2.1.1 What are Key Forces of the external Environment?

Your company is affected by many forces, which have to be observed in order to optimize your business strategy. Customers and their aggregation in the form of markets are defined as the demand side of business transactions. From a seller´s perspective a market is the group of customers who are either actual or potential buyers of a respective product or service. Customers are the central stakeholders, and hence you should carry out a detailed analysis on them.

Suppliers on the other hand provide your company with raw materials, products and services, which are necessary for you to produce your goods. Suppliers influence the profitability of a sector / business, due to the fact that the products and services they sell, are used as input for the value creation process of a sector / business. Technology is the driving force behind a great number of processes in a company. You need technology not only in your production processes, but also for communication procedures, logistics, etc. The labour market functions through the interaction between workers and employers. Newer models of the labour market focus on the bargaining power of both sides.

Competitors are also an important part in the analysis of the supply side of the market. Competitors can be found in similar sectors - e.g. transport - a bike can be a substitute for a car - and in the same strategic group.

Another opportunity to strengthen your competitive position is to perform a search for potential synergies. The whole process of performance creation - the so called value chain - must be observed with regards to cost and differentiation advantages. Sometimes the advantage of the combination of value chains is contradicted by the increase of complexity of the process and accordingly higher coordination efforts and a loss of insight into every company parts.