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EXTERNAL ANALYSIS
To perform an external audit, a company first must gather competitive intelligence and
information about economic, social, cultural, demographic, environmental, political,
governmental, legal, and technological trends. The external business environment is the
external setting in which Hexa-arch works and almost completely outside the companys
control. Hexa-arch is part of the agricultural and manufacturing industry and their market
is the construction of private and public property such as high-rise buildings, houses,
and other similar constructs.
A. General Environment
A.1. Economic Forces
Economic forces are the factors that help to determine the competitiveness of the
environment in which the firm operates. It refers to the nature and direction of the
economy in which business operates. Factors such as level of employment, rate of
inflation, rate of interest, demographic changes, and fiscal and monetary policies, which
determine the state of competitive environment in which a firm operates affect the
outcome of the firm's marketing activities, by determining the volume and strength of
demand for the its products.
Threats:
T1. Import/Export Factors
The top exports of the Philippines are that of the
manufactured technologies such as the integrated
circuit and computer units. This means that the
Philippines is still seen as an exporter of technological
goods rather than processed natural materials such as
wood veneers. This also means that there is little
demand from other countries to import wood veneers
from the Philippines. This absence also means little to
no business opportunities for Hexa-arch.
T2. Unemployment Rates
The demographic of the unemployed here in the
Philippines largely comes from the labour sector.
These include those working in farms and factories.
Since there was a decrease in the unemployment rate,
this means there is not much of an abundance of
potential manpower that Hexa-arch could tap since it
also manufactures its own wood veneers in its plant.
The trend that natural and organic materials will be big by 2015
Monitoring
may be an advantage for the veneer industry.
Production of wood veneer is high.
In the Assessment, it is important to identify two (2) opportunities and two (2) threats
factor. Here in Chapter 4, the student must NOT focus on the solutions or
recommended strategies for each opportunity factors and threat factors.
Technological forces represent major opportunities and threats that must be considered
in formulating strategies. Technological advancements can dramatically affect
organizations products, services, markets, suppliers, distributors, competitors,
customers, manufacturing processes, marketing practices, and competitive position.
This category of the General Environment is different from the other categories because
it constantly changes and develops.
About 97 percent of the 2,122 IE establishments IE used computer and other hardware
in their business operations SICT. This percentage was slightly higher than the 96.1
percent reported in 2009. Only 91.1 percent was recorded in 2008. Those in the ICT
sector (97.2%) reported a slightly higher percentage compared to the Content and
Media Sector (96.8%). All of the establishments engaged in ICT manufacturing
industries, software publishing and computer programming, etc. activities used
computers and other hardware. Those engaged in repair of computers and
communication equipment had the lowest percentage at 83.5 percent.
Primary and secondary wood processing has improved a lot in the last centuries (e.g.
high capacity sawmills, continuous presses for wood based panels, high-performance
wood machining), but new process technologies, manufacturing concepts (mass
customization, tailoring of products etc.) have to be developed. Resource- and eco-
efficient processes have to be envisaged in wood industries by means of improved and
new process analytics as discussed by Kessler (2006) and production management
systems which in turn are part of a concept of knowledge-based production
Solidwood is part of FILTRA Timber, largest importer and distributor of premium wood
species. The company supplies the wood consuming industries in the Philippines such
as furniture and door manufacturers, with woods from all over the world. Filtra timber
exists for more than 40 years in the Philippine and international timber markets. They
have established partners in all major timber producing countries which enables them to
offer a wide range of wood products that will meet the demands of the consumers. It
can be seen that Filtra Timber - Solidwood have already established a good reputation
in the wood industry because most of their customers are some of the biggest local and
multi-national conglomerates in the Philippines such as Starbucks, The Manila Hotel,
Solaire, City of Dreams, Sofitel etc. Filtra Timber is likely to strengthen their
relationships with their supplier in order to maintain the quality of premium woods they
are offering as well as their customer loyalty.
High Low
CSF2 Skilled workforce
resource budget
Analysis of the Competitive Forces
Monitoring The information gathered shows that the competitors of
Hexa-Arch are well established firms in the agro-
manufacturing industry.
Forecasting Given the current information and trends, the
competitors will still pose a challenge for Hexa-Arch.
But they too have deficiencies which could benefit
Hexa-Arch
Assessment O1. Hexa-Arch could capitalize on other wood veneer
products and the creation of other furniture such as wall
clocks and file organizers to have provide for demands other
than that of the construction and housing sector.
O2. Hexa-arch could expand its international linkages or
supplier of wood timber in order to offer a wider range of wood
species.
T1. The dominant players in the field namely Filtra Timber-
Solidwood & Manila Wood Veneer Supplies as established
networks makes it difficult for Hexa-Arch, as the emerging
one, to reach an equal standing with them in terms of the
quality and quantity of wood veneer products.
T2. Hexa-arch could invest on expanding their product line
coverage in order to keep up in the changing demands of the
consumers and trends in the agro-manufacturing industry.
B. Industry Analysis
Porter's Five Forces is a model of analysis that helps to explain why different industries
are able to sustain different levels of profitability.
- Established Competitors
- High capitalization
requirement
-
-(write here key words that -(write here key words that
describes this force; bulleted) describes this force; bulleted)
- -
The degree of threat is low to MODERATE. Although the number competitor in the
wood veneer industry is few they are those that are well-established having already
wood manufacturers and suppliers. Entering in this kind of market is costly with regard
to the capital requirement because this kind of business requires equipment, warehouse
and plant. Furthermore, most industries today are focusing on business that would cater
the everyday needs of the people as the population in the Philippines continues to grow.
