Essay Sample: Impact of Internal and External Environment Assessment on Strategic Planning

Published: 2022-03-09 16:28:10
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Businesses have been operating in a highly competitive and turbulent environment over the past few years. The competition is likely to get even stiffer given the dynamics of the global supply chain management and the multiplicities of changeovers in regulatory requirements. As such, strategic planning is progressively becoming an essential practice in the management of organizations. However, the turbulences imply that businesses cannot approach strategic planning in the conventional ways. Many companies are considering the integration of the results of environmental assessment into their strategic plans. Therefore, a scan of both the internal and external environments of business presents a more proactive approach to understanding the challenges, opportunities, and trends that inform the strategic planning process.

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The conceptualization of environmental scan is crucial as far as the construction of the importance of internal and external factors is concerned. In simple terms, a scan of either internal or external situation of a business is a function of diagnostic study. In this respect, the decision framework results from a diagnostic review of the case within an organization and the dominant forces in the industry. According to Hladchenko (2014), suggestions highlighted in any diagnostic study play significant roles in the strategic management of organizations. One of the benefits of a diagnostic report is that it outlines the key areas that require operational and decisional action.

Additionally, diagnostic reports pay particular attention to a company's strengths and opportunities. This argument is premised on the observation that organizations that focus on internal weaknesses and threats have the risk of making flawed and counterproductive decisions (Njanja & Ogutu, 2012). Therefore, recommendations act as catalysts for advanced management practices in an organization by supporting strategic alternatives and resources that match local and international standards of management. However, strategic planning enthusiasts should exercise caution to ensure that suggestion is not adopted subconsciously as part of the decisions they are intended to assist in developing.

The primary objective of conducting a scan of the internal situation of a business is to unpack its strengths, weaknesses, opportunities, and strengths. An in-depth and objective SWOT analysis is the principal activity in strategic planners. These forces in the internal environment determine the resource and operational muscles of a company and thus, cannot be ignored in formulating and implementing both short-term and long-term strategic plans (Njanja & Ogutu, 2012). The underlying argument in favor SWOT analysis is that it is the strategy formulation tool that harmonizes internal capabilities of business with the available external opportunities. On this ground, one can safely state that SWOT analysis supports the strategic planning goal of achieving a nexus between inherent abilities and possible breakthroughs in the outside world.

SWOT analysis also captures current and projected future trends that may impact strategic business processes and resource allocation methods. Myroslava (2014) assessed the role of SWOT analysis in the strategic management of institutions of higher learning in Europe. The author argued that institutions of higher education cannot make future strategic decisions without stipulating and evaluating the institutional factors that underpin their growth and development as well as student performance. In support of the argument adopted therein, one can state with utmost certainty that institutions undergo structural changes and resource adjustments that shape their workforces, financial performance, and academic rating.

SWOT analysis facilitates strategic decision-making in organizations in such a manner that the resulting decisions are reliable, verifiable, and viable. A successful scan of an institution's internal environment produces an information framework that guides leaders through the organizational decision-making process (Dominic & Theuvsen, 2015). Besides, the scan provides strategic planners with solid grounds for justifying the decisions they make. Strategic decisions are considered to be legitimate as the environmental scan frameworks on which they are based. There seem to be reasonable grounds to believe that strategic management in institutions of higher learning cannot come to fruition in the absence of an environmental scan report.

Diagnostic study and SWOT analysis are the bedrocks of a superior organizational strategy. They provide information that is useful in predicting the functioning, and efficiency of processes and structural plan of an organization. By the evidence currently available, it could be argued that the two environmental scanning tools facilitate the designing and implementation of organizational and managerial transformations (Turkay, Solmaz & Sengul, 2011). Change is the only constant in strategic management of companies and can be achieved through assessment of the internal factors that may either promote or hamper the transformation.

Nevertheless, SWOT analysis plays pivotal roles in formulation and design of policies in the business. Research shows that a vast majority of investment decisions are based on SWOT analysis results (Dominic & Theuvsen, 2015). On this ground, one can claim that investors usually assess the financial stability and solvency status of a company before they can commit to a particular investment. In this case, economic capability serves as a critical strength of the company that plans to invest in the project. From another angle, the availability of a viable project is an opportunity that the firm can capitalize on to attract investment.

