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External analysis is the process of examining factors outside an organization that can impact its performance and strategic direction. This includes evaluating the competitive landscape, market trends, economic conditions, regulatory environment, and social influences. Tools such as PESTEL (Political, Economic, Social, Technological, Environmental, and Legal) analysis and Porter’s Five Forces are commonly used to assess these external factors. The insights gained from external analysis help organizations identify opportunities and threats in their operating environment.
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The Political, Economic, Social and Technological (PEST) analysis for the Volkswagen company studies its external environment. This analysis is done to assess the potential of a new market for Volkswagen.
In order to understand the threats and opportunities facing an organization, you need a thorough understanding of its external context, including not only its industry, but the larger environment in which it operates. The proper analysis of the external context, together with the firm-level analysis you learned in Chapter 3 (e.g., VRINE, value-chain), allow you to complete a rigorous analysis of a firm and its options. You could say that with these tools you can now perform a thorough and systematic (rather than intuitive) SWOT analysis; that is, an assessment of a firm's strengths, weaknesses, opportunities, and threats.
A decision maker can identify strategic factors in an organization's external international environment by conducting a thorough PESTEL analysis, which examines Political, Economic, Social, Technological, Environmental, and Legal factors. Additionally, market research and competitive analysis can provide insights into industry trends and competitor behavior. Engaging with local stakeholders and experts can also offer valuable perspectives on regional dynamics. Finally, utilizing tools like SWOT analysis can help synthesize these external factors into actionable strategies.
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Marketing external environment analysis
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A SWOT analysis is an internal assessment tool used to evaluate a company's strengths and weaknesses, as well as opportunities and threats in its external environment.
External analysis is the process of examining factors outside an organization that can impact its performance and strategic direction. This includes evaluating the competitive landscape, market trends, economic conditions, regulatory environment, and social influences. Tools such as PESTEL (Political, Economic, Social, Technological, Environmental, and Legal) analysis and Porter’s Five Forces are commonly used to assess these external factors. The insights gained from external analysis help organizations identify opportunities and threats in their operating environment.
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Analysis of Alternatives
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You do this through a SWOT analysis.
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External criticism ensures that the data analysis is thorough and unbiased by bringing in perspectives and insights from outside sources. It helps to validate the findings and conclusions of the analysis by identifying potential errors or limitations in the data. This type of criticism enhances the rigor and reliability of the data analysis process.