The Four Step Process of External Environmental Assessment
The external environmental assessment is a process in which entrepreneurs (strategic planners) assess social, economic, technical, supply, official, and market conditions to identify challenges and opportunities for the company. Then, managers set their goals and strategies. During the external environment assessment, it is essential to recognize the key sources of weaknesses or sources. Thus, business executives take a varied approach to understanding the phenomenon as they have diversified economic concerns and attitudes that are full of conflicting characteristics (Ansah & Sorooshian, 2017).
The external environment analysis aims to identify threats and opportunities in the sector or industry that will drive volatility, profitability, and growth. The external environmental analysis process includes four steps: monitoring, scanning, assessing, and forecasting.
The first procedure is environmental scanning, where the entire environment is examined to identify changes that may arise in the future or have already occurred. The scanning method includes formal search, casual search, conditioned viewing, and objectiveless viewing (Ghicajanu, 2019).
An analyst uses a monitoring process to evaluate the external environment to monitor those factors recognized through scanning if there are any significant environmental changes. External monitoring is important because it assists companies in knowing competitors, re-evaluating plans, and addressing threats when dealing with contractors, stakeholders, and customers.
The third process is forecasting to predict what would occur in the business world. The forecasting is based on monitoring and scanning to estimate what might happen and how quickly it will occur. It is essential to assist the organization in adjusting its sales to meet demand (Hernes, Chojnacka-Komorowska & Matouk, 2017).
The final step is assessing the macro environment. The analyst identifies the timing and importance of the impact of environmental trends and changes on the strategic management of a company. It will help determine whether a current trend assessment is a risk or a possibility.
Resource dependence is when a company has to depend on the resources of another company. For example, almost all external parties, such as financial institutions, banks, raw material suppliers, and more, drive power as they rely on the resources of companies. As a result, the company with these resources is provided power and influence over the company without resources. In this way, companies can influence prices and support a particular organizational structure (Veale, Van Kleek & Binns, 2018).
Effective knowledge management enhances employee output and happiness. The broad spread of Knowledge means making more effective decisions from top to bottom of a company. The Knowledge gained from the external analysis will help the company make the best choices during the strategic planning and implementation process. In addition, this Knowledge allows the company to improve its strengths (Greve & Man Zhang, 2017).
The focus is on managing joint decision-making during the policy and action plan distribution process to maintain involvement and ensure the success of the integrated action plan. The significance is changed from production to distribution. Distributors will be able to understand the preferences and tastes of customers. The product produced is determined by the distribution authority. Thus, distribution organizations gain power through their involvement in the implementation process (Benzaghta et al., 2021).
Resource Dependence and Knowledge Management
Internal links can help external stakeholders influence corporate strategy. In general, highly authoritarian companies don’t have interconnection and allow external stakeholders to influence the strategic management process (Rajagopal, Venkatesan & Goh, 2017).
Different models can be used to make decisions in the company, including SWOT analysis, retrospective, rational, and administrative decision-making models. The SWOT analysis can be applied to make decisions in a company because it reflects the strength, opportunity, threat, and weakness of the company. This model is most commonly used because it aids companies to plan strategically. The company can examine its weaknesses and how it can overcome and recognize its strengths that helps in their empowerment. The company can recognize market opportunities and create a strategic plan to maximize its profits (Evans, 2019).
Other decision models may be retrospective, rational, and administrative models but may not recognize the weaknesses and strengths of a company. The rational model has several steps which ensure that objectives and problems are apparent. The administrative model relates to the achievement of goals. This model highlights that there must be an alternative approach to achieving the specified objectives (Bazhenova et al., 2019). The administrative model assumes that people choose fewer options as the best decisions usually need a lot of information that is not available. The retrospective model emphasizes how the decisions taken are justified and rationalized. Individuals make one decision but find the other and choose the best (Timilsina, 2018).
Conclusion
It is essential to constantly review its strategies and processes to keep pace with rapid globalization. During the strategic planning process, companies should assess external and internal environmental aspects that may hinder the successful implementation of their strategies. For an organization to thrive before a competition, managers should constantly adjust their strategies to reflect their businesses’ environment. To avoid adverse impacts on the external environment, various analysis tools can be used to assess the performance of an organization.
Timilsina, B. (2018). Overcoming the Barriers of Strategic Planning, Implementation, and Monitoring in Turbulent Business Environment: A qualitative study on Finnish SMEs. In Global Business Expansion: Concepts, Methodologies, Tools, and Applications (pp. 1276-1298). IGI Global. https://doi.org/10.4018/978-1-5225-1949-2.ch011
This article has highlighted strategic management as a competitive advantage provider. However, management and strategic leaders also face difficulties in planning, execution, and control. Hence, this article aims to identify the prevailing practice of strategic planning, monitoring, and implementation and identify these barriers. This article also identified potential solutions to strategic planning, implementation, and monitoring barriers. Timilsina (2018) researched to explore the skills of good strategic planners. It can be stated that strategic planning and implementation have long been recognized as necessary aspects for the existence and growth of an organization. The author mentioned four reasons. Firstly, strategy is the planning that directs the resources of an organization towards the desired goal. Secondly, strategy is a connection between the operational environment and the enterprise; Third, strategic planning helps companies neutralize or defeat competitors; Fourth, strategic planning gives organizational stability by helping managers and leaders manage change. In business practice, it is assumed that people with better skills to use resources must have completive benefit who generate more revenue. However, it is nearly impossible to gain a competitive edge by deploying resources without an appropriate management plan, commitment, and policy. The article argues that strategic planning aids a company in restoring a competitive landscape. This is essential for organizational performance and growth in the market.
