Which term describes the process that firms use to study and understand the many different layers and aspects of their competitive environment?

Strategic analysis.

Explanation:

Strategic analysis is a term which describes the process that firms use to study and understand the many different layers and aspects of their competitive environment.

Basically, strategic analysis is a technique used for analyzing the critical external contingencies facing an organization in terms of economic conditions, competitors, and customers. It is a management strategy that focuses on systematically acquiring informations about occasions, trends, events or patterns through surveys and analysis of these information in an organisation's external and internal environment. The informations acquired through strategic analysis is then used by the executive management in strategically planning the organisation's future and exploitation of available opportunities for the success of the organization.

The internal information offers an organization strength and weakness while the external information provides information about opportunities and threats.

The tools used in strategic analysis includes SWOT analysis, Porter's five forces of competition, value-chain model etc.

reducing the scale of the market for a new product.