Jason Brady The purpose of this work is to explore this week’s core theme of evaluating the external environment

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Jason Brady

The purpose of this work is to explore this week’s core theme of evaluating the external environment. An organization must be able to analyze its external threats and opportunities to understand where there are areas of growth and improvement. It is vital for a business to understand how competition, politics, social issues, and geographic issues may affect their business processes.

Process: Evaluating the external environment

When evaluating external factors, a business must ensure that they first know what factors affect a business. The PESTEL analysis is a great way for an organization to evaluate its external factors. According to Gamble, Peteraf, and Thompson (2019), they explain using the PESTEL analysis stands for 6 principals: political factors, economic conditions in the firm’s general environment, sociocultural forces, technological factors, environmental forces, and legal and regulatory factors. Another factor to look at and study is the macro-environment. According to Gamble et al. (2019), the macro-environment consists of all relevant factors that have enough of an impact that would suggest a possible change in the long-term strategy and decision model.

Businesses also need to consider how competitive forces function in a business environment. A business should utilize the five forces model of competition, which can evaluate a company's current market position. According to Gamble et al. (2019), the five competitive forces include: buyer bargaining, winning over substitute products, supplier buying power, the threat of entries into the market, and rivalry among competing sellers. A firm must be able to actively adjust to these five forces to stay competitive. When businesses ignore these five competitive forces, they can find themselves in a negative situation. Another step in evaluating the external environment is the utilization of strategic thinking.

Strategic thinking: Discussion of a key source of power and weaknesses

In strategic thinking, there are key sources of advantages and disadvantages that need to be brought to the attention of organizational leaders. According to Rumelt (2011), “no one has an advantage at everything. Team, organizations, and even nations have advantages in certain kinds of rivalry under particular conditions” (p. 161). Managers and leaders must try to exploit any competitive advantage contained in order to keep their firm successful. Improper usage of these advantages can lead to firms deteriorating financially and a loss in their market share. Another key source to effective strategic thinking is value-created changes. A weakness to value-created changes is the factor of an impatient leader. According to Rumelt (2011), “first, management may mistakenly believe that improvement is a ‘natural’ process or that it can be accomplished by the pressure or incentives alone" (p. 170). Impatient managers and leaders can be detrimental to the success and effectiveness of an organization.

To become an innovative organization, one must utilize design thinking to influence the organization to improve business processes. According to Johansson-Sköldberg, Woodilla, and Çetinkaya (2013), “…design thinking has been described as the best way to be creative and innovative, while within the design realm, design thinking may be partly ignored and taken for granted, despite a long history of academic development and debate” (p. 122). In order to remain innovative, organizations must involve their whole organization to utilize their diversity. Diversity in the workplace is a key method to drive innovation and to improve strategic thinking.

Decision model

Utilizing a decision model in business processes will help guide an organization to a successful future. Feedback in any organization is a very important aspect to drive improvement and constructive criticism. According to Krogerus and Tschäppeler (2018):

Feedback is one of the most difficult and sensitive processes in groups. It is easy to hurt people with criticism, but false compliments are also unhelpful. Compliments often make us too complacent, while criticism damages our self-esteem and can lead us to unwise choices. (p. 26)

The feedback model is a great choice for organizations that are driven on some criticism on their job effectiveness and efficiency. Management giving feedback to its employees is vital to the improvement of an organization. If employees are not given accurate feedback on their job performance, then they will never have a chance to improve. Improvement in the human capital of an organization directly correlates with the improvement of the organization as a whole. According to Richardson (2010), “if used appropriately, 360-degree feedback can increase self-awareness, promote skill development, and foster a collaborative organizational culture—outcomes that reflect social work values and ethics” (p. 260). The value of feedback in an organization is priceless. Leaders must strive to give constant feedback to their subordinates in order to grow a stronger organizational team. Once this is done, then the feedback decision model will have brought value to any organization that utilizes it.

Conclusion

In evaluating the external environment, one must also remember that Satan is also a factor. According to Keller and Alsdorf (2012), “…but it is a mistake to think that the Christian worldview is operating only when we are doing such overtly Christian activities” (p. 179). Utilizing the five forces of competition are important to a business professional, but to a Christian business professional, it is even more important to utilize the Bible. Impatient managers can be a weakness to an organization and to the body of Christ. The Lord decides when and how he wants events to happen on Earth. As leaders, it is important to show patience with employees and give constant feedback to ensure their successful development. When an organization gives constant feed, it then positions itself to become a stronger organization.

References

Gamble, J., Peteraf, M., & Thompson, A. (2019), Essentials of strategic management, (6th ed.) New York, NY: McGraw - Hill Higher Education

Johansson-Sköldberg, U., Woodilla, J., & Çetinkaya, M. (2013). Design thinking: Past, present and possible futures. Creativity and Innovation Management,22(2), 121-146. doi:10.1111/caim.12023

Keller, T. (2012), Every good endeavor, New York, NY: Riverhead Books, Penguin Group, New York, NY.

