External and Internal Environment of a Business, Essay Example

An overview of the external and internal environment of a business is an essential part of any strategic planning method. Strengths (stand for letter ‘S’) and weaknesses (stand for letter ‘W’) are in most cases categorized as internal factors of the firm, while those external to the firm are labeled as opportunities (stand for letter ‘O’) and threats (stand for letter ‘T’). Such a breakdown of a strategically important environment is called a SWOT analysis. The analysis in question supplies the managers of a business with data and information that is useful in order to equally distribute the company’s reserves and abilities inside the competitive environment it functions in. Therefore, the managers of any company should conduct a SWOT analysis to have an effective strategic plan. It is helpful in strategy generation and adoption.

Following the SWOT analysis, the primary internal organization considerations for the development of a strategic plan include the overview of its strengths and weaknesses. It is vital for any company or firm to ensure the construction and development of strengths and supervising and handling the weaknesses. Analyzing profitability, existing brand, employee capability, relative cost, and sales assist in the creation of the strategic plan. The most important internal considerations related to strengths may include training programs and employees’ development, outstanding customer service, and well-organized product development process, while the considerations related to weaknesses may include producing a larger volume of products, developing sales plans, and cutting down the unnecessary layers of management. Though the key to success is to balance the weaknesses and develop the strength, the most important consideration might be building up an exceptional customer service and strong bonds between the seller and the actual clients. Finding more about what the existing or potential customers need or want may expand the market, help develop new breakthrough products or services, and even open up a new market.

The primary external organization considerations include customer (segments, motivations), competitive (strategies, objectives), market (trends, growth, profitability), and environmental (cultural, economic) analysis’s. External factors consist of threats (a challenge or a number of challenges caused by an unfavorable trend or cultural development that may ultimately lead to profit loss or sales deterioration) and opportunities (areas, in which a firm may possibly gain profit), which have to be evaluated carefully on how they can affect the company in general. Competitor analysis may be the most important consideration, as far as it includes identifying the actual competing companies and businesses, reviewing competitor’s objectives, strengths, weaknesses, and strategies, and choosing whether to show aggression towards a competitor or avoid it. This step is a key stone in the formation of a strategic plan.

Any business unit can utilize several key planning factors to achieve competitive success in the market environment. In marketing, these factors are usually used as tools to analyze the character of the field or industry, in which organization operates. For instance, product attributes, specific strategy elements, competitive capabilities, resources, and competencies are those key planning attributes that affect ability of a business unit to survive and develop in the marketplace. Procter & Gamble Company has gained its fame through careful planning and management. Their products became popular due to the fact that each of them had specific attributes and marketing campaigns aimed to satisfy certain segments in the marketplace. Iridium LLC, satellite phone seller, failed to utilize planning factors to gain competitive success. Their product had no adequate competitive capabilities in comparison to the local companies, such as AT&T or Verizon companies.