The external analysis, also known as environmental analysis, is a process through which companies objectively evaluate changes that might influence their current operations to their industries and the wider world. Companies do this to make sure they can adapt and succeed in a drive in the context of changes. The difference between external and internal analysis is the focus of attention. External analysis results focus on the impact and success of external factors such as industry trends. The internal research focuses instead on the internal processes, such as the company’s culture and embedding in employees and their impact on its success. The excerpt establishes the essential questions to ask and the approaches used in external analysis.
The external analysis involves evaluating a company’s industrial climate, including competitive landscape, competitive role, trends, and historical dimensions. Macro-economic, financial, political, educational, demographic, and technical analytics are part of the external analysis (Ansoff et al., 2018). The external research’s critical goal is to recognize the opportunities and risks that will lead to sustainability, development, and uncertainty in a sector or any segment.
Various approaches are used to carry out external analysis, for example, SWOT analysis, PESTEL, and Porter’s Five Forces Model (Bolland, 2017). The presented approach is the SWOT analysis since the process demonstrates the strength, the weakness that needs to be improved, the current and future opportunities at the organization, and the threats that the business faces.
The organization will further concentrate its internal efforts to reduce the risks and take advantage of its potential by assessing the external world by carrying out SWOT analysis. The benefits of SWOT analysis include the internal and external conditions are analyzed. The relation between internal and external assessments is provided, and the interpretation is clear. SWOT analysis’s disadvantage is that it produces a single-dimensional model that classifies any feature of problems: power, vulnerability, potential, or hazard.
As a consequence, only one effect on the topic under review tends to each attribute. Regardless of the time spent in SWOT research, people advocate brainstorming. Unfortunately, this renders it more biased due to information presented after the analysis. The only thing a person will use without structured information is his views. The paper concludes that external analysis results focus on the impact and success of external factors such as industry trends.
References
Ansoff, H. I., Kipley, D., Lewis, A., Helm-Stevens, R., & Ansoff, R. (2018). Implanting strategic management. Springer.
Bolland, E. J. (Ed.). (2017). Comprehensive strategic management: A guide for students, insight for managers. Emerald Group Publishing.