Strategic Environmental Analysis Frameworks: PESTEL, SWOT, and Porter’s Five Forces

STRATEGIC ENVIRONMENTAL ANALYSIS SYSTEM
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Strategic Environmental Analysis System
Introduction
Organizations often face similar opportunities and environmental conditions but tend to perform differently. The argument made for such observations is that differences in strategy yield different results even when conditions are similar. Therefore, strategic management is critical for the success of a business. Strategy can be described as the course of action that is designed to contribute toward the achievement of organizational goals. A good strategy has to consider all environmental factors, both internal and external. Strategic management would involve using the appropriate tools in examining the environment and making critical decisions.
The position taken in this paper is that PESTEL analysis, SWOT analysis, and Porter’s five forces are the most essential analysis frameworks for external and organizational environments. The reasoning for this position is that they allow firms to consider all possible environmental factors, both internal and external. Additionally, the frameworks are comprehensive and offer different approaches to the business environment. Combining all three helps a business understand its position in a market and design internal processes in response to the forces outside the organizational environment. As for Porter’s five forces, the strategic importance of the framework is that it is competition-oriented, which means that it seeks to place the organization ahead of its rivals. SWOT and PESTEL often analyze the opportunities and barriers to determine how a company should respond to improve various performance metrics.
Strategic Environmental Analysis Frameworks
As mentioned earlier, the three selected frameworks for examining external and organizational frameworks are PESTEL analysis, SWOT analysis, and Porter's five forces. This section described in detail the elements of each of the frameworks and how they help in the strategic management of a business.
PESTEL Analysis
PESTEL framework is a management tool used to examine the external environment of a business. The framework is an acronym for the six external environmental factors: political, economic, social, technological, environmental, and legal. The political environment comprises government activities that deal with policies, regulations, and other issues influenced by the country’s political situation. A stable political regime means greater possibilities and chances for success. Political instability is a key hindrance to business and economic activity. The economic environment comprises issues in the country’s economy, including growth, labor availability of shortages, interest rates, and inflation among others. A country’s economy hints at the prospects of a business, for example, favorable interest rates make it easier for businesses to access capital.[Aminul Islam, “SWOT mix and PESTEL analysis: effective tools of risk management of leasing companies”, The Millennium University Journal, 2, no. 1 (2017): 13.] [Wei Pan, Le Chen, and Wenting Zhan, “PESTEL analysis of construction productivity enhancement strategies: a case study of three economies”, Journal of Management in Engineering, 35, no. 1 (2019): 7]
The social environment depicts such aspects as cultural settings, population growth trends, attitudes towards careers, products, and services, and levels of literacy. Negative attitudes toward a business' products, services, or activities will hinder its establishment and success, similar to how low education levels cause labor shortages and derail the performance of the company. The technological environment implies the technological developments taking place within a country. Today, businesses that have embraced modern technologies, including the internet, computers, and social media, have recorded astounding growth and success. The availability of the technologies and the relevant supporting infrastructures determine a company's ability to implement the relevant systems to help boost performance. Failure to adopt new technologies can spell doom for a business. similarly, attempts to implement new technologies can be expensive capital investments for a business, which means that technology is a barrier to success when it is beyond the reach of firms.[Pan, Chen, and Zhan, “PESTEL analysis”, 7]
In terms of the natural environment, every business has different implications in terms of greenhouse gas emissions, energy consumption, pollution, and damage to the natural environment through such activities as exploitation of natural resources. The result has been accelerated climate change and the danger it currently poses to human beings and other species on the planet. Today, companies are under severe pressure to reduce their negative impacts on the environment from such stakeholders as the government, environmentalists, consumers, and even the general population. Lastly, the legal environment comprises the legislations of a country regarding various aspects of the business. For example, the construction business would be governed by sustainability laws and related government legislations, including workplace safety. The legal environment determines what business activities are allowed and those that are deemed illegal. Businesses have to comply with the legal environment to avoid expensive lawsuits or even closure of the business.[Pan, Chen, and Zhan, 8.]
Overall, the PESTEL framework is critical for the strategic management efforts of a business. The external environmental factors are all categorized under the six elements of this framework. Therefore, PESTEL becomes the most important framework for examining the external environment. The framework is relevant for any business since the environmental factors apply to all businesses. however, those businesses that respond better to these factors can record better performances than those that fail to integrate them into their strategic planning and management.
SWOT Analysis
SWOT analysis is another one of the most important frameworks for examining the external and organizational environment. As opposed to the PESTEL method that focuses on the external environment, the SWOT framework addresses concerns from both the external and internal environment. SWOT is an acronym for strengths, weaknesses, opportunities, and threats, where the first two are internal and the latter two externals. According to, many compan...