There are two environments in which any company operates. First one is external environment consist of opportunities and threats and other one is internal environment consist of strengths and weaknesses. Opportunities and threats are uncontrollable factors whereas internal strengths and weaknesses are controllable factors.
These are the favorable factors exist in the external environment. Any company which has been proactively monitoring the external environment will surely try its best to utilize or capitalize the available opportunities. However, any opportunity can turned into threat if a direct competitors capitalize on it. Therefore, the time factor is important and should be considered while formulation and execution of strategies. [sky]
What are the examples of External Opportunities?
External opportunities contains but not limited to the following factors:
Acquisition of direct competitors.
Expansion in domestic and internal market.
Offer new products and services in the market.
These are the external factors which may harm the company in long run. However, the impact of threats can be minimized to some extent by using the company internal strengths and capitalizing on the opportunities.
What are the examples of External Threats?
Following are the example of threats but not limited to:
Low industry growth
Many new entrants in the market
High taxes and interest rates
Weak economy due to high inflation
Rapid change in technology.
Opportunities and Threats are Uncontrollable
Opportunities and threats are the external factors which are dynamic and uncertain, therefore a company will has limited control over it. It is important to understand that there would be some factors present in the external enviroment but unidentified during the strategy formulation phase.
Tools or methods to identify Opportunities and Threats
EFF (External factor evaluation) matrix SWOT and TWOS analysis are commonly used tools or methods for the external enviroment analysis. However, the accuracy of these tools or methods is still a big question mark.