External environment analysis is a key input into strategy formulation. PESTEL is an external environment analysis framework that helps guide your prospecting in the political, economic, social, technological, environmental, and legal spheres of an organization’s external environment. Working inward to the focal organization, we discussed the broad dimensions of the stakeholders feeding into the firm. Porter’s five forces analysis considers (1) barriers to entry and new entry threats, (2) buyer power, (3) supplier power, (4) threat from substitutes, and (5) rivalry as key external environmental forces in developing strategy. The ultimate goal of a Porter’s five forces analysis is to determine the attractiveness or profit potential for the industry.
Strategic Management 2E by John Morris is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, except where otherwise noted.