St. Petersburg School of Economics and Department of Management St.

Petersburg, Russia, 2024

management

STRATEGIC MANAGEMENT

Leshchenko Natalya Petrovna,

Ph.D. in Economics, Ass. professor
 St. Petersburg School of Economics and Department of Management St.Petersburg, Russia, 2024

management

Unit 2.
EXTERNAL ANALYSIS
 Department of Management Strategic management Lecture 2. External analysis
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Layers of the business environment

Organization

Competitors
(Markets)

The environment creates both opportunities Industry (or sector)

and threats.
The future can never be predicted perfectly. The macro-
environment
 Strategic management Lecture 2. External analysis
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Analysing the macro-environment

megatrends

Inflexion points
The point is to minimise threats Forecasting
and to seize opportunities.
Weak signals
PESTEL analysis
- market
- nonmarket Prediction emphasis

Scenario analysis Learning emphasis

 Strategic management Lecture 2. External analysis
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PEST- analysis

Options Contents

PEST Political, Economical, Social, Technological

STEEP PEST+ Environmental/Ecological

PESTEL PEST+ Environmental/Ecological + Legal

PESTELI PEST+ Environmental/Ecological + Legal + Industry

PESTELID PEST+ Environmental/Ecological + Legal + Industry + Demographic

PESTE PEST+ Ethical

LONGPEST PEST+ Local+ National + Global

 Strategic management Lecture 2. External analysis
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Direct state involvement

High
PESTEL- analysis: politics

Political factors: Defence

?
companies

▪ The role of the state. Political exposure

▪ Political exposure. High Low

Food
Hotel industry
companies

Low
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PESTEL- analysis: politics

Two key dimensions to political risk analysis:
1. macro–micro
• countries’ macro political risks (foreign trade policies,
corruption) Macro External
• specific micro-level risks (foreign trade policies, tariffs, legal
and regulatory constraints, tax regulations) Micro Internal
2. internal–external
• internal political risks (religious conflicts, revolution)
• external political risks (War, terrorism, and civil unrest,
sanctions)
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PESTEL- analysis: economic

Economic
growth rate

Kitchin stock cycle

(3-4 years)
Juglar investment cycle
(7-11 years)
Kuznets infrastructure
cycle (15-25 years)
Kondratiev waves
(40-60 years)

https://dzen.ru/a/YyHsE0rhW3_g7i3d
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PESTEL- analysis: economic

Important pattern in the macro-environment:

Good economic times do not last forever,
while bad economic times lead eventually to recovery.

The key is to identify cyclical turning points.

It is crucial not to assume that current economic growth

rates will continue.

Particularly vulnerable industries:

• Discretionary spend industries
• High fixed cost industries

Photo: China Eastern Airlines

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PESTEL- analysis: social

Two impacts upon organisations: Demographics

1. Influence the specific nature of

demand and supply (four drivers)
2. shape the innovativeness, power and
Culture Distribution
effectiveness of organisations
(organisation field)

Geography
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PESTEL- analysis: social

Organisational field:

• Network density
• Central hub positions
• Broker positions

‘small worlds’

https://www.doubleloopmarketing.com/services.html
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PESTEL- analysis: technology

Citation analysis

Patenting New product

activity announcements

Research & Innovative

development Media coverage
budgets activity
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https://research.ibm.com/blog/ibm-quantum-roadmap-2025
 Strategic management Lecture 2. External analysis
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PESTEL- analysis: ecological

Direct pollution obligations

Three sorts of challenges

Product stewardship

Sustainable development
 Strategic management Lecture 2. External analysis
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PESTEL- analysis: ecological

CONTEXT ORGANISATIONAL
MOTIVES
• Ecological • Competitiveness
• Organisational field • Legitimacy
Contexts and motives for ecological issues • Internal organisation • Responsibility
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PESTEL- analysis: Legal

legal aspects
• labour, environmental and
consumer regulation;
• taxation and reporting
requirements
• competition and corporate
governance, etc.

formal and informal

‘rules of the game’

https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package
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Potential considerations in
environmental analysis

@The Strategist’s Toolkit/ Jared D.Harris and Michhael J.Lenox

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Stages of PESTEL - analysis

Stage 1. List factors (key drivers for change in a particular context).

• How does the factor affect the industry and the company?
• What is the nature of the impact (positive or negative)?
Stage 2. Strength of influence. Impact quantification.
• Identify individual expert assessments of each factor. Calculating the average impact assessment.
Stage 3. Estimating the probability of change in each factor
Stage 4. Determining the interactions of factors. Moving from observation to forecasting.
Stage 5. Conclusions
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FORECASTING and the VUCA – BANI – SHIVA – TACI world

• economists Warren
VUCA world Bennis and Burt Nanus BANI world • futurist Jamais Cascio

V • Volatility B • Brittle

U • Uncertainty A • Anxious

C • Complexity N • Non-linear

A • Ambiguity I • Incomprehensible

https://priceva.com/blog/transforming-world-vuca-bani-shiva-taci
https://www.forbes.com/sites/jeroenkraaijenbrink/2022/06/22/what-bani-really-means-and-how-it-corrects-your-world-view/?sh=25b5a8b311bb
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FORECASTING and the VUCA – BANI – SHIVA – TACI world

SHIVA world • psychologist Mark Rosin

TACI world • psychologist Sergey Deryabin

S • Split
T • Turbulent
H • Horrible
A • Accidental
I • Inconceivable

V • Vicious C • Chaotic

A • Arusing I • Inimical

https://priceva.com/blog/transforming-world-vuca-bani-shiva-taci
https://www.forbes.com/sites/jeroenkraaijenbrink/2022/06/22/what-bani-really-means-and-how-it-corrects-your-world-view/?sh=25b5a8b311bb
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FORECASTING

@Exploring Strategy, Ch.2.3.1.p. 49

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FORECASTING

Directions of change
1. Megatrends
2. Inflexion points
3. Weak signals:
- the repetition of the signal and the emergence of some kind of pattern;

- vehement disagreement among experts about the signal’s significance;

- an unexpected failure in something that had previously worked very reliably.

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Forecast for industry sectors in

2024
By Economist Intelligence

Key factors
▪ pandemic,
▪ soaring commodity prices,
▪ high interest rates
▪ political disruption
▪ climate change and EI Nino.

Source: EIU. © The Economist Intelligence Unit Limited 2023

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SCENARIO ANALYSIS

The scenario cube The scenario process

Define scope (industry, region, years)

Identify key drivers (PESTEL, forecasts, cube)

Develop distinct scenario ‘stories’ (name scenarios)

Identify impacts (check and adapt strategies)

Monitor progress (early warning indicators)

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Risk outlook 2024

By Economist Intelligence

Ten critical risk scenarios facing the

global economy
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SUMMARY

➢ Environmental influences can be thought of as layers around an organisation, with the outer layer making up the
macro-environment, the middle layer making up the industry or sector and the inner layer strategic groups and
market segments.
➢ The macro-environment can be analysed in terms of the PESTEL factors – political, economic, social, technological,
ecological and legal.
➢ Macro-environmental trends can be forecast according to different levels of uncertainty, from single-point, through
ranges to multiple-futures.
➢ A PESTEL analysis helps identify key drivers of change, which managers need to address in their strategic choices.
Alternative scenarios about the future can be constructed according to how the key drivers develop.
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Thank you for your attention!