The firm’s understanding of the external environment is matched with knowledge about its internal environment to form its vision, to develop its mission, and to take strategic actions that result in strategic competitiveness and above-average returns. Although firms cannot directly control the elements of the external environment, they may be able to influence, and will be influenced by, these factors.

Given the importance of understanding the external environment, why do some firms fail to do so? Provide examples of firms that did not understand their external environment. What were the implications of the firm’s failure to understand that environment?