Along similar lines, an assessment of the external environment of a business is paramount in any progressive organization. The external scan enables companies to identify the political, economic, social, technological, environmental, and legal factors that influence the implementation of strengths and opportunities discerned in the SWOT analysis. Political considerations lie at the heart of eternal factors that shape the future of multinational corporations. Globalization has narrowed the distance between different countries as companies seek to gain global presence. The sad news is that political upheavals may cripple operations of a foreign company in a host country, thereby impacting adversely on profitability productivity, and growth (Aldehayyat, 2015). Companies always consider the political stability of the states and regions where they intend to establish operations. Politics also dictates the share of revenue that remains in the host country, thereby creating a barrier to market entry particularly for businesses that have smaller financial bases.

Politics also determines foreign trade policies between countries and within regions. It is important for an organization to consider the existing relationship between it country and the host country before establishing its subsidiaries in the latter. This consideration should pay attention to the trade-offs involved in either decision. There seems to be a compelling reason to suggest that foreign companies are likely to benefit from tax concessions in the host country when the two nations enjoy mutual trade agreements. Besides, organizations are concerned about the insurgency that is rampant in certain countries. When businesses have a clear picture of the internal security of a prospective host country or current host country, they can make rational decisions about their products and services as well as production activities in that country.

Another important factor that is closely related to the political environment is legal considerations. As Haase and Franco (2011) correctly reported, restrictions on imports and exports in a country influence a firm's decision to invest in that country. The legal framework is an integral part of the legal environment that organizations need perfect knowledge of in deciding whether to enter a given market or not. According to Njanja and Ogutu (2012), effective contract enforcement requires astringent adherence to existing contract laws and the implications of any violation. People in different countries are endowed with wealth differently and thus; intellectual property protections may be unique to every country. A scan of the legal environment is important because it assists strategic planners to identify regulatory flaws that may offer an additional opportunity for growth. In sharp contrast, certain multinationals depend on top secrets for their production and service delivery. Consequently, failure to assess the law enforcement efforts in a country may put an organization on the verge of collapsing, primarily if it depends on the secrets for its continuity.

Moreover, an assessment of economic policy and situation impacts on the performance of a company in a particular country. Amara and Benelifa (2017) opined that a productive evaluation of a country's economy should begin with the overall economic policy. Although many countries have opened their economies to international trade, there are some which still operate in closed economies. Economic analysts have expressed their optimism with open economies citing free flow of goods, services, financial resources, and human capital. Other aspects of a country's economy that are important in strategic management include market regulation, the efficiency of both capital and financial markets, infrastructural development, the degree of skills of its workforce, and minimum wage requirements. A well-function financial market attracts investment due to seamless access to credit and banking services.

The role of social factors in strategic planning of organizations surpasses contemporary globalization discourses. One of the most important social considerations is culture. Amara and Benelifa (2017) while citing Hofstede, posited that cross-cultural management is a critical factor in planning. By this claim, it could be argued that managers in modern companies require a deeper understanding of other countries cultures so that they can manage workforces that are progressively becoming diverse.

In light of Hofstede's model of cross-cultural management, companies are obliged to learn the language, values, and leadership styles preferred in the host country. When companies expand overseas, it is pretty obvious that it will confront new structural orientations and social systems. There is a need for strategic managers to evaluate the implication of this information for designing its premises in the local market in a way that conforms to the existing cultural order. Social values and attitudes are the steering wheels of employee motivation, job satisfaction, work commitment, risk-taking behavior, time management, and chain of command.

Finally, technological advancements remain the driving force of competitiveness in the digitalized global economy. Reports show that technology has become highly disruptive in many aspects of operation (Aldehayyat, 2015). The primary concern of digital marketers is whether a country has functional information and communications technology infrastructure and policy. It is important to consider the diffusion of social media networks that can ensure the success of marketing campaigns. Furthermore, technology promotes product innovation and process innovation for competitive advantage. On the same note, computer technology such as cloud computing reduces information storage and processing costs.

References

Aldehayyat, J. S. (2015). Environmental scanning in business organizations: Empirical...

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