Unit 2 - The external Environment

Learning Objective

This unit on Environmental Analysis includes the study of the organizational environment which outlines all the environmental factors that can significantly influence your company operations. It will help you understand what is happening both inside and outside your company and it will provide suggestions and methods on how to integrate environmental analysis into your business strategy. In order to perform an environmental analysis, managers must first understand how organizational environments are structured. This section considers both the contextual and the transactual environment, including tools such as Porters 5 forces model, the notion of Industry structure and "Strategic Groups". Lastly, competitive or technological threats are highlighted.

Estimated Time

It should take you around 90 minutes to complete this unit.


The external environment is a crucial factor that determines to a great extent the success of your company. You have to fulfil customer expectations, while on the other hand suppliers must provide you with important resources. Technology is the driving force behind your processes and your competitors want to expand their market shares at the cost of your company. Porter´s Five Forces model will help you analyse all stakeholders and your company position in terms of the competition. Strategic groups are another, more detailed way to observe your company´s position with regards to market competition.