QS Study

The process of analyzing the External Environment

The environment of an organization consists of it surrounding anything that affects its operation favorably or unfavorably. The external environment includes the areas of General, Industry, and Competitor environment. Opportunity is a general environment condition that is exploited helps a company achieve strategic competitiveness.

The external environment is everything outside an organization’s boundaries that might affect it. An external analysis is the systematic analysis of a company’s external environment.

Actually, an external analysis is the systematic analysis of everything outside an organization’s boundaries that might affect it. However, there are some steps in analyzing the external environment. These are as follows:

Determination of strategic group: The first step in analyzing the external environment is the determination of the strategic group. Strategic groups are conceptually defined clusters of competitors that share similar strategies and therefore compete more directly with each other than other flans in. the same Industry.

Environmental scanning: The second step in analyzing the external environment is environmental scanning. Environmental scanning is the process of examining the environment to determine trends and projections of factors that will affect the organization. It involves studying and interpreting the effects of social, political, economic, ecological, and technological events in an effort to spot budding trends and conditions that could become driving forces.

Scenario planning: The third step in analyzing the external environment is scenario planning. Scenarios are stories about what the future environment might: bold and how a firm might respond to this future. So, these are the various steps in analyzing the external environment.