Evaluating the External Environment - Free Essay Example

Introduction

The organization needs to check the external environment where the suppliers, government, competitors, etc. affect the company. The organization should have a strategy that guides its operation in the market. The discussion post explains the different factors that are essential in every decision-making of the organization. Any firm cannot ignore the power of the external environment. The discussion post expounds on the process of evaluating the external environment, key sources of power and weakness, and the decision model.

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Process of Evaluating the External Environment

The evaluation of the external environment depends on the type of market and the type of organization. The main consideration is the type of competition and the impact that the factors have on the firm (Gamble et al. 2019). Understanding an organization’s external environment plays a huge role in its success. The main factor the organization needs to consider is the PESTLE. According to Gamble et al. PESTEL is an acronym for political, environmental, social, technological, and legal aspects. Each of the factors has a way they do affecting the organization. Many organizations survive because of how well they deal with the macro environment.

The organization needs to keep the macro environment in check. Factors like politics can affect the organization. Economic factors can again result in company closure. Every aspect is essential, and the organization must have a way to deal with these forces to work for the business. The company should work to remain in business and relevant. The management should work with these forces and ensure they are on the safe side—the Porter theory is needed for competitive advantage (Shtal et al., 2018). The organization should do business that is not against the laws of the country. On the political scene, the organization should not take a direct side or endorse a candidate to avoid chasing away some customers. On the technological aspect, the organization should stay updated. Finally, the firm needs to relate well with the community where they operate.

Key Sources of Power and Weakness

The power in the organization is not easy to get. Sources of power are mainly from what the organization can do differently from others. Strategic thinking is one of the things that can build power. According to Rument, it is not always easy to utilize all the available opportunities (2011). One needs to have something extra that the other competitor does not have in the market. When one is on top, they enjoys some form of power. In that, they can influence price and other things. Critical and strategic thinking is one thing that creates innovation, and the management should focus on this much (Peter Prud’ Homme, 2017). The organization should focus on creating new goods and services in the market so that one can quickly boost its strength and power.

Expert power is through the new ways of doing things that the organization ventures. It is a product of strategic thinking. The challenges come when the organization is unable to deal with competition and is not innovative. They are the two main signs of a weak company. The competitors can easily crash it. It is one of the things that the organization needs to consider, and the management needs to invest in it heavily. When a company loses its competitive advantage, it risks closure.

Decision Model

The decision model is a smart way of organizing and ensuring logic in all business decisions. The decisions in the organization should follow a certain path for efficiency. The organization needs to focus on a good model which can work for the organization. According to Krogerus & Tschäppeler, the firm needs to have different decision models to use in different situations (2018). The rational decision-making model can work. One does not need to have a satisfying option, but the good enough should work. It is the style that many organizations go for because getting a perfect process is not possible. It is important to consider a decision model that is not demanding. A demanding model might not work well with some micro and macro environments.

Conclusion

Organizations need to be careful with the external environment. Macro-environment affects the many things the organization is involved in, and the better the organization responds to them, the better it will stay in the market. In the decision model, the management needs to make the right decision using the best model, which works for the company. Finally, to gain power, one needs to have certain activities, that others cannot easily imitate.

References

Gamble, J., Peteraf, M., & Thompson, A. (2019). Essentials of strategic management: The quest for competitive advantage (6th edition). McGraw - Hill Higher Education.

Krogerus, M., & Tschäppeler, R. (2018). The decision book: 50 models for strategic thinking (Revised edition). W. Norton & Company, Inc.

Peter Prud’ homme, v. R. (2017). The culture of design thinking for innovation. Journal of Innovation Management, 5(2), 56-80. Retrieved from http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F1957729439%3Faccountid%3D12085

Rumelt, R. (2011). Good strategy/bad strategy: The difference and why it matters., Crown Business, New York, NY.

Shtal, T. V., Buriak, M. M., Amirbekuly, Y., Ukubassova, G. S., Kaskin, T. T., & Toiboldinova, Z. G. (2018). Methods of analysis of the external environment of business activities. Revista Espacios, 39(12). Retrieve from https://scholar.google.com/scholar?hl=en&as_sdt=0%2C33&q=evaluating+a+company%27s+external+environment&btnG=