The development of this essay will be discussing uncertain and dynamic external environments and if they require more effective application of analytical tools and framework and to what extent they do. The external environment refers to the range of factors that influence the operation and performance of an organisation that happens out-with the organisation which they have limited control over and by applying analytical tools and framework they try to prepare themselves best for what may come. As the environment is constantly uncertain and dynamic the organisation is not in a very stable strategic position as the factors surrounding the company may change at any minute and they cannot control the rate of change at which this happens and how often it will change. Analytical tools and frameworks are then put in place to try and predict the environmental changes or to even influence the environmental change for the organisations benefit. Even though the organisation cannot control the external environment and when it happens it is always wise to prepare themselves for what may come in the future as it may arise quickly. The future environment is not only essential to the organisation but for the future of the products and staff. There are many opportunities involved in the external environment but it is up to the organisation on which factors to focus on. There is the opportunity to access new segments in the market, complementary products and services to the consumer and the opportunities that arise over time by thinking ahead to what the consumer will want and then when the time comes having that competitive advantage over the marketplace.
In the strategic management industry analytical tools and frameworks are all connected even though they are all in no way the same they all have the same output, which is to put the company at a competitive advantage and to stop them from making radical business decisions which could lead to financial problems or tarnish their reputation.
Firstly the macro environment affects almost all organisations to some level and plays a part in the strategic goals of companies. The macro environment “consists of broad environmental factors that impact to a greater or lesser extent on almost all organisations.”(Johnson et al :54) One of the frameworks that works with the macro environment is called PESTEL which stands for political, economic, social, technological, environmental and legal and this is what is used to try and find or predict what will happen in the future of the organisation. Their data or information wouldn't be correct or it may be close to what will happen but they build on their “data” to create scenarios and then the organisations try to explore, not predict future outcomes that may be an advantage or a disadvantage to the company. Companies must remember when using scenarios that “the aim is not to predict but to explore a set of possibilities”(Lynch:85). Although they aren't accurate they can be a great advantage to the company. When applying a scenario in an organisation the manager needs to focus on the key drivers of change, which is the factors of PESTEL that would affect the company most severely instead of focusing on the ones that might never change, they focus on the high impact factors. Once the manager has identified the factors of high importance to the organisation they then act upon it and decide either 2 or 4 scenarios (3 is an uneven number and would cause scenarios to be forgotten about). Without the key drivers of change which are essential the PESTEL analysis can not be constructed properly and it would be a waste of everyones time. The scenarios play a large role in the success of the PESTEL framework in any organisation as if the scenarios do not happen they are opening up and challenging the minds of the managers and excelling them into thinking of a broader range of options. “scenario analyses are carried out to allow for different possibilities...
Lynch.R, (2006), Corporate Strategy 4th Edition, England, Pearson Education Ltd
Johnson.G,Scholes.K,Whittington.R,(2008),Exploring Corporate Strategy 8th Edition, England, Pearson Education Ltd
Please join StudyMode to read the full document