EXTERNAL ENVIRONMENT

EXTERNAL ENVIRONMENT
Assessing the External Environment .
Having understood something of the mission, vision, and other “guiding stars” (statements of creed, purpose, philosophy, beliefs, values, business principles, etc.) of the organization you are studying, you will seek next to understand and evaluate the external environment in which the organization seeks to execute on its mission, in order to achieve its future vision.
Study Group Work: Research
Follow the steps below to describe, understand, and assess the structure and nature of the external environment in which the organization works. You will approach this work from two perspectives, the dynamic systems perspective (Step 1), and the market competitive perspective (Step 2). When you have completed the research and analysis from these two perspectives, you should be able to use your findings to clearly describe the major opportunities and threats facing the organization (Steps 3 and 4).
Be certain to provide an APA-format reference for each source you use to complete the following steps. When you use information from one of the sources in your responses to the questions below, be sure to include an APA-format in-text citation to the source.
Step 1: The Dynamic Systems Perspective: PESTEL Analysis. Begin by raising your consciousness to consider your organization, which is a social system, in the context of larger systems, like a group of Russian dolls, one inside the other: it is part of a state, a region, a nation, an industry, a global society, etc.
Think of the world as a global system where everything affects everything else. In fact, this is what modern mathematics and scientific theories teach us. Systems theory, system dynamics, cybernetics, and chaos theory provide even clearer understandings about how even the smallest change at one place in the world, which is a global non- linear system, can have dramatically much larger effects far away from the initial cause.
In 1963, Edward Lorenz demonstrated mathematically that this was so, and he used the illustration of how a butterfly might flap its wings, or not, on one side of the world, and mathematically the effect some time later could be a hurricane on the other side of the world. (Consider reading the famous little book by Andy Andrews, The Butterfly Effect. This is not required reading, it may just helpful and enjoyable. The cost of a download is nominal and it only takes about fifteen minutes to read.)
With this dynamic systems perspective in mind, research, read, identify, and reflect upon the economic, sociocultural, demographic, natural environment, political, legal and regulatory, and technological currents, trends, and forces that are currently, and will, in the future, impact the organization. Collect as many relevant facts and observations as you can along these lines to share within your study group.
Figure 3.1 Partial PESTEL Analysis

LIVING CASE STUDY
How, for instance, is the current political environment of your organization affecting it? (Consider everything from local to national politics!) How may various changes in the political environment in the future (both the near future and further out) affect it? Repeat and answer these two questions for the economy, society and culture, technology, natural environment, and the legal and regulatory milieu. A partial example of this analysis is shown in Figure 3.1
It may be helpful to first identify current and future trends in each of these six areas, then to think about what consequences each could have for your organization. Be sure that you frame each item to show how the environmental force is currently acting on or may eventually act on (or impact) the organization. If your organization is currently responding to the environmental force or trend, make note of how they are doing so.
Step 2: The Market Competitive Perspective: Five Forces Analysis.
a) Who are your competitors? Your organization shares its environment with a variety of other organizations that compete for similar resources and customers (or the equivalent). Identify the most significant, direct competitors of your organization. Characterize each competitor with respect to your organization. Which of the organizations are leaders and which are followers? Be comprehensive in your work here, as you will draw on it in upcoming sessions.
b)  How is your organization different? In 2009, Oliver Williamson won the Nobel Prize in Economics because he discovered the answer to a fundamental question, which no one had been able to truly explain before, namely, “Why do organizations exist? Why don’t we just have a global market and customers?” The theory he put forward and validated was that organizations exist to mediate between the global market and customers, particularly in terms of creating value by minimizing the “transaction costs” (time, energy, trouble, money, etc.) involved in meeting the needs of customers by the global market.
In particular, Williamson’s theory drives us to search out and identify how it is that the organization is different from other organizations. Using your research to this point, describe what makes your organization different from each of its competitors in its industry.
c)  What is the nature of the relationship among competitors, with suppliers, and with customers? Complete the study of the position of your organization within its industry using Porter’s Five Forces model. Describe and discuss: the threat of new entrants in the industry, i.e., potentially new competitors; the threat of substitute products or services, i.e., the other products and services that can “perform the same function as the product of the industry;” the bargaining power of customers of this industry; the bargaining power of suppliers to the industry; and the intensity of competitive rivalry (Porter, 1980, p. 23).
Step 3: Drawing on your findings in Steps 1-2, identify and describe 5-8 of the major opportunities facing the organization. Frame each opportunity as something present or evolving outside of the organization.
Example: If you identified the current technological trend: the ever-increasing popularity of social media, a potential opportunity for your organization might be described as: Current and emerging forms of social media offer avenues for forging new and improved relationships with customers, prospective customers, and other stakeholders.
Step 4: Drawing on your findings in Steps 1-2, identify and describe 5-8 of the major threats facing the organization. Frame each threat as something present in or emerging from outside of the organization.
Example: If you identified the current technological trend: the ever-increasing popularity of social media, a potential threat for your organization might be described as: Current and emerging forms of social media offer increased risk for loss of reputation via negative campaigns targeted at the company and its products, employees, suppliers, and other associates.
Discussion Suggestion
If you could interview a knowledgeable person working within this industry, or someone at the very organization you are studying, what would you like to ask them pertaining to the topics and questions of this session?
If you are currently working within this industry or organization, or have worked in it in the past, answer several of the questions posed by your group members. An organization looks one way to outsiders and to people collecting information on it, but it looks quite another way from the view of an insider!
If you do not work within the industry or organization, realize that some of the contributions of a company or industry “insider” might be myopic or merely personal, and while relevant to that individual, it may not be to the organization on a broader scale. Discuss and determine whether or not the “insider” has some relevant insights that illuminate the organization’s situation within its competitive context that should be seriously considered and included in the strategic case study.
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