Dr.

Panita Surachaikulwattana

Strategic Management
Session 2: External Analysis
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The Firm within its external Environment and industry

PESTEL External environment STAKEHOLDER APPROACH

Industry

FIVE FORCES

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The PESTEL Model: Political, Economic,
Sociocultural, Technological, Ecological, Legal

• A straightforward
way to scan,
monitor, and
evaluate external
factors.

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Political Factors
• Processes and actions of government bodies that influence
the firm can be shaped through:
• Lobbying.
• Public Relations.
• Contributions.
• Litigation.

• Political and legal forces are closely related.

• Political pressure often results in changes in legislation.
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Economic Factors

• Largely macroeconomic. • Examples include:

• Economic boom/bust
• Affect economy-wide
• Growth rates.
phenomena.
• Level of employment

• Interest rates.

• Price stability (inflation, deflation).

• Currency exchange rates.

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Sociocultural Factors
• Society’s cultures, norms, and values:
• Are constantly in flux.
• Differ across groups.
• Trends should be monitored.

• Demographic trends:
• Population characteristics.
• Age, gender, family size, ethnicity, sexual orientation, religion, and
socioeconomic class.

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 Demographic trend in Thailand

Source: Prasartkul, P., Thaweesit, S. & Chuanwan, S. 2019. Prospects and contexts of demographic transitions in Thailand.
Journal of Population and Social Studies, 27(1): 1 – 22.
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Technological Factors

• Application of knowledge:
• New processes and products.

• Innovations in process technology:

• Lean manufacturing, biotechnology, CAM/CAD.

• Innovations in product technology:

• Smartphones, wearable devices, high-performing electric cars.

Advances in artificial intelligence and machine learning.

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Ecological Factors
• Broad environmental issues:
• Natural environment.
• Global warming.
• Sustainable economic growth.
• The relationship between
organizations and the
environment can be:
• Adversarial.
• Can provide business opportunities.
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Legal Factors

• Official outcomes of political processes: • Legal factors often

• Laws.
coexist with or result
from political will.
• Mandates.
• Regulations.

• Court decisions.

• Many industries have been deregulated.

• Airlines, telecom, energy, and trucking.

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Read the Blackberry
case and answer
these questions.

• What made BlackBerry so

successful initially in the mobile
phone industry?
• What were the external factors
that led to BlackBerry’s decline?
(Using the PESTEL model)

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PESTEL Analysis

PESTEL Opportunity Threats To wtach out/weak

signals
Political factors • … • … • …
• … • … • …
Economic factors • … • … • …
• … • … • …
Sociocultural factors • … • … • …
• … • … • …
Technological factors • … • … • …
• … • … • …
Ecological factors • … • … • …
• … • … • …
Legal factors • … • … • …
• … • … • …

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The Firm within its external Environment and industry

PESTEL External environment STAKEHOLDER APPROACH

Industry

FIVE FORCES

21
Strategic Groups

• Strategic groups:
• A set of companies pursue a similar strategy in the same industry.

• The strategic group model (framework):

• Clusters different firms into groups based on key strategic dimensions e.g., expenditures

on research and development, technology, product and service offerings, market

segments, distribution channels, and customer service, etc.

• Companies in the same strategic group are direct competitors.

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How to Create a Strategic Group Model

1. Identify the important strategic dimensions, e.g., expenditures on

research and development, technology, product and service offerings,
market segments, distribution channels, and customer service, etc.

2. Choose two key dimensions for horizontal and vertical axes.

3. Graph the firms in the strategic group.

4. Indicate each firm’s market share indicated by the size of the bubble.

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Strategic Groups and Mobility Barrier in U.S. Domestic Airline Industry

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Activity
Create a strategic group model for business schools in Thailand.
• Identify the important strategic dimensions.
• Choose two key dimensions for horizontal and vertical axes.
• Graph the firms in the strategic group.

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Strategic Group –
business schools Vertical Horizontal

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Insights from Strategic Group Mapping

• Competitive rivalry is strongest between firms in the

same strategic group.

• External environment affects strategic groups differently.

• Five competitive forces affect strategic groups differently.

• Some strategic groups more profitable than others.

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Strategic Groups and Mobility Barrier in U.S. Domestic Airline Industry

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The Firm within its external Environment and industry

PESTEL External environment STAKEHOLDER APPROACH

Industry

FIVE FORCES

SG 2

SG 1

31
 What Strategy Is: Gaining and Sustaining
Competitive Advantage
A GOOD STRATEGY CONSISTS OF:

Strategic Analysis: Diagnose the competitive advantage, and identify challenges

• External analysis
• Internal analysis
• Vision, mission

Strategic Formulation: Create the guiding policy to address the competitive challenge
• Corporate strategy
• Business strategy

Strategic Implementation: Create set of coherent actions to implement the firm’s guiding policy
• Organizational structure
• Organizational culture
• Corporate governance and business ethics
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