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UNIT 6:STRATEGIC ANALYSIS: EXTERNAL ANALYSIS

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• Two sets of factors primarily shape a company’s strategy:

- External factors (macro environment, industry, competition, customers)

- Internal factors (resources, competence, culture etc)

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• 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.

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SWOT Analysis• Careful assessment of the organization

and its environment

- Identification of Strengths, Weaknesses, Opportunities and Threats

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Strengths

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

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Weaknesses

• An organization’s vulnerabilities

– Internal to the organization.– Can lead to poor performance if not

addressed.

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Opportunities

• Conditions that an organization can turn to its advantage

– External to the organization– Can enhance performance if exploited

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Threats

• Conditions that can hurt the organization

– External to the organization– Can hurt performance if not confronted

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• 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

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External Analysis

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

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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

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Scenario Planning

• Building possible futures of the organization

• Surfacing planning assumptions

• Testing planning assumptions