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In accordance with the requirements of the ISO9001:2015 standard, an organization should analyze and evaluate its internal and external environment. The organization fully identifies these internal and external factors and analyzes them in order to understand the impact of such factors on its business operations. By using the SWOT analysis method, it can identify the organization’s opportunities and threats, and then formulate appropriate measures. The specific contents and analysis methods for analyzing the internal and external environments of an organization are as follows: 1. Analysis of the external environment (I). Analysis of the organization’s macro-environment 1. Political and legal environment (1) Contents of the analysis Political factors have a direct impact on organizations, but generally they exert an indirect influence through laws. The analysis of the legal environment focuses on the following 4 aspects: a) Legal regulations related to the organization ； b) **Judicial and law enforcement agencies: departments such as industry and commerce, taxation, technical supervision, environmental protection, and work safety supervision ； c) The organization’s legal awareness ； d) The international legal environment as provided by international law and the legal environment of the target country (2) Characteristics of the political and legal environment: a) Uncertainty – it is difficult for organizations to predict changes in the political environment ； b) Directness: it has a direct impact on the organization’s activities and conditions ； c) It is irreversible; once it affects the tissue, very rapid and noticeable changes occur, and it is impossible to avoid or divert these changes. 2. Economic environment analysis refers to the social conditions and **economic policies** that constitute the framework for an organization’s survival and development. a) Socio-economic structure: It includes five aspects, namely industrial structure, distribution structure, exchange structure, consumption structure, and technological structure. The most important thing is the industrial structure ； b) Level of economic development: Indicators: GDP, GDP per capita, economic growth rate. c) Economic system: The ** form of economic organization. d) Macroeconomic policies: **Strategies and approaches for economic development, including national development strategies and industrial policies, policies regarding the distribution of national income, price policies, and policies related to the circulation of goods. e) Current economic conditions: The economic growth rate depends on overall changes in the demand for goods and services. Factors that influence it include tax levels, inflation rates, trade balances and exchange rates, unemployment rates, interest rates, credit policies, and **supply, among others. f) Other general economic conditions: such as wage levels, price changes of suppliers and competitors, etc. 3. Social and cultural environment: The formation and changes of factors such as the social structure in which an organization operates, social customs and traditions, beliefs and values, behavioral norms, lifestyles, cultural traditions, population size, and geographical distribution. These include: Ø Demographic factors Ø Social mobility Ø Consumer psychology Ø Changes in lifestyle Ø Cultural traditions Ø Values. These factors influence an organization’s strategies for marketing, promotion, business development, and management of internal resources. 4. Technical environment includes **the technology system, technology policies, level of technology, and trends in technological development**. Impact on strategy: a) Fundamental technological advancements enable organizations to analyze the market and customers more effectively. b) The emergence of new technologies has increased the demand for products and services in society and emerging industries, prompting organizations to expand their business scope or enter new markets. c) Technological progress can create a competitive advantage. d) Technological progress can ； This leads to the obsolescence of existing products or a shortened lifespan for them. e) The development of new technologies enables organizations to pay more attention to environmental protection, social responsibility, sustainable growth, etc. (II) Analysis of the industrial environment 1. Product life cycle Ø Introduction stage: characterized by few users, few competitors, high gross margins, small scale, and high operational risks. Ø Growth stage: Characterized by increasing product sales and high profit per unit. The main strategy is marketing, and operational risks decrease, though they remain at a relatively high level. Ø Maturity stage: Characterized by price competition among competitors and a decline in gross profit. The risk further decreased to a moderate level. The strategy is to improve efficiency and reduce costs. Ø Decline phase: The strategy is defensive, aimed at generating final cash flows and reducing costs; if there is no cost-based competitive advantage, exiting should be considered. 