Developing Strategy through External Analysis
Read this section to learn the difference between internal and external forces and how they affect organizations. Attempt the exercises at the end of the section.
KEY TAKEAWAY
External environment analysis is a key input into strategy formulation. PESTEL is an external environment analysis framework that helps guide your prospecting in the political, economic, social, technological, environmental, and legal spheres of an organization's external environment. Working inward to the focal organization, we discussed the broad dimensions of the stakeholders feeding into the firm. Porter's five forces analysis considers (1) barriers to entry and new entry threats, (2) buyer power, (3) supplier power, (4) threat from substitutes, and (5) rivalry as key external environmental forces in developing strategy.