Analyzing the External Environment

Trends and events in the environment can have a significant impact on a company’s

performance and sustainability. Business environments change frequently as a result of

internal and external factors and require consideration when planning, conducting

operations and making strategic decisions. These factors can either create opportunities or

challenges for the organization. (Indeed Editorial Team, 2022)

For example, government’s tax cut to Tesla that produces eco-friendly cars is a business

threat to car manufacturers that are still producing gas-powered-engine cars. Similarly, the

acquisition of 21st Century Fox by Walt Disney is of concern to the infotainment industry

because Disney will be able to provide more appealing high-quality content and

entertainment options to meet growing consumer demands (The Walt Disney Company,

2019). That is an opportunity for expansion.

The following are examples of external factors that organizations should monitor;

Technological, Economic, Political, Social, Legal and Environmental.

Organizations get more aware of their environment through environmental scanning,

environmental monitoring and competitive critical inputs. The concept of Scenario

planning helps decision-makers identify a range of potential outcomes and the impacts of

those factors on their organization in the future. They then evaluate responses and manage

them for both positive and negative possibilities. It is more like seeing the future and

proactively preparing for what lies ahead.

PESTLE, is an acronym for POLITICAL, ENIVRONMENTAL, SOCIAL, TECHNOLOGICAL LEGAL,

ECONOMIC and the Porter's Five Forces Analysis are useful tools for environmental analysis.

In conclusion, it is very important for business decision makers, to keep track of external

factors to enable them take strategic business decisions or minimize the consequences of

those external actions in their own business.

The whole idea is to be proactively protected against predictable events and consequences

of unexpected changes, as opposed to been a reactive organization.

References
The Walt Disney Company. (2019, March 19). Disney’s acquisition of 21st Century Fox will bring an

unprecedented collection of content and talent to consumers around the world.

https://thewaltdisneycompany.com/disneys-acquisition-of-21st-century-fox-will-bring-an-

unprecedented-collection-of-content-and-talent-to-consumers-around-the-world/

Indeed Editorial Team. (2022, April 27). 9 External Environment Factors That Affect Business.

www.indeed.com. https://www.indeed.com/career-advice/career-development/external-

environment-factors