1 UNIT 6: STRATEGIC ANALYSIS: EXTERNAL ANALYSIS

2 Two sets of factors primarily shape a company’s strategy: -External factors (macro environment, industry, competition, customers) - Internal factors (resources, competence, culture etc)

3 It is important to think critically about an organization’s business –What is happening inside the organization? –What is happening outside the organization? There are various models to help managers think more strategically about their organizations.

4 SWOT Analysis Careful assessment of the organization and its environment -Identification of Strengths, Weaknesses, Opportunities and Threats

5 Strengths An organization’s competencies –Internal to the organization –Core competences –Distinctive competencies –Can enhance performance if harnessed.

6 Weaknesses An organization’s vulnerabilities –Internal to the organization. –Can lead to poor performance if not addressed.

7 Opportunities Conditions that an organization can turn to its advantage –External to the organization –Can enhance performance if exploited

8 Threats Conditions that can hurt the organization –External to the organization –Can hurt performance if not confronted

9 SWOT provides a way of organizing information for developing strategy and operating plans. –Does not provide specific answers –Has benefits and dangers as a strategic tool

10 External Analysis Understanding the external influences on an organization –Environmental (PESTEL) scanning –Industry analysis –Competitor analysis –Market analysis

11 Environmental (PESTEL Scanning) Environmental dynamism (high, low) Environmental complexity (high, low) Trends in the PESTEL elements (+ve, -ve) Focus on relevant factors in the PESTEL elements

12 Scenario Planning Building possible futures of the organization Surfacing planning assumptions Testing planning assumptions