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Here’s a concise summary of the main points from the document on External Environmental Analysis in Strategic Management:
Identifies key environmental factors influencing a business.
Helps organizations recognize threats, seize opportunities, and understand competition.
Assists in identifying stakeholders and their expectations.
PEST Analysis – Assesses political, economic, social, and technological factors affecting the business environment.
Variations include PESTLE and SLEPT analyses.
Drawbacks: Limited objectivity and relevance in fast-changing industries.
Porter’s Five Forces Model – Evaluates industry-specific competitive conditions.
Includes power of buyers, power of suppliers, threat of new entrants, threat of substitutes, and rivalry among competitors.
Drawbacks: Doesn’t account for government influence or business alliances.
Industry Life Cycle Analysis – Helps businesses align strategy to different product life cycle stages (Introduction, Growth, Maturity, Decline).
Guides pricing, production, and market strategies at each stage.
Competitor Analysis – Assesses competitive advantage, strategies, and behavior.
Helps position an organization effectively relative to rivals.
Global Market Considerations – Evaluates factors influencing expansion into international markets.
Benefits: Access to new markets, economies of scale, investment opportunities.
Risks: Cultural differences, exchange rate volatility, political stability.
Porter’s Diamond Model – Explains national competitive advantage and industry clustering.
Key elements: Factor conditions, demand conditions, competition, and supporting industries.
Drawbacks: Based on developed economies, overlooks multinational corporations.
Regular environmental analysis is essential to staying relevant.
Organizations should adapt strategies to external factors.
Global expansion requires careful assessment of risks and opportunities.
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