External Environment - Essay Example

External Environment Strategic management is a crucial aspect of any business organization since it helps to deal with the changes that are experienced in organizations. Managers should cope with the changes being witnessed in the external environment as this is the only way they can ensure that the goals of an organization are achieved effectively and with a lot of efficiency. When formulating strategies, it is essential to consider the external environment within which the organization operates.

When conducting strategic analysis, the external environment of an organization is helpful since it assists in comparing the organization with other similar businesses that operate within the same market. Moreover, the analyzing the external environment helps to ascertain the threats and opportunities that are there in the market (Ireland, et al 2008, p.66). An analysis of the external environment is also essential as it helps an organization to identify market niches that are suitable to market its goods.

Without proper identification of the market niches, the organization experiences difficulties in marketing its services or products. In addition, the assessment of the external environment is essential since it helps organization to deal with external challenges that it may face in the future. Organizations are best suited to deal with challenges in the external environment when they have conducted a good analysis and assessment of their external environment. There are some environmental conditions that an organization may experience in the future, which are similar to challenges experienced in the past or being experienced presently.

Organizations that have mastered their external environment properly overcome these challenges with a lot of ease (Macrae 2012, p.23). When conducting the external environmental analysis of an organization, there is a plan that the organization can follow. The general plan of conducting this analysis starts with an environmental scan. During this step, the organization identifies the social, political, competitive, technological, as well as geographic factors that affect the firm. After identifying the factors, the organization then evaluates whether these factors are threats or opportunities to the business.

Another crucial step involved in the external analysis of the organization is strategic segmentation. This aspect helps in converting competitor differences into competitive advantage that can benefit the organization. At this stage, the organization should understand the forces that drives the industry in which their business falls, as well as gain an understanding of the competitive environments in which the business can operate (Macrae 2012, p.24). Environmental forecasting is another step that can be used in conducting the analysis of an organization’s external environment.

Through this strategy, the organization can determine the strategies needed to counteract the actions of the competitors. While carrying out forecasting, there are various activities that ought to be carried out; these include an analysis of government reports, analysis of the market trends, as well as conducting statistical analysis for the purposes of outcome predictions. Moreover, it is necessary to conduct intelligence analysis of the competitor intelligence. When an organization conducts forecasting, it can determine whether its strategies can meet the goals and objectives.

Thus, environmental forecasting is an essential step in assessing the external environment of an organization (Goyal and Goyal 2007, p.39). References List Goyal, A. and Goyal, M. (2007). Business Environment. New Delhi: FK Publications. Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy: Concepts and cases. Mason, OH, South-Western Cengage Learning. p.66 Macrae, T. (2012). Strategic Management: Tools and Applications. New York, Prague College. p.23-26.