Approaches to Internal and External Environmental Analysis

This presentation discusses the approaches to internal and external environmental analysis in strategic marketing. It covers techniques such as McKinsey 7-S Framework, Resource-based Analysis, Portfolio Analysis, PEST/PESTLE Analysis, and Competitor Analysis. It also explores the integration of internal and external analysis using the SWOT analysis approach. The presentation provides insights into how these analyses help organizations in developing strategies and attaining competitive advantage.

TASK 2
Strategic marketing

2.1 Approaches to Internal
Environmental Analysis
The internal environment of an organization is
constituted from the various conditions, events and
factors within the entity and has a major impact on the
behavior of the stakeholders working within it
The mission statement, leadership and management
style, working culture etc. are considered a part of the
internal environment. This analysis determines the
resources of the company which generate the strengths
and weaknesses of the enterprise

Contd.
The following are some of the techniques evolved to
analyze the internal environment:
Mc - Kinsey 7-S Framework: It is a Value based
Management Model to organize a company holistically
and effectively. Shared value, Strategy, Structure,
System, Staff, Style and Skill are the 7-S which are
analyzed
Resource-based Analysis: It aims at gaining
competitive advantage by exploiting external
opportunities with the use of available resources in an
innovative manner rather than developing new skills
for individual opportunities.

Contd.
Portfolio Analysis: It analyzes various elements of
product mix to ascertain the optimum allocation of its
resource by plotting it on a matrix. IKEA has adopted
this technique by rating the available products and
services as per the demand in the market. This has
enabled the company to ascertain which area requires
more time and money and which requires less.

2.2 Approaches to External
Environmental Analysis
The external environment of an organization are
factors existing outside the organization and has a
great impact on its functions. Some of them can be
controlled by the marketing strategies while others
cant be controlled and hence, the company is required
to adjust according to them.

Contd.
 The following techniques can be adopted to analyze the external
environment of an organization:
 PEST/PESTLE Analysis: PEST analysis examines the external
forces which have a great impact on the functioning of an
organization and are beyond the control of the management.
Political, Economic, Social and Technological factors are
examined and analyzed by PEST. In addition to the stated factors
if legal and environmental factors are also incorporated in the
study it constitutes to be PESTLE Analysis.
 The use of PEST and PESTLE varies from the nature of the
organization and the requirements attached to it. IKEA has
adopted this approach to analyze the external factors and
particularly analyzes the role of government as well as the level
of intervention in the economy and the business world.

Contd.
Competitor Analysis: This approach analyzes the
strengths and weaknesses of the existing as well as the
potential competitors. It further identifies the threats
and opportunities the company may face in the
identified scenario.

2.3 Integration of Internal and
External Analysis
In order to develop strategies in pursuance of attaining
competitive advantage, it is imperative to create a fit
between the internal and external environment.
Various tools and techniques have been developed for
the integration, however IKEA has adopted the SWOT
analysis approach as it is one of the most enduring one.

Contd.
It is an empirical analysis which helps the company
determine the weaknesses of its business and accordingly
manage and eliminate threats, that the company might have
to face. The strengths and weaknesses are internal to the
organization whereas the the opportunities and threats are
the external factors affecting the functions of a company.
Hence, adopting such an integrated approach has assisted
IKEA in effectively managing resources and further
knowing the core competencies. The managers of the
company are able to understand the performance of the
company in connection to the value chain of sourcing and
marketing.

REFERENCES
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Upper Saddle River: Pearson.
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strategy and its influence on a firm's performance. Journal of
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 Wilson, R.M. and Gilligan, C., 2012. Strategic marketing
management. Routledge.
 Varadarajan, R., 2010. Strategic marketing and marketing
strategy: domain, definition, fundamental issues and
foundational premises. Journal of the Academy of Marketing
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 Drummond, G., Ensor, J. and Ashford, R., 2010. Strategic
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 Wilson, R.M., 2010. Strategic marketing planning. Routledge.

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