Question

Chapter 3

1. Define external analysis and explain its role in determining strategic decisions.
2. How often should external analysis be conducted and why?
3. Discuss the major elements of customer analysis.
4. Explain customer segmentation and discuss 4 ways to segment customers.

Answer 1

1. External analysis means examining the industry environment of the company, including factors such as competitive structure, competitive position, dynamics and history. On a macro scale, external analysis includes macroeconomic, global, political, social, demographic and technological analysis. The primary purpose of external analysis is to determine the opportunities and treats in an industry or any segment that will drive profitability, growth and volatility. Its role in determining strategic decisions is important, A SWOT analysis is the common method used to determine decisions. It is important because the information gathered would show if there exists opportunities for growth and expansion which they could exploit and reap the benefits.However, the same information may show looming threats to the business, enabling firm to make necessary adjustments to prevent or reduce negative impacts to the business
2. External analysis conduct at least once every 6 months, or whenever a significant decision is to be made for your business or external factors are looming, that can impact your business.Conducting external analysis includes following steps:

• Decide on the objectives of your analysis
• Research your business, industry and market
• List your business strength
• List your business weakness
• List potential opportunities for business
• List potential threats to your business
• Establish priorities fro analysis
• Develop a strategy to address issues in the analysis

Why external analysis is conducted because it is important for a business to perform external analysis because to aware about the political, economic, social, technological, environmental and legal factors. It also helps the business to forecast and predict changes in the market. It also help to exploit opportunities and guard against threats.

3.Major elements of customer analysis includes:

• Identify your customers:

it is important to define specific characteristics about your desired customer.Clearly identify the benefits of your product or service, and make a list of the types of people who would most need those benefits. Questionnaires can be a good starting point. Learning about existing customers by survey, analysis, social listening etc.

• Define customer needs

Once you know about who your customers are,its important to define their needs. You need to know about the emotional information, motivation, language, specific need, objections etc. we have to find that through ask directly, quora, online reviews etc.

• Show how your product or service meets those needs

The final step in customer analysis is to show your product or service fits the customer needs.There are 4 steps for product or service analysis

list the features of your products or services

describe the benefits of each feature

describe customer outcomes

define the transformation that the customer can expect from using product or service

4.customer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways to relevant to marketing, such as age, gender, interests and spending habits

4 ways to segment customers includes:

• demographics: divide your customers into demographic groups.Customers primarily purchased based on needs and wants.
• behavior: divides customers on behavioral, attitude, loyalty, occasion, usage rate etc.
• psychographic: divide customer base into less tangible segment groups such as personality, lifestyle, interest, social class and values.
• geographical: it is a strategy where companies target audience based on country region.