Exploring the External Environment: Macro and Industry Dynamics
OBS 320: Chapter 4, Exploring the External Environment: Macro and Industry Dynamics
Leave out:
The Value Curve (P. 152-156); and
When industry Divide and Collide (P.163-164)
1. Explain the importance of the external context for strategy and firm performance (P. 130-132)
A. The External Context of Strategy (Figure 4.1)
B. The External Context of Strategy (Explained)
It is crucial that the external environment is thoroughly understood in order to formulate an effective strategy that can help one in achieving company objectives.
The external environment provides the business opportunities to the firm as well as threats that may impede the successful implementation of a strategy.
Knowing what industry and firm specific factors affect a firm is critical to understand a firm’s competitive position and to determine what strategies are viable.
The proper use of tools to analyse the external environment will help to identify some of the major reasons industries differ so much in their long term profitability.
Characteristics of the external environment are the factors that are relevant to the firm’s performance at a given point in time so in order to avoid blind spots in an industry analysis, managers should always integrate their analysis of a firm’s industry with a broader stakeholder analysis.
Managers must remain focused on the industry and not on a particular firm operating in it.
C. The external environment has two major components:
i. The Macro Environment (Political, Economic, Sociocultural, Technological, Environmental and Legal factors, known as PESTEL). ii. The industry environment which is comprised of strategic groups of firms that seem to be more similar in certain ways than other members of the larger industry.
2. Use PESTEL to identify the macro characteristics of the external context (P. 133-138)
A. What is PESTEL?
PESTEL is a tool for analysing the larger
Leave out:
The Value Curve (P. 152-156); and
When industry Divide and Collide (P.163-164)
1. Explain the importance of the external context for strategy and firm performance (P. 130-132)
A. The External Context of Strategy (Figure 4.1)
B. The External Context of Strategy (Explained)
It is crucial that the external environment is thoroughly understood in order to formulate an effective strategy that can help one in achieving company objectives.
The external environment provides the business opportunities to the firm as well as threats that may impede the successful implementation of a strategy.
Knowing what industry and firm specific factors affect a firm is critical to understand a firm’s competitive position and to determine what strategies are viable.
The proper use of tools to analyse the external environment will help to identify some of the major reasons industries differ so much in their long term profitability.
Characteristics of the external environment are the factors that are relevant to the firm’s performance at a given point in time so in order to avoid blind spots in an industry analysis, managers should always integrate their analysis of a firm’s industry with a broader stakeholder analysis.
Managers must remain focused on the industry and not on a particular firm operating in it.
C. The external environment has two major components:
i. The Macro Environment (Political, Economic, Sociocultural, Technological, Environmental and Legal factors, known as PESTEL). ii. The industry environment which is comprised of strategic groups of firms that seem to be more similar in certain ways than other members of the larger industry.
2. Use PESTEL to identify the macro characteristics of the external context (P. 133-138)
A. What is PESTEL?
PESTEL is a tool for analysing the larger