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Understanding Strategic Management: Environmental Analysis

Lorena O. Goneda

College of Business Administration, Notre Dame of Marbel University

CBME 101: Strategic Management

Krystianne Paul A. de Pedro, MBA, CPA

March 7, 2025
 2

Environmental Analysis: Chapter 2 to 6

I learned that companies function within a continually evolving environment

shaped by external influences, which are divided into three layers: physical, societal, and

industry contexts. The physical surroundings encompass natural resources, climate

conditions, and sustainability, necessitating that companies take into account the

availability of raw materials, climate change, and environmental regulations.

Environmental scanning aids in recognizing trends and risks that could affect operations.

The social environment includes political, economic, socio-cultural, technological,

demographic, and global elements. Regulatory policies, economic factors, and

technological progress affect business plans, whereas demographic expansion,

education levels, and shifts in lifestyle impact consumer choices. International relations

and global trade agreements also influence business growth and competitiveness. The

business environment encompasses customers, suppliers, competitors, creditors,

employees, and government entities, all of which have a direct impact on operations,

necessitating robust relationships and strategic planning.

To manage these external factors, companies need to perform environmental

scanning, observation, and competitive analysis. These processes aid in identifying

trends, evaluating risks, and comprehending competitor tactics, enabling organizations

to adjust and make well-informed choices. Keeping informed about external factors

allows businesses to stay competitive, sustainable, and adaptable to changes in their

surroundings. To maintain success, organizations employ techniques such as SWOT

analysis, the VRIO framework, and value chain analysis to identify their strengths,

weaknesses, and unique differentiators from rivals. Various business models, such as

the profit-pyramid model or efficiency model, assist companies in determining how to

market their products and services.

I also learned that companies utilize strategic tools to assist them in future

planning. PESTEL and STEEP analyses assist companies in comprehending trends in

politics, the economy, and technology. Porter’s Five Forces Model assists businesses in

determining the level of competition they encounter. SWOT analysis allows

organizations to identify their strengths and areas for enhancement. The BCG Growth-

Share Matrix assists companies in overseeing their various products, whereas the VRIO

framework enables them to determine if they possess resources that are valuable and

difficult to replicate.

I realized that companies cannot manage external environmental elements, yet

they can ready themselves and adjust accordingly. For instance, climate change

remains a persistent issue, and businesses need to discover methods to minimize their

carbon emissions and handle resource shortages. Economic changes, like inflation or

recession, can influence consumer buying power, compelling companies to modify

pricing strategies and manage costs effectively. Technological progress can render

certain industries outdated while generating chances in others, hence companies need

to remain innovative and invest in emerging technologies. Competition is unavoidable in

every industry, and businesses that neglect to examine their rivals risk losing their

market standing.

I also realized that thriving businesses do not merely respond to external shifts;

they foresee and plan for them. Businesses that perform consistent external

assessments are more apt to recognize risks promptly and develop solutions ahead of

potential issues. Companies that grasp social trends can more effectively fulfill customer

needs and create products or services that correspond with evolving lifestyles.

Moreover, staying informed about global trends, like trade deals and new markets, can

aid companies in broadening their scope and boosting profits.

Application

I intend to apply this knowledge by being more aware of how external factors

impact companies and sectors. As a learner, I will watch how businesses adjust to shifts

in the economy, technology, and society. This will assist me in cultivating a strategic

perspective and comprehending how companies make choices. I will remain informed

about trends and current happenings that affect various industries, including emerging

technologies, environmental concerns, and governmental regulations. This will enable

me to evaluate business obstacles and prospects in practical scenarios.

Moreover, I will apply this knowledge in my education and future profession by

enhancing my critical thinking and problem-solving abilities. By understanding how

companies react to external influences, I can equip myself for upcoming positions in

management or entrepreneurship, enabling me to make informed and strategic choices

References

Dovetail. (2024, April 1). What is Environmental Analysis? | Definition &

Techniques. https://dovetail.com/market-research/environmental-

analysis/#:~:text=Environmental%20analysis%20is%20a%20critical,achie

ve%20their%20goals%20and%20objectives

LibGuides: Industry Research: PESTEL Analysis. (n.d.).

https://libguides.libraries.wsu.edu/c.php?g=294263&p=4358409

Loganathan, P. (2024, December 21). External Environment, Opportunities,

Threats, Industry competition and Competitor analysis. Pradeep

Loganathan’s Blog. https://pradeepl.com/blog/external-environment-

opportunities-threats-industrycompetition-and-

competitoranalysis/#:~:text=The%20industry%20environment%20is%20a,

gather%20and%20interp ret%20competitor%20information.