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of global markets, a country’s borders no longer restrict industry structures. In fact,
movement into international markets enhances the chances of success for new
ventures as well as more established firms. [12]
Following study of the five forces of competition, the firm can develop the

insights required to determine an industry’s attractiveness in terms of its potential to
earn adequate or superior returns on its invested capital. In general, the stronger
competitive forces are, the lower the profit potential for an industry’s firms. An
unattractive industry has low entry barriers, suppliers and buyers with strong
bargaining positions, strong competitive threats from product substitutes, and intense
rivalry among competitors. These industry characteristics make it very difficult for
firms to achieve strategic competitiveness and earn above-average returns.
Alternatively, an attractive industry has high entry barriers, suppliers and buyers with
little bargaining power, few competitive threats from product substitutes, and
relatively moderate rivalry. [13]
KEY TAKEAWAY
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.
EXERCISES
1. What are the six dimensions of the environment that are of broad
concern when you conduct a PESTEL analysis?
2. Which of the PESTEL dimensions do you believe to be most important,
and why?
3. What are the key dimensions of a firm’s microenvironment?
4. What are the five forces referred to in the Porter framework?
5. Is there a dimension of industry structure that Porter’s model appears to
omit?

5.6 Formulating Organizational and Personal Strategy With the Strategy
Diamond
LEARNING OBJECTIVES
1. Learn about the strategy diamond.
2. See how you can add staging, pacing, and vehicles to the strategy.
3. Use the diamond to formulate your personal strategy.
This section introduces you to the strategy diamond, a tool that will help you
understand how clearly and completely you have crafted a strategy. The diamond
relates to both business and corporate strategy, and regardless of whether you are a
proponent of design or emergent schools of strategizing, it provides you with a good
checklist of what your strategy should cover. The section concludes by walking you

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