MEI608 Study Guide
Unit 2: The Competitive Analysis
2a. Choose appropriate business planning tools such as SWOT or PESTLE for competitive analysis
- Why do entrepreneurs perform a competitive analysis?
- How can the competitive analysis grid be used to better understand external environments?
The competitive analysis is designed to provide the entrepreneur with information about how competitors market their business. This allows the entrepreneur to identify how best to penetrate the market and identify gaps in the market.
A competitive analysis grid lists key characteristics of the competitive landscape, including competitive strengths and weaknesses. This provides a solid overview of the market.
Another tool used is the SWOT analysis, which addresses strengths, weaknesses, opportunities, and threats. Companies also use a PEST analysis, which is a tool that addresses factors in the external environment. PEST stands for political, economic, societal, and technological factors.
Besides these tools, companies will use market research to find customers and help understand their customers' needs and wants. They will look at factors like demand, market size, economic indicators, location, market saturation, and potential pricing models.
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2b. Select methods to analyze internal and external environments
- When is a mechanistic organizational structure used?
- In what situation is an organic organizational structure used?
- How might an entrepreneur use the McKinsey 7-S model?
When entrepreneurs write their business plan, addressing the external environment and macro forces that could impact their business is important. This includes economic, technological, sociocultural, natural disasters, human-induced problems, and government and political forces.
Entrepreneurs also look at external environments and industries by determining whether or not the industry is stable and the complexity of the industry. As a result of these factors, they may choose a mechanistic organizational structure or an organic one. A mechanistic organizational structure is usually used for stable, low-uncertainty environments. In contrast, organic organizational structures, often used by entrepreneurs as they get started, are used for unstable, highly uncertain environments.
Within these structures are functional, divisional, geographic, and matrix structures. However, many companies use organic, simple structures when they are just starting out.
An open model system model of an organization looks at the environment and considers the inputs, throughputs, and outputs. When considering the internal environment, the McKinsey 7-S model describes the elements a company should have, which include shared values, systems, style, staff, skills, strategy, and structure.
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Unit 2 Vocabulary
This vocabulary list includes terms you will need to know to successfully complete the final exam.
- competitive analysis
- competitive analysis grid
- mechanistic organizational structure
- open system model
- organic organizational structure