Understanding the External Environment
Understanding the External Environment
By Fergus McDermott, MMII, MBA - Examiner in Professional 2 Stage Strategy & Leadership
If you knew everything about tomorrow, what would you do differently today?
Faith Popcorn
In this time of great uncertainty, many companies and their executives are wondering which changes will have the greatest impact on their businesses in the year/years ahead. What is certain is that the threats and opportunities facing any business, which fall out of change and uncertainty in the environment, can impact directly upon the profitability and even the very survival of those businesses. Some companies will have experienced such damage from the recession that they will be unable to recover as the economy revives. It is imperative to be alert to change, recognise it and deal fittingly and decisively with important issues identified. Perhaps never has this been more important! This paper considers the analysis and understanding of the external environment within the context of the strategic process. It is useful to consider the notion that the business environment conforms to an ecosystem, very similar to that of the natural world. Scientists better understand ecosystems in nature by looking at individual elements, how they move, and how each of the elements relates to one another. “As in nature, when one element of the ecosystem dynamically changes, the effect cascades right throughout the whole environment” 1. The same dynamics apply in the business world. Figure 1: The Strategic Process
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The notion of a business ecosystem steers us to look at the strategic process (Figure 1) as something that needs to be contemplated holistically, as a whole, rather than just the individual parts, separately. The strategic process includes the external and the internal environment which interact with each other in a relatively seamless way. “There is little point in building a strategy that focuses entirely on either an external or an
By Fergus McDermott, MMII, MBA - Examiner in Professional 2 Stage Strategy & Leadership
If you knew everything about tomorrow, what would you do differently today?
Faith Popcorn
In this time of great uncertainty, many companies and their executives are wondering which changes will have the greatest impact on their businesses in the year/years ahead. What is certain is that the threats and opportunities facing any business, which fall out of change and uncertainty in the environment, can impact directly upon the profitability and even the very survival of those businesses. Some companies will have experienced such damage from the recession that they will be unable to recover as the economy revives. It is imperative to be alert to change, recognise it and deal fittingly and decisively with important issues identified. Perhaps never has this been more important! This paper considers the analysis and understanding of the external environment within the context of the strategic process. It is useful to consider the notion that the business environment conforms to an ecosystem, very similar to that of the natural world. Scientists better understand ecosystems in nature by looking at individual elements, how they move, and how each of the elements relates to one another. “As in nature, when one element of the ecosystem dynamically changes, the effect cascades right throughout the whole environment” 1. The same dynamics apply in the business world. Figure 1: The Strategic Process
Page 1 of 8
The notion of a business ecosystem steers us to look at the strategic process (Figure 1) as something that needs to be contemplated holistically, as a whole, rather than just the individual parts, separately. The strategic process includes the external and the internal environment which interact with each other in a relatively seamless way. “There is little point in building a strategy that focuses entirely on either an external or an
References: 1 Robinson, Richard. Electronic Business Continuum, Managing eBusiness Relationships, IDC White Paper, sponsored by Novell, page 2, 2000 2 Sondhi, Rakesh. Total Strategy, Airworthy Publications 1999. page 21 3 Senge Peter M. The Fifth Discipline. Century Business. 1990 4 Wood R. Lissack M et al. Managing Complexity. Quorum Books 1999 5 Shaw B, Foundations of Management: Henley Management College 1996 6 Drew S, Strategic Direction: Strategic Analysis. Henley Management College 1997 7 Teather D, Consumers going greener, cited in The Guardian Business, November 27, 2006. 8 Sondhi, Rakesh. Total Strategy, Airworthy Publications 1999. page 38 9 rd Grant, Robert M. Contemporary Strategy Analysis, 3 edition. Blackwell Publishers, page 32 10 Sondhi, Rakesh. Total Strategy, Airworthy Publications 1999. page 57 11 rd Grant, Robert M. Contemporary Strategy Analysis, 3 edition .Blackwell Publishers, page 76 12 th Johnson G, Scholes K. Whittington R. Exploring Corporate Strategy 8 edition. FT Prentice Hall, 2008 Page 8 of 8