Week: 6
External analysis
The external analysis
means analyzing the external environment which is beyond the control of an organization.
Basically it investigates and study about the opportunities and threat for an
organization. By comparing the strength and weakness with opportunities and
threat it helps to provide proper conclusion for decision making process.
Opportunities is the favorable situation for organization if it is act properly
where as threat is risk or barrier that may prevent the firm from achieving its
objectives. In broad sense external environment can be divided into two types
they are general environment (macro environment) and industry environment (meso
environment). General environment deals with government regulation, economic
indicators (inflation, GDP growth, and interest rate) and demographic etc. And
industry environment deals with industry, new entrant, market and customer,
substitute product etc Overall the external analysis motive is to support for
proper decision making. (Ballowe. T, 2008)
PESTEL analysis
It describes a
framework of macro environment of factor used in the environment scanning component
of strategic management. It is a part of the external analysis when conducting
a strategic analysis or doing market research, and gives an overview of
the different macro environmental factors that the company has to take
into consideration. It is a useful strategic tool for understanding market
growth or decline, business position, potential and direction for operations.
Lastly PESTEL stands for political, economic, social, technology, environment
and legal. (Wikipedia 2013)
The purposes of PESTEL
analysis are
a.
First of all it helps
to provide detail information about the different factor of external
environment.
b.
With necessary
information an organization can take a proper decision for their future.
c.
Mainly deals
with past and present scenario so past experience will be benefit for
organization to solve present situation.
d.
Even though future is
unpredictable the analysis can minimize the risk of an organization.
e.
Conducting
PESTLE analysis to inform a SWOT analysis can result in recognizing more opportunities
and threats, which can translate into better decisions.
f.
The
analysis will lead the organization in better direction.
g.
Overall
the analysis will directly support for making decision.
Bibliography
1. Ballowe.
T,( 2008) External Analysis (online) http://mystrategicplan.com/resources/external-analysis/
(Accessed on March 29)
2. PEST Analysis (online),http://pestleanalysis.com/ (Accessed on March 29, 2013)
No comments:
Post a Comment