Understanding the Role of External Environment in the Development of Organisational Strategies

Posted by John Puttick in Apr, 2024

Develop organisational strategies

The external environment refers to the factors outside an organization that can impact its performance and strategies. This includes economic conditions, technological advancements, political and legal factors, social and cultural trends, and competition.

People in enterprises need to understand the external environment to develop effective strategies that can adapt to changes and seize opportunities. By analyzing the external environment, organizations can identify potential threats and opportunities, thus allowing them to make informed decisions and stay competitive.

Key Components:


1. Economic Factors: This includes economic growth, inflation rates, and exchange rates that can impact consumer purchasing power and demand for products or services.
2. Technological Advancements: Understanding how technology can impact operations, production, and the development of new products or services.
3. Political and Legal Factors: Government policies, trade regulations, and political stability that can affect business operations and decision-making.
4. Social and Cultural Trends: Changes in demographics, lifestyle trends, and cultural shifts that can influence consumer behavior and preferences..
5. Competition: Analyzing the competitive landscape and industry dynamics to identify strengths, weaknesses, opportunities, and threats.

Key Terms:


– PESTLE Analysis: A framework for analyzing the various external factors that can impact an organization – Political, Economic, Social, Technological, Legal, and Environmental.
– Industry Analysis: Assessing the competitive forces within an industry to understand the overall attractiveness and profit potential.
– Market Research: Gathering and analyzing information about the market environment, including consumer behavior, preferences, and trends.

Those engaged with operating or implementing this topic include strategic planners, business analysts, market researchers, and senior management who are responsible for setting organizational goals and making strategic decisions.

Integration with other components:


Understanding the external environment is crucial for developing effective marketing strategies, identifying potential growth opportunities, and mitigating risks. It aligns with internal analysis to form the basis of a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, which is essential for strategy formulation.

Students can find more information about the topic from academic journals, business publications, industry reports, and reputable online sources such as government websites, professional associations, and market research firms.  Click to see Industry Professor John Puttick’s articles on organisational strategies.

Job roles knowledgeable about this topic include business development managers, strategic analysts, marketing managers, and consultants specializing in organizational strategy and planning.

In relation to sports, understanding the external environment is akin to a sports team analyzing the strengths and weaknesses of their opponents, the current game conditions, and the overall strategy needed to win. In family or school settings, it’s comparable to understanding the external factors that can influence family dynamics or educational outcomes, such as societal trends, technology, or educational policies.

(The first edition of this post was generated by AI to provide affordable education and insights to a learner-hungry world. The author has edited, endorsed, and published it, updating it with additional rich learning content.)

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