Strategic Management Decisions: Business Environment and Strategy - Assignment Example

The rapid sociological changes also contribute to the changing business environments, especially with respect to the entertainment market. Governmental policies and laws also affect where and how firms choose to compete. All these factors affect not only the general competitive environment in which the firm is operating but also the strategic decisions made by companies to combat the competition within the industry. In general, the business strategies are based on the firm's ability to capture and convert the external and internal forces into desired outcomes.

Thus "an integrated understanding of the external and internal environments in which the firm is operating is essential for the firm to understand the present and predict the future."(S.A. Zahra & Geroge 2002) A firm's external environment can be broadly divided into general, industry and competitor environments. "The general environment is composed of dimensions in the broader society that influence an industry and the firms within it" (L.Fahey 1999). These dimensions can be grouped under the following environmental segments: For formulating strategies to steer the firm through the challenges being posed by these environmental forces, a careful evaluation of the firm's strengths in these areas need to be analyzed and for that purpose, the 'PESTLE' analysis comes handy.

An in-depth analysis of the firm's competitive ability is one of the more important components of environmental scanning. PESTLE analysis like the PEST analysis involves identifying the political, economic, socio-cultural, technological, legal and environmental influences on an organization. PESTLE analysis is simple, quick and uses the basis key perspectives of an organization. The advantage of this tool can be found in encouraging the management to adopt proactive and structured thinking in its decision-making process.