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External and internal environment analysis
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Strategic Management
QUESTION
The study of the external environment is a crucial step in the mapping of business strategy for an organization.
Discuss how the assessment of external forces can be performed with business examples to support your analysis.
CONTENT PAGE
1. Question Paper 2
2. Introduction 3
3. PEST Analysis 4
(3.1) Political Legal Environment 4
(3.2) Economic Environment 4
(3.3) Social Environment 5
(3.4) Technological Environment 5
4. Industry Analysis 5
5. The Michael Porter Five Forces 6
(5.1) Threat Of New Entrants 7
(5.2) Rivalry of existing firms 7
(5.3) Threats of substitutes 7
(5.4) Bargaining power of buyer 8
(5.5) Bargaining power of suppliers 9
6. Conclusion 9
7. Bibliography 10
8. References 10
Introduction
Business environment is an element that will affect all the activities of an organization. Beside, it will bring firms both opportunities and threats because of its uncertainties. Business environment is uncertain, complex & dynamics; organization should apply more flexibility & discontinuity ways to manage them. A firm cannot control the environment because it is unpredictable in its direction and speed of change, such as interest rates, rate of inflation and exchange rate.
Business environment can classifies in two categories that are internal environment and external environment. Internal factors close to the company that have a direct impact on the organizations strategy, these factors include employee, customer, suppliers, shareholder, banker etc. External environment comprises those factors and trends outside the organisation that might have an influence upon an organisation and its future. Many external factors can have an effect upon an organisation - from changes in government legislation to the entry of new competition into a market....
... middle of paper ...
...; more the fact that your supplier realizes you can do it and so needs to respond accordingly
Bibliography :
http://IMBA 702 Cases.htm
Strategic Management and Business Policy Entering 21st Century Global Society (Sixth edition) ?Thomas L. Wheelen & J.David Hunger
http://www.Marketing Environment.htm
References:
Strategic Management and Business Policy Entering 21st Century Global Society (Sixth edition) ?Thomas L. Wheelen & J.David Hunger
Business Policy and Strategic Management (Fifth Edition) ?Lawrence R. Jauch & William F.Glueck.
Management of Business for GCE A Level & LCCI (2nd Edition) ?Vincent Gabriel
Management (Third Edition) ?Kathryn M Bartol & David C Martin
Strategic Management Awareness and Chance (Third Edition) ?John L Thompson
Strategic Management Theory and Pratice ?G.A.Cole BA MA MIPD MIMgt,
Strategic Management (International Edition) ?Alex Miller Gregory G.Dess
Strategic Management (McGRAW-HILL International Edition) ?Gregory G.Dess & Alex Miller
http://www. Porter's Five Forces.htm
http://www.IMBA 702 Cases.htm
http://www.Marketing Environment.htm
http://www. Business Competition.htm
http://Activity 1 - PESTEL analysis.htm
A firm?s external environment is divided into three major areas : the general, industry and competitor environments. Below is an elaboration in further detail regarding the firm?s opportunities and threats in these three environments.
Wheelen, Thomas L. and J. David Hunger. Strategic Management and Business Policy, 13th Ed. Upper Saddle River, NJ: Pearson Education, Inc., 2012. Print.
Pearce, J.A., & Robinson, R.B. (2013) Strategic Management: Planning for Domestic and Global Competition. (13th Ed.). Boston, MA: McGraw-Hill/Irwin. ISBN-13: 9780078029295
Wheelen, Thomas L. and J. David Hunger. Strategic Management and Business Policy, 13th Ed. Upper Saddle River, NJ: Pearson Education, Inc., 2012. Print.
& J. D. Hunger (12th ed.), Strategic management and business policy (pp. 29-1 – 29-23).
Hill, C. W. L & Jones, G. R. (1998). Strategic Management Theory (4th edition). Boston New York: Houghton Mifflin Company
Wheelen, T.L., & Hunger J.D. (2008) Strategic management and business policy. Upper Saddle River, NJ: Pearson-Prentice Hall.
Environmental – External environmental factors are forces or trends that can affect a business whether it is an opportunity, threat, or constraint. They can be divided into three interrelated subcategories of remote, industry, and operating environments. The remote environment includes factors beyond a company’s operating situation such as the economic, social, political, technological, and ecological factors. The industry environment includes factors that have more of a direct influence on a company’s business such as entry barriers, competitor rivalry, the availability of substitutes, and the bargaining power of buyers and suppliers.
Businesses play a significant role with the economies of all countries, whether developed or developing. It contributes to the welfare of the society through the satisfaction of needs, provides a source of livelihood to millions of people worldwide. Businesses do not operate in vacuums but operate within business environments. The events in the environment of a company have a direct effect on the success or failure of that company. According to Jain, Trehan and Trehan (2009), business environments can be categorized in two: (1) internal business environment; (2) external business environment. Institutions and organizations are usually in a position of controlling their internal business environment. By doing so, they gain the ability of affecting their institutional performance. On the contrary, it is difficult for a business to control the external environment; however, businesses can identify in advance the opportunities and threats presented by the external environment and take decisive actions to ensure its continued success (Jain, Trehan & Trehan, 2009; Goyal & Goyal, 2009).
Wheelen, T. L., & Hunger, J. D. (2012). Strategic Management and Business Policy: Towards Global Sustainability. Upper Saddle River, NJ: Prentice Hall.
Environmental scanning "is the acquisition and use of information about events, trends, and relationships in an organization's external environment, the knowledge of which would assist management in planning the organization's future course of action." Choo (2001) As explained by Gazzale (2007) all businesses external environment are made up of three facets ": 1) the remote environment (macroeconomic factors including inflation, GDP, interest rates, etc.), 2) the industry environment (barriers to entry, the level of competition within the industry, etc.), and 3) the operating environment (the business's customers, suppliers, and workforce, etc.).
Pearce, J. A., & Robinson, R. B. (2013). Strategic management: planning for domestic & global competition (13th ed.). New York: McGraw-Hill/Irwin.
Strategic management is a disciplined effort or control to make necessary decisions that have an effect on a business or an organization; the aim of strategic management is mainly to develop new, innovative or diverse ideas and opportunities for potential or development, and facilitates or assists an organization to achieve its goals (SM, 2010). In reality, strategic management not only can be used or applied to determine mission, vision and values or objectives, but it also establishes roles and responsibilities or timelines in a business (David, 2009). In the following sections, this study will focus on and examine the nature of strategy formulation, implementation, and evaluation activities, and analyze the potential pitfalls or risks in using a strategic-management approach to decision making.
Analysis of the external environment is very important for the development strategy of the organization and a very complex process requiring a process tracking and assessment factors and also the establishment of links between those factors and the strengths and weaknesses as well as opportunities and threats. External environment has its complexity and uncertainty. It is obvious that without knowing the environment the organization can not exist. The organization studies the environment in order to secure a successful progress towards its goals.
The business environment that firms operate in can be divided into the internal environment and the external environment.