with its success, thus allowing them to plan accordingly. Lastly, a competitive analysis allows companies to determine appropriate changes that they should make to utilize and account for technological advancements that could enhance their business performance.