Changes Are Happening in the External Environment
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PREPARATION SHEET FOR THE CONCEPTS QUIZ
The key for this quiz is to recognize that there are many tools and templates that are used in performing strategic analysis. You begin by remembering that overall we are assessing the organizations external and internal situations. We want to know what changes are happening in the external environment that will affect organization performance. In order to adapt to those changes, we need to know the current situation of the company – particularly as it relates to its capabilities and the degree to which those capabilities are suitable to the current environment and the future environment. In all cases with all tools and templates, the objective is to determine what actions are required of the company to maintain its strategic health and therefore its financial performance. With each tool or template, we use it to derive implications where the implication is a desired action. Those actions range from very critical, must be performed, actions though less critical actions that should be done to least critical actions that could be done.
Tools and Templates:
External and Internal Situation Assessment:
SWOT Analysis – draw implications for each column and each row in the table as well as those for the entire table.
Yips Analysis of Environmental Drivers and Strategic Levers – This was covered in the lecture for Week 3. It can also be found online.
External Assessment:
PEST or PESTEL Analysis aka (General Environment Analysis): PEST stands for Political, Economic, Socio-cultural, and Technological Environments. The further E (Ecological) and L (Legal) are sometimes added. For each environment component such as Political, you assess industry or company relevant drivers of change that are occurring or will be occurring. You need to determine which are most critical – you can think in terms of value (big or little), valence (positive or negative), and velocity (linear, exponential or discontinuous). You also need to be on the look out for changes that can make your current value-delivery system obsolete. This threat usually comes from the technological environment, but can come from any of the others. There are different categories of factors that are sometimes used. Sometimes these factors are split into sub categories (Economic can be split into economic and demographic).
Industry Analysis of Competition aka (Porters Five Forces): This tool is used to assess the strength of the competitive environment within an industry. It is a single-factor tool.
Stakeholder Analysis: This tool looks at the interests of key stakeholders within three broad categories of Capital Markets, Product-Market,