External and Internal Environment Analysis

2372 Words Mar 5th, 2013 10 Pages
Big 5 Sporting Goods External and Internal Environmental Analysis Big 5 Sporting Goods (Big 5) has operated within the sporting goods industry, predominantly in the western United States, for over 50 years (Hoovers, 2013). To understand the organizational structure and strategic path chosen by Big 5, it is critical to analyze various factors found within its external and internal environments. Big 5’s external environment includes remote, industry, and operating factors whereas the internal environment includes human capital resources and organizational structure factors. Ultimately these external and internal environmental factors provide opportunities and threats that help to develop and alter generic and grand strategies to meet Big …show more content…
Ultimately understanding and analyzing the effect of each remote environmental factor will allow Big 5 to implement targeted strategies to capitalize on opportunities and minimize threats.
Industry Environment Industry environment pertains to how an organization copes with the five basic forces that shape the competitive market in which it operates. How these forces relate to each other will determine the competitive nature of the industry and control how much profit can be made. In a perfectly competitive market, where new entrants are fairly consistent and lack barriers, the likelihood of long-term profits is low. This is seen in such industries as plastics and rubber. The five basic forces consist of suppliers, buyers, new entrants, substitutes, and industry competitors (Pearce, Robinson, 2011). Big 5 Sporting Goods industry environment starts with determining the possibility or ease of new entrants into the market. The ease of the market depends on how many barriers exist for entrants. There are six major sources of barriers, the first being economies of scale. Economies of scale allows Big 5 to purchase a large quantity of a product at a reduced per item cost. This in turn allows them to sell that product at a competitive price in the market. This creates a capital barrier for new entrants. An organization would need a significant amount of capital to take advantage of the economies of scale and stay price