EVALUATING A COMPANY’S EXTERNAL
ENVIRONMENT
We have to learn and understand the evaluating a
company’s external environment it is to become aware of factors in a company’s
broad macro-environment that may have strategic significance. That means
thinking strategically about a firm’s external environment that companies have
to choose the best situation to running their business. In the business we can
use PESTEL analysis focus on the six principle component of strategic
significance in the macro-environment. With learn evaluating a company’s
external environment it can help company to Gain command of the basic concepts
and analytical tools widely used to diagnose the competitive conditions in a
company’s industry. Then become adept at mapping the market positions of key
groups of industry rivals. Learn how to use multiple frameworks to determine
whether an industry’s outlook presents a company with sufficiently attractive
opportunities for growth and profitability.
There have example figure to explain from thinking
strategically about the company’s situation to choosing a strategy. With that
figure it can help company to choose best strategy.
I will talk about the macro-environment
encompasses the broad environment context in which a company’s industry is
situated that includes strategically relevant components over which the firm
has no direct control. Use PESTEL as a focus on principal components the
strategically relevant factors in the Macro-Environment. PESTEL Analysis:
ü Political factors
ü Economic conditions (local to worldwide)
ü Sociocultural forces
ü Technological factors
ü Environment factors (the natural environment)
ü Legal/regulatory conditions
To related macro-environment with PESTEL must see
first what the component of companies:
The figure show the component of a company’s
macro-environment.
Political factors --à These factors include political policies and
processes, including the extent to which a government intervenes in the
economy. They include such matters as tax policy, fiscal policy, tariffs, the
political climate, and the strength of institutions such as the federal banking
system. Some political factors, such as bailouts, are industry-specific.
Others, such as energy policy, affect certain types of industries (energy
producers and heavy users of energy) more than others.
Economic conditions --à Economic
conditions include the general economic climate and specific factors such as
interest rates, exchange rates, the inflation rate, and the unemployment rate,
the rate of economic growth, trade deficits or surpluses, savings rates, and
per capita domestic product. Economic factors also include conditions in the
markets for stocks and bonds, which can affect consumer confidence and
discretionary income. Some industries, such as construction, are particularly
vulnerable to economic downturns but are positively affected by factors such as
low interest rates.
Sociocultural forces --à Sociocultural
forces include the societal values, attitudes, cultural factors, and lifestyles
that impact businesses, as well as demographic factors such as the population
size, growth rate and age distribution. Sociocultural forces vary by locale and
change over time. An example is the trend toward healthier lifestyles, which
can shift spending toward exercise equipment and health clubs and away from
alcohol and snack foods. Population demographics can have large implications
for industries such as health care, where costs and service needs vary with
demographic factors such as age and income distribution.
Technological factors --à Technological factors
include the pace of technological change and technical developments that have
the potential for wide-ranging effects on society, such as genetic engineering
and nanotechnology. They include institutions involved in creating new
knowledge and controlling the use of technology, such as R&D consortia,
university-sponsored technology incubators, patent and copyright laws, and
government control over the Internet.
Environmental forces --à This includes ecological
and environmental forces such as weather, climate, climate change, and
associated factors like water shortages. These factors can directly impact
industries such as insurance, farming, energy production, and tourism. They may
have an indirect but substantial effect on other industries such as
transportation and utilities.
Legal and regulatory factors --à These factors include the
regulations and laws with which companies must comply such as consumer laws,
labor laws, antitrust laws, and occupational health and safety regulation. Some
factors, such as banking deregulation, are industry-specific. Others, such as
minimum wage legislation, affect certain types of industries (low-wage,
labor-intensive industries) more than others.
That all, thank you..
chill J