Krogerus, M., & Tschäppeler, R. (2018), The decision book: 50 models for strategic thinking. (Revised ed.), New York, NY: W. Norton & Company, Inc.

Richardson, R. (2010). 360-degree feedback: Integrating business know-how with social work values. Administration in Social Work,34(3), 259-274. doi:10.1080/03643107.2010.480933

Rumelt, R. (2011), Good strategy/bad strategy: The difference and why it matters., New York, NY: Crown Business

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Krystal Hertenstein

To gain more insight into planning strategic objectives, a view into understanding is needed. Evaluation of external environments is needed to understand the themes of the market and gain information in order to understand external threats and opportunities. The ability of an organization to capture areas for growth and improvement for their market can give the firm access to paths for competitive advantages. Seeking the information and context on competitors, political aspects, global issues, or social issues, will gain an understanding of the external environment.

Process: External Environment

When seeking external information factors, an organization must first decide what external factors impact their organization. According to Gamble et al. (2019), using a PESTEL analysis creates focus on reviewing six principals: political factors, economic conditions in the firm’s general environment, sociocultural forces, technological factors, environmental forces, and legal and regulatory factors. These factors create a cross-section of external factors that together make up the landscape for the macro-environment that organizations must operate in.

Understanding the relevant factors form external sources, leaders and teams can then understand the external impacts and work to plan for impacts by creating a strategy model to react to the external factors. By using a strategy plan, organizations can create a decision model to decide how to react to external factors. Companies must also consider how competitive forces operate and create market completion in a business environment. Utilizing the five forces model of competition, a company can understand the current market position. According to Gamble et al. (2019), the five competitive forces are buyer bargaining, substitute products, supplier buying power, the threat of entries, and rivalry among competitors. Understand the active competitive forces, supports the planning need to stay ahead of the competition. If these five competitive forces are not understood, they can find themselves to be unprepared for market entry or a release of a product or service. “Therefore, one must consider the need to perform parallel interactive analysis exploring external and internal factors and different relevance ranks of the considered factors” Fernandes, 2019, para 8). Evaluating the external environment is an example of an active method of strategic thinking.

Strategic Thinking: Power & Weakness

Within strategic thinking methods, there are advantages and disadvantages that occur that leaders should be prepared for. According to Rumelt (2011), advantages in markets often cannot be held in every area (p.161). Organizations can have advantages in certain kinds of rivalry under conditions and not have them in others. This why focus is required to understand where a company should seek advantages that are most impactful. Leaders must seek competitive advantages to keep their firm successful. A power of effective strategic thinking is the value that is created in changing an organization to seek strength in the market. However, once a strategic direction is set, a source of weakness can occur if an impatient leader, changes the direction too often. “First, management may mistakenly believe that improvement is a ‘natural’ process or that it can be accomplished by the pressure or incentives alone" (Rumlet, 2011, p. 170). Effective plans work to maintain control over direction and information, and all should be conducted in a methodical approach. Methodical approaches work in an organized fashion to work to control plans and decision-making steps. This supports showing leaders' progress and can help impatient leaders not to pull focus from strategic objectives too early if their desired results are not seen early enough.

Decision Models: Aid & Hinder

Utilizing a decision model as an integrated process into operational workstreams will supporting guiding decisions on an ongoing basis. For organizations to have a successful future, strategic efforts and operational planning must remain ongoing. The ability to capture feedback on external factors will aid the organization to drive improvement and create more value in their strategic objectives. A feedback model drives effectiveness and efficiency since the information being gathered in the model is active and current knowledge. Information and feedback models are vital in organizations so that leaders can create stronger plans and stronger teams focused on the right objectives. All models and strategic methods work to gather information in order to make better choices. “All of them lead to the existence of a demand or request to an organization that is always trying to hold development in various ways for the betterment of the organization” (Budiyono et al.,2018, p. 38). Often feedback decision models bring value to organizations; however, they must be paired with ways to decide what factors to respond to.

Conclusion

When evaluating the external environment, it is important to note that the understanding of competition from external environment factor gathering is what supports strategic insights and planning. Leaders are vital is the process of decision making once the information is gathered and understood. Leaders can be a source of weakness to an organization if they do not follow the methods and guidance of the models. When an organization reaches out for constant feedback, in this review, reaching for external feedback, it then positions itself to become a stronger organization ready for entry to markets.

References

Budiyono, B., Budiyanto, B., & Suwitho, S. (2018). The influence of leadership and external environment on performance through learning organization, and the influence towards competitiveness through performance of institute of economic science in java. International Review of Management and Marketing, 8(4), 36-44.

Fernandes, J. P. (2019). Developing viable, adjustable strategies for planning and management—A methodological approach. Land use Policy, 82, 563-572. https://doi:10.1016/j.landusepol.2018.12.044

Gamble, J., Peteraf, M., & Thompson, A. (2019). Essentials of strategic management, McGraw - Hill Higher Education (6th ed.).

Rumelt, R. (2011), Good strategy/bad strategy: The difference and why it matters., Crown Business. ISBN: 9780307886231.