Identifying strategic factors is a key component of a company’s development and potential success because they help to define the trends and set goals for a business. All the significant information related to future possibilities, new opportunities, and risks can be obtained from the external environment. Paying close attention and researching it in detail make a basement for the progress and growth of a company.
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The most significant advantage of employing SWOT analysis is that it combines both internal and external environments in analyzing strategic planning where opportunities and stress pertaining to external factors. It can also be used for comparison of different courses of actions outlined by the managers for a company (Bolland, 2017). However, it is important for a decision-maker to understand the dubious nature of external factors as they can be both treated as threats and opportunities (Grant, 2016). For example, a threat might suggest a new way of looking at the existing state of affairs and eventually help to gain an advantage from it.
The level of consistency of the strategy of a firm with the external environment reflects how strategically fit it is for the current trends and challenges. The latter can be divided into several categories: political, economic, sociological, technological, and environmental factors, though in practice, they are often closely interrelated. Other crucial sources of information for a well-formulated strategy are customers and competitors because they can help a business “identify a need it can fulfill via its corporate mission” (Wheelen, Hunger, Hoffman, & Bamford, 2017, p. 11).
Analyzing the external environment and evaluating possibilities for progress and change is one of the most significant stages in strategic planning. Without this information, it is impossible to outline the course of actions for a company, set goals, predict challenges, and seize new opportunities.
Bolland, E. J. (2017). Comprehensive strategic management: A guide for students, insight for managers. Bingley, United Kingdom: Emerald Group Publishing.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition (9th ed.). Chichester, United Kingdom: John Wiley & Sons.
Wheelen T. H., Hunger, J. D., Hoffman, A. N., & Bamford C. E. (2017). Strategic management and business policy: Globalization, innovation, and sustainability (15th ed.). New York, NY: Pearson.