The degree of threat is LOW. As of now, the eco-friendliness trend has infiltrated every
industry, including the architecture and construction industry. Many structures today
incorporate natural elements in their architectural designs by using natural building
materials such as wood finishes from timber. Potential substitute for wood products are
those factory made wood-like materials which are not as durable as natural wood
products and way much more costly.
B.1.4. Bargaining Power of Suppliers
This force addresses how easily suppliers can drive up the price of goods and services.
It is affected by the number of suppliers of key aspects of a good or service, how unique
these aspects are and how much it would cost a company to switch from one supplier to
another. The fewer number of suppliers and the more a company depends upon a
supplier, the more power a supplier holds.
The degree of threat is LOW to MEDIUM. Although there are plants that supply wood
veneer the price are still expensive since most of the wood being used in making the
products are from suppliers licensed to log trees.
MEDIUM KASI MAY PLANT NAMAN TO SUUPLY WOOD VENEER PERO MEJO
MATAAS DIN KASI YUNG WOOD NA KINUKUHA NILA HINDI SILA MISMO NAG
LOLOG KINKUHA NILA SA SUPPLIER, MAS MAHIRAP KUMUHA NG PAG
KUKUNAN NG WOOD,
VENEER IT SELF LOW KASI TAYO MISMO GUMAGAWA.
SUPPLY OF WOOD DON MATAAS KASI HINDI SATIN NANGGAGALING YUNG
WOOD VENEER SILA NAG SUSUPPLY
LOW- KASI SILA MISMO BUMILI, AND CURRENT TREND IS GUSTO NILA NGA
VENEER, OR GUMAGAMIT NG VEENEER SA BAHAY OR FURNITURES.
The body of section B.1.5. will proceed immediately. Mention immediately if the degree
of threat is HIGH, MEDIUM OR LOW. Analysis must be based on the data and
information gathered to explain why the threat is high, medium or low. [ 5 quality
sentences; in paragraph format; together with tables, charts and/or figures]
In the Assessment, it is important to identify three (3) opportunity factors and three (3)
threat factors from the 5 Sections of the Porters Analysis. These 6 factors should have
high implication for the company.
B.2. Market Analysis
B.2.1. What are the main features of the market? [ 3 quality sentences]. Include
here the sales volume, sales value, geographical spread of sales, channels of
distribution, supply chain, trends in demands, ease of market entry and exit, seasonality
and trends. (LM students should carefully describe the market because this is one of the
major basis for implementing market penetration strategies, market development and/or
product development)
B.2.2. Who are the customers and what are their buying habits? [ 3 quality
sentences] Include the target market, the number, common features, products they
really want, satisfaction with current products, loyalty, etc.
B.2.3. What are the products? [ 3 quality sentences] Include important features,
where are they in their life cycle, delivery frequency, quality, lead time, stocks,
substitute, potential new products, customer service, etc.
Market Analysis
(Observe environmental changes to see if an important trend is emerging
from among these spotted through scanning)
Monitoring
-2 sentence/ phrase of bulleted information that is worth to watch out
In the Assessment, it is important to identify three (3) opportunity factors and three (3)
threat factors from this Market Analysis. These 6 factors should have high implication
for the company.
2. Profile of Competitors
The two major competitors are Solid Wood/FILTRA Timber and Manila Wood Veneer.
Solid Wood/FILTRA Timber is the Philippines largest importer and distributor of
premium wood species and they supply the wood consuming industries in the
Philippines such as furniture and door manufacturers, with wood from all over the world.
Manila Wood Veneer Supplies (MWVS) is one of the countrys top distributors of wood
veneers ranging from locally produced to internationally well-known and high quality
veneers.
3. List of All Opportunities and Threats Identified from the General Environment
and Industry Analysis
The student may adjust the font size in order to fit or modify the table size. After laying
down all the opportunities and threats, the student must choose top 6 opportunities and
top 6 threats. The choice must be highlighted by underline or putting it into box.
In choosing the top 6 opportunities, the opportunities must be very important in terms of
attaining goals of the company. If the opportunities are exploited effectively, it helps the
company achieve strategic competitiveness.
In choosing the top 6 threats, the student must think that the threats to be chosen has
high negative impact in attaining goals of the company. These threats are providing the
greatest hindrance or obstacles to achieve competitiveness.
Select 6 Opportunities and 6 Threats. The identification of key opportunities and threats
must be meticulously done. Importance of the opportunity and threat factors (in terms
of the big impact or relevance to the company) must be considered very well.
After classifying, rate each factor by assigning numerical value based on the dimension
on stability position or industry position (Check the PowerPoint slides for the lecture or
textbook pages 208 to 212 for the explanation of Stability Position and Industry
Position). The concept of Stability Position and Industry Position will be more useful in
Strategy Formulation.
1
2
3
4
5
6
# Threats Basis Dimension Rate
1
2
3
4
5
6
Ensure that each of these Opportunity and Threat factor must be traceable or has basis.
Its impossible that an opportunity factor or threat factor suddenly appeared in the list
without assimilating information in the general environment and industry analysis.
Notes:
*The Dimension in the table will reflect if the Opportunity or Threat factor falls under
Stability Position or Industry Position
**All tables and figures in the entire chapter 4 must be mentioned and explained in
paragraph discussions
***It is possible that 2 or more opportunities (or threats) can be identified from the same
level and sublevel.