2. Industry competitiveness: There are five fundamental competitive forces in every industry: potential entrants, substitutes, buyers, suppliers, and the rivalry among existing competitors (Porter, Competitive Strategy). (1) Analysis of the five competitive forces: Ø Analysis of potential new entrants: The level of entry threat depends on the barriers to entry and the counteractions that existing firms may employ against those who intend to enter. They are referred to as “structural barriers” and “behavioral barriers” respectively. Ø Threat of substitution by alternatives: divided into direct substitutes and indirect substitutes. The replacement of old and new products depends mainly on the performance-to-price ratio of the products, that is, the concept of \"value\" in value engineering: value = functionality/cost. Ø The bargaining power of suppliers and buyers: Organizations have a dual role – they are buyers to their upstream partners and suppliers to their downstream partners. Bargaining mainly revolves around two aspects: value and added value, namely functionality and cost. The bargaining power of buyers and suppliers depends on: a) the degree of concentration among buyers and the scale of their business volume ； b) The degree of product differentiation and the degree of asset specificity ； (for example: high-end products from abroad, home appliances) c) Degree of vertical integration ； d) Degree of mastery of information. Ø Competition among existing organizations within the industry: It usually manifests itself through price competition, advertising battles, the introduction of new products, and an improvement in customer service. Competition within the industry is the focus of the analysis. (2) Response strategy: Ø Position oneself by leveraging cost advantages or differential advantages to separate itself from the five competitive forces, thereby outperforming competitors. Ø Identify niche markets and adopt a focused strategy. Ø Change the five competitive forces, form alliances with suppliers and buyers to reduce bargaining, and also seek blocking strategies to mitigate the threat of potential entrants. 3. The key factors for success refer to the skills and assets that are necessary to achieve profitability in a specific market. Several common key factors for success: Ø Technology-related factors (research skills, skills in creative improvement, ability to innovate products, proprietary skills, capacity to disseminate information, take on orders, deliver goods, and provide services, etc.) ； Ø Manufacturing-related factors: (low-cost productivity, fixed asset utilization, labor force, cost-effective product design and product engineering, etc.) ； Ø Distribution-related factors (powerful distributors and their networks, sufficient space on retailers’ shelves, own sales channels and networks, low distribution costs, fast delivery, etc.) ； Ø Skill-related factors (quality control techniques, the ability to respond quickly to market changes, excellent information systems, etc.) ； Ø Others: image, reputation, patent protection, access to low-cost financial capital, etc. (III) Competitive Environment Analysis 1. Competitor Analysis: Future goals, assumptions, current strategies, and potential capabilities. Ø Competitors’ future goals: These help to predict the extent to which competitors are satisfied with their current market position and financial situation, thereby allowing an assessment of their likelihood to change their current strategies and their sensitivity to the strategic actions of other organizations. Ø Competitor assumptions: include the competitor’s evaluation of itself as well as its assessment of the industry and other organizations. a) The role in formulating strategies for the company ； b) Key factors analyzing competitors (public statements, specific products, level of awareness and emphasis on certain matters, values and principles, views on future demand for products and the significance of industry trends, impact on current strategies, etc.) ； Ø Current strategies of competitors: View the competitors’ strategies as the key business policies in various functional areas of the business, and understand how they seek to establish relationships between these functions. Ø Competitor capabilities: A realistic assessment of competitors is the final step in competitor analysis. The framework for analyzing competitors’ strengths and weaknesses includes: ① Products ② Agents/distribution channels ③ Marketing and sales ④ Operations ⑤ Research and engineering capabilities ⑥ Total costs ⑦ Financial strength ⑧ Comprehensive management capabilities ⑨ Company’s business portfolio ⑩ Organization ⑪ Others. 2. Strategic groups within the industry: An important aspect of analyzing the competitive environment is to identify the characteristics of various strategic aspects among all key competitors in the industry. Strategic cluster analysis: Ø Understand the competitive dynamics among strategic clusters ； Ø Barriers to movement between strategic groups ； Ø Competition among organizations within the group ； Ø Predict market changes and identify strategic opportunities. (IV) Market Demand Analysis 1. Determinants of market demand Ø The main factors include: product price, consumers’ income level, prices of related products, consumers’ preferences, and consumers’ expectations regarding product prices, etc. Ø Market demand = Population x Purchasing power x Desire to buy. Ø Population – the number of consumers. Ø Purchasing power – the income level of consumers. Ø Desire to buy – product price, consumer preferences, prices of related products, and consumers’ expectations regarding product prices. Ø The desire to buy is a key factor that needs to be taken into account, and it forms the focus of marketing strategies. Ø The price of a product, its degree of differentiation, and promotional tactics all influence the desire to purchase it. 2. Consumer analysis is a key aspect to consider, covering three aspects: consumer segmentation, consumption motivations, and unmet consumer needs. Ø Consumption segmentation: market segmentation, industry segmentation ； Ø Consumption motives: consumers’ choices based on their preferences for certain brands, as well as the products and services they value; consumers’ goals and motivations, etc. Ø Needs satisfied by consumers: Unmet needs indicate that an organization has opportunities to enter the market or increase its market share; they also represent threats to the organization, as competitors likewise have the opportunity to enter the market. The product should be modified or new products developed.