Jonathan Powell

BUS 479
Essay 1
Modern business is tumultuous. Markets rise and fall like desert temperatures as
information infrastructures exponentially increase, making strategic management a
mountainous task. Luckily, there are advantageous external analyses to facilitate
meaningful decisions, and they come in three varieties.
General environment analysis examines broad external trends affecting industries
and firms. There are seven primary categories: demographic, economic, sociocultural,
physical environment, political/legal, technological, and global. Managers must not only
examine, but also interpret their findings in these areas to effectively establish the broad
external framework in which their firm must operate. Because these trends are outside a
firm’s control, lacking knowledge of general environmental trends may be detrimental to
the survival of the business on both a macro and micro scale. Strategy without calibration
to broad external variables may become misguided, inflexible and ineffective.
Industry environment analysis, typically articulated by Michael Porter’s five forces
model, examines the landscape of a particular industry from various vantage points. These
include potential entrants, substitute products, suppliers, buyers, and rivalry amongst
other firms. Effectively gathering and interpreting this information is vital for managers to
make educated strategic decisions due to the complexity and highly competitive nature of
contemporary business. This data begs the ultimate managerial question, “Is this
profitable?” Without analytical support for the answer to that question, a manager has no
ground on which to compose effective conclusions.
Competitor analysis is arguably the most difficult as well as imperative
environmental analysis. Gauging rival strategic intent, gathering data on current rival
strategies, and strength/weakness evaluations are all critical in effectively analyzing a
firm’s competition. This information will guide a vast majority of managers’ strategic
decisions, as its direct affect on the focal firm is so prevalent. As the landscape of all three
discussed environments begins to change more rapidly, businesses are forced to adapt at
increased speeds resulting in less time to be reactionary. Consistently gathering data about
competitors can reduce reactive tendencies as well as allow for strategic innovation, which
will ultimately result in competitive advantage.
Inevitably, there are innumerable variables a company cannot control. Yet a
manager’s job is to make sound and effective decisions with what they can control. This is
why all the former analyses are paramount in assembling an effective environmental
evaluation as the foundation for successful strategies. Modern business may be
tumultuous, but with these techniques managers can do more than weather the storm –
they can harness it.