Distributors and Their Involvement in the Implementation Process
Yu, W., Chavez, R., Jacobs, M., Wong, C. Y., & Yuan, C. (2019). Environmental scanning, supply chain integration, responsiveness, and operational performance: an integrative framework from an organizational information processing theory perspective. International Journal of Operations & Production Management. 39(5), 787-814. https://doi.org/10.1108/IJOPM-07-2018-0395
This article examined the impact of Environmental Scanning (ES) on operational performance through Supply Chain Responsibility (SCR) and Supply Chain Integration (SCI). Yu et al. (2019) combined the supply chain management and strategic management literature to enlighten the relationship between firm performance and environment screening. The results of the article indicate that ES activities give valuable information to create effective supply chain strategies respond to the supply chain partner. Since the industry has become more dynamic and competitive, the data from external environment screening is a significant resource for companies to improve their competitiveness. The research shows that managers need to create effective data processing strategies with ES, particularly to identify, collect, and analyze information about trends and events outside the company, especially in developing strategic collaboration, responsive supply chain, and supply chain integration. Authors proposed that supply chain managers must cooperate with senior managers to get signs from environmental screening activities as inputs for creating SCR and SCI, as well as use SCI as collaborative interpretations of ES factors for SCR development to gain profitability in the changing business environment.
References
Ansah, R. H., & Sorooshian, S. (2017). Effect of lean tools to control external environment risks of construction projects. Sustainable cities and society, 32, 348-356. https://doi.org/10.1016/j.scs.2017.03.027
Bazhenova, E., Zerbato, F., Oliboni, B., & Weske, M. (2019). From BPMN process models to DMN decision models. Information Systems, 83, 69-88. https://doi.org/10.1016/j.is.2019.02.001
Benzaghta, M. A., Elwalda, A., Mousa, M. M., Erkan, I., & Rahman, M. (2021). SWOT analysis applications: An integrative literature review. Journal of Global Business Insights, 6(1), 55-73. https://doi.org/10.5038/2640-6489.6.1.1148
Evans, N. J. (2019). A method, framework, and tutorial for efficiently simulating models of decision-making. Behavior research methods, 51(5), 2390-2404. https://doi.org/10.3758/s13428-019-01219-z
Ghicajanu, M. (2019). Analysis of factors from the external environment in changing business processes. In MATEC Web of Conferences (Vol. 290, p. 07008). EDP Sciences. https://doi.org/10.1051/matecconf/201929007008
Greve, H. R., & Man Zhang, C. (2017). Institutional logics and power sources: Merger and acquisition decisions. Academy of Management Journal, 60(2), 671-694. https://doi.org/10.5465/amj.2015.0698
Hernes, M., Chojnacka-Komorowska, A., & Matouk, K. (2017, September). External environment scanning using cognitive agents. In International Conference on Computational Collective Intelligence (pp. 342-350). Springer, Cham. https://doi.org/10.1007/978-3-319-67074-4_33
Rajagopal, V., Venkatesan, S. P., & Goh, M. (2017). Decision-making models for supply chain risk mitigation: A review. Computers & Industrial Engineering, 113, 646-682. https://doi.org/10.1016/j.cie.2017.09.043
Timilsina, B. (2018). Overcoming the Barriers of Strategic Planning, Implementation, and Monitoring in Turbulent Business Environment: A qualitative study on Finnish SMEs. In Global Business Expansion: Concepts, Methodologies, Tools, and Applications (pp. 1276-1298). IGI Global. https://doi.org/10.4018/978-1-5225-5481-3.ch059
Timilsina, B. (2018). Overcoming the Barriers of Strategic Planning, Implementation, and Monitoring in Turbulent Business Environment: A qualitative study on Finnish SMEs. In Global Business Expansion: Concepts, Methodologies, Tools, and Applications (pp. 1276-1298). IGI Global. https://doi.org/10.4018/978-1-5225-1949-2.ch011
Veale, M., Van Kleek, M., & Binns, R. (2018, April). Fairness and accountability design needs for algorithmic support in high-stakes public sector decision-making. In Proceedings of the 2018 chi conference on human factors in computing systems (pp. 1-14). https://doi.org/10.1145/3173574.3174014
Yu, W., Chavez, R., Jacobs, M., Wong, C. Y., & Yuan, C. (2019). Environmental scanning, supply chain integration, responsiveness, and operational performance: an integrative framework from an organizational information processing theory perspective. International Journal of Operations & Production Management. 39(5), 787-814. https://doi.org/10.1108/IJOPM-07-2018-0395
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