EVALUATING A COMPANY

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