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External Analysis Tools
While there are probably hundreds of different ways for you to study an
organizations’ external environment, the two primary tools are PESTEL and industry
analysis. PESTEL, as you probably guessed, is simply an acronym. It stands for

political, economic, sociocultural, technological, environmental, and legal
environments. Simply, the PESTEL framework directs you to collect information
about, and analyze, each environmental dimension to identify the broad range of
threats and opportunities facing the organization. Industry analysis, in contrast, asks
you to map out the different relationships that the organization might have with
suppliers, customers, and competitors. Whereas PESTEL provides you with a good
sense of the broader macro-environment, industry analysis should tell you about the
organization’s competitive environment and the key industry-level factors that seem
to influence performance.
KEY TAKEAWAY
Strategy formulation is an essential component of planning; it forms the bridge
that enables the organization to progress from vision and mission to goals and
objectives. In terms of the P-O-L-C framework, strategy formulation is the P
(planning) and strategy implementation is realized by O-L-C. Corporate strategy
helps to answer questions about which businesses to compete in, while business
strategy helps to answer questions about how to compete. The best strategies are
based on a thorough SWOT analysis—that is, a strategy that capitalizes on an
organization’s strengths, weaknesses, opportunities, and threats.
EXERCISES
1. What is the difference between strategy formulation and strategy
implementation?
2. What is the difference between business strategy and corporate strategy?
3. What are some of the forms of diversification, and what do they mean?
4. What do you learn from a SWOT analysis?
5. In SWOT analysis, what are some of the tools you might use to
understand the internal environment (identify strengths and weaknesses)?
6. In SWOT analysis, what are some of the tools you might use to
understand the external environment (identify opportunities and threats)?
5.2 How Do Strategies Emerge?
LEARNING OBJECTIVES
1. Understand the difference between intended and realized strategy.
2. Understand how strategy is made.
3. Understand the need for a balance between strategic design and
emergence.
How do the strategies we see in organizations come into being? In this section,
you will learn about intended and realized strategies. The section concludes with
discussion of how strategies are made.
Intended and Realized Strategies
The best-laid plans of mice and men often go awry.
Robert Burns, “To a Mouse,” 1785

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