What Is External Analysis?

The purpose of external analysis is to evaluate the relationship between the enterprise and its environment in terms of opportunities and threats. In this work, the function of the executive is to identify the relevant components of the environment, and done it, analyze them as to the situation of opportunities and threats for the company.

The business environment is not a stable but a very dynamic work where large amounts of forces , of different size and nature constantly changing , as each affects , influences and interacts with other environmental forces . In this context, companies should seek to leverage the opportunities and threats dampen or simply adapt to them.

It is important and necessary to connect the external and internal factors to the company , however , it is interesting that this interconnection is done after the completion of the analysis of external and internal factors in isolation .

It must be considered that the right opportunities will be chosen if, focus on maximizing opportunities and minimizing threats not, all major opportunities are analyzed jointly and systematically, if understood opportunities which fit the basic activity of the company, there is balance between opportunities (immediate and long term) .

Every business is an integral part of their environment. While the lower levels of the company (operational level) relate to internal aspects , the task of the higher levels (strategic level) focuses on study and map the opportunities and threats that the environment impose on the company .

The environmental analysis corresponds to the study of the various factors and environmental forces, relations between them over time and their effects or potential effects on the company, based on the perceptions of the areas in which strategic decisions to be taken. The environmentalist analysis is often used in two approaches. To solve some immediate problems that require strategic decision and there is considerable interaction between the company and the environment, to identify future opportunities and threats not yet clearly perceived by the company. The executive may seek environmental information directly or indirectly from two sources: primary sources: surveys conducted by the company directly in the environment; secondary sources: environmental information obtained through government agencies.

Therefore, a company is able to decide on a reasonable macro study the environment or, in other cases, by a division of the environment into segments and performing exhaustive depth studies on each of the parties.

The most common difficulties in conducting environmental analysis are:

1 ) It is very difficult to set boundaries that are appropriate in any company and determine its size , because many companies have branches , external agencies , independent representatives , among other things , generating a query in relation to when the organization ceases to be company for be considered part of society .

2) Generally companies have several purposes or functions that can be as primary produce and sell, or secondary as providing security to employees or even give growth opportunities.

3) In companies include certain representations of the environment. Employees are not only members of the organization that employs them, but also members of civil society and other organizations such as churches, unions etc. . . . Through these roles other people carry within them certain requirements, expectations and cultural norms that influence the companies where they work.

4) The media environment characterized by rapid change and turbulence require companies are endowed with amazing responsiveness and adaptation.

The impact of an opportunity or threat may be too strong for the expectation of a company. Thus, an opportunity can provide fully enjoyed increased profits of the company as a threat mismanaged can generate a decrease in expected profits, or even large losses for the company.

The Five Forces Model Michael Porter

One of the key aspects in the formulation of corporate strategy in particular marketing of its size, is the relationship between the company and its context or environment .Although this is fairly broad, covering the most varied type of forces from those of an economic, social, technological, political and legal, the decisive aspect of this context is the set of most relevant sector or sectors, also called industries in which the company carries out its activities. The structure of an industry influences and determines the "rules of the competitive game” in a fundamental way, and outlines potential strategies that the company can come to adopt and implement. The intensity of competition in an industry is not a factor in the accident.

The competition in an industry based on its economic structure and goes beyond the behavior of firms operating in it .The intensity of competition in an industry depends on five basic forces: the number of competitors and their rivalry at some point, the entry of new competitors, the bargaining power of customers, the bargaining power of suppliers, the emergence of substitute products.

It is from the combination of the relative impact of each of these forces is determined that the potential profitability of the sector. The strategic objective of each company, will be to find a position in this industry