What are some of the fundamental characteristics of the External Context and the key questions to be asked when analyzing the firm’s external context.
Understanding and identifying external context is essential for firms. External environment is the main attraction of business opportunities (Carpenter & Sanders, 2008, p.95). External environment has positive and negative outcomes as it can pose a threat (Carpenter & Sanders, 2008, p.95). Guest (1997) mentioned external context reflects standard strategic approaches that make it essential to understand in order to be able to respond and interact with the environment (p.270). Important questions that Carpenter and Sanders (2008) state should be asked when analyzing a firm’s context are:
“what macro environmental conditions will have a material effect on our ability to implement our strategy successfully?
What is the firm’s industry?
What are the characteristics of the industry?
How stable are these characteristics?” (p.96).
By addressing the questions shared above by Carpenter and Sanders (2008), managers ultimately have a better sense of strategic options and challenges that the firm will be faced with (p.97). However, it is crucial that managers stay focused on the industry rather than focusing on a firm within the industry (p.97). The two major external environments are micro and industry environments (p.97). It was interesting to read that Coca-Cola tried to enter into the wine industry but failed (Carpenter & Sanders, 2008, p.96).
How to use PESTEL analysis to identify the macro characteristics of the external context.
PESTEL analysis help identify political, economic, sociocultural, technological, environmental, and legal tools used by a firm (Carpenter & Sanders, 2008, p.97). PESTEL analysis help managers identify and plan for potential threats that otherwise would not have been identified. In terms of identifying the macro characteristics of the external context, Carpenter and Sanders (2008) mentioned, at the macro level, all PESTEL tools are analyzed in a broader context (p.97). Furthermore, Yukel (2012) supports the use of PESTEL as “PESTEL analysis, as it stands, mainly provides a general idea about the macro environmental conditions and situation of a company” (p.52). Yukel (2012) also shared, the PESTEL model has two primary functions which are identification of the environment in which the firm operates and the identification of data and information that help the company predict situations that might come up in the future (p. 53). Interestingly enough, Carpenter and Sanders (2008) shared political factors have substantial influence on consumers and consumer spending (p.98). Economic factors also have an effect as managers are advised to consider macroeconomics (Carpenter & Sanders, 2008, p.98).
What are some of the determinants and consequences of globalization.
Carpenter and Sanders (2008) shared the determinants of globalization are markets, costs, and governments and competition (p.101). Markets are considered determinants because there are similar markets in different areas which result in increased pressure for the industry to globalize (Carpenter & Sanders, 2008, p.100). Furthermore, trade policies are said to help globalization of industries and markets (Carpenter & Sanders, 2008, p.101). Furthermore, a few consequences presented by, Swank (1998) are “globalization of capital markets has resulted in decreases in business social security, payroll, and profit taxes” (p.671). Lastly, Hellwig and Samuels (2007) also mentioned that globalizations cause consequences for political and social life as there are constant debates about the topic of globalization and the restrictions (p. 284).
Review Alan Murray’s 5 cubed model presented in Week 4 and attached again with this forum
After reviewing Murray’s article that was introduced in week 4 and reading the assigned readings, the article was a bit more clear in terms of context. Murray (n.d.) clearly outlined that the 5-Cubed model builds off of the traditional SWOT analysis (p. 46). Furthermore, Murray (n.d.) also shared the five common constraints related to the model as customers, context, change, competition, and capabilities (p. 48). Each of the five common constraints has a cause and an effect to it. Additionally, Murray (n.d.) also emphasized the questions every business must answer to ensure that there is a business principal in place (p.61-p.62).
Carpenter, M. A., & Sanders, W. M. (2008). Strategic management: A dynamic perspective—Integrated StratSim simulation experience. Upper Saddle River, NJ: Pearson Prentice Hall.
Guest, D. E. (1997). Human resource management and performance: a review and research agenda. International journal of human resource management, 8(3), 263-276.
Hellwig, T., & Samuels, D. (2007). Voting in open economies: The electoral consequences of globalization. Comparative Political Studies, 40(3), 283-306.
Murray, A.I. (n.d.). Strategic choice under knowledge competition. Retrieved from http://csumb.elearningctr.com/pluginfile.php/30634…
Qureshi, M. S., & Wan, G. (2008). Distributional Consequences of Globalisation: Empirical Evidence from Panel Data. Journal Of Development Studies, 44(10), 1424-1449. doi:10.1080/00220380802265637
Swank, D. (1998). Funding the welfare state: globalization and the taxation of business in advanced market economies. Political Studies, 46(4), 671-692.
Yuksel, İ. (2012). Developing a multi-criteria decision-making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52.