Discussion Reply: Strategy Development, Strategy Decisions, and Decision ModelsYou will reply to one of your classmate’s thread.Minimum of 250 words in the body.Minimum of 2 sources from the literature in addition to course texts.Use bolded headings below in the reply.Current APA format must be used.Use the following Outline:• Summary – Sumarize the author’s original thread in no less than 125 words.• Critique – Discuss what you agreed with, did not agree with and why in no less than 125words.Support your factual assertions with citations.
Introduction
Organizations do not exist in silos. Instead, they operate within a complex and ever-changing external environment that is outside of the organization’s control but strongly impacts their business. Therefore, it is vital for companies to analyze their unique external environment during the strategic planning process. The process of evaluating the external environment includes assessing the macro-environment in which the company exists as well as the specific industry and competitive environment for the business (Gamble et al., 2024). One key source of weakness in the external environment is low barriers of entry for new competitors. Finally, SWOT, PESTEL, and Five Forces are decision-making models that can assist in the evaluation of the external market.
Process: Evaluating the External Environment
To accurately assess the external environment of an organization, it is important to look at both the macro-environment as well as the industry and competitive environment. The PESTEL analysis is useful in evaluating the external macro-environment (Gamble et al., 2024). As indicated by PESTEL, the broad, macro-environment includes analyzing various political factors, economic conditions, sociocultural aspects, technological facets, environmental considerations, and legal/regulatory circumstances that can potentially impact the internal business operations or performance. This assessment should cover relevant areas within each section, such as tax policy, average consumer income, changing societal values, technology advancements, severe weather predictions, and safety regulations. This look at the macro-environment will provide business leaders with valuable information for strategic planning.
Once the macro-environment has been evaluated, companies should then move to analyzing their industry and competitive market. This assessment, commonly done using Porter’s Five Forces Model, should include analyzing the bargaining power of suppliers, bargaining power customers, and the various competitors (Gamble et al., 2024). The Five Forces Model breaks the competitors into three sections – rivals or current competitors, potential new entrants into the industry, and substitute goods for their offerings. Examining each area of the industry a firm operates in will provide knowledge on how best to achieve competitive advantage.
In addition to the previously mentioned models for external environment analysis, firms can also investigate four common components of the external environment – complexity, dynamism, hostility, and benevolence (Suder, 2025). These have been used to assess competitive advantage, firm performance, and entrepreneurial orientation. In recent research, Suder (2025) was able to use these four components to identify that the external environment is a strong driver of internal entrepreneurial orientation. A comprehensive analysis of the external environment, ideally utilizing the three assessments mentioned, assists business leaders in making strategic decisions about the organization. Finally, after thoroughly assessing the current state of the external environment, it is important for leaders to take their analysis one-step further and examine the future trends apparent in their external environment.
Strategic Thinking: Key Source of Weakness
When evaluating the external environment, business leaders will undoubtedly identify various sources of both power and weakness. One of these weaknesses stems from the industry easily allowing for new entrants (Gamble et al., 2024). Low barriers to entry can allow for a flood of new entrants, or new competitors, which poses a significant risk to the organization. Natural barriers to entry, such as the need for highly specialized equipment or knowledge, exist on their own and naturally make it more difficult for new entrants (Overstreet, 2020). Artificial barriers to entry, such as patents or fees, are put in place to intentionally deter competition. An industry with low-barriers to entry allows for new entrants into the market without any hassle. One example of this can be seen in the entertainment industry, as the low-barriers to entry in video sharing platforms like TikTok allow for any number of competitors to enter the industry (Chen & Wang, 2023). While TikTok videos may not be a direct competitor to entertainment giants like Disney, they would still be considered a substitute competitor as many consumers may shift the time normally spent watching Disney movies and shows to watching content on TikTok. Therefore, this low barrier to entry of new video content creators is a weakness for established entertainment companies. It is important for organizational leaders to understand if there are low barriers to entry in their external competitive environment, as this weakness will need to be carefully monitored. This weakness could allow for competitors to enter the market without much warning, which creates a highly competitive arena to operate in. Firms may need to respond by further differentiating their offerings or devising another strategy that directly addresses the threat of new entrants.
While low barriers to entry may be a weakness for established industry firms, arguments can be made that high barriers to entry are actually negative for society as a whole. This is because high barriers to entry, particularly the artificial ones, make it difficult for the low-income population to open businesses (Overstreet, 2020). As a result, the high barriers to entry have been shown to maintain any existing income inequality. Barriers that are too high can also decrease healthy competition in an industry, potentially leading to monopolies or oligopolies.
Decision Model
Admittedly, my experience evaluating the external environment of an organization is limited. However, I have used a lighter version of Porter’s Five Forces as well as SWOT in this analysis. As the opportunities and threats areas of SWOT are focused on the external environment, that has been the most common external analysis I have done. I have served on a Strategic Planning Team at my church and previous places of employment on several occasions and each time the only external environment analysis completed was within SWOT. While this simplifies the analysis, it certainly does not provide a comprehensive examination. The external analysis within SWOT relies on leaders to determine what areas of the environment are being considered. I know that many areas included in the PESTEL and Five Forces Models were not considered at all. And, if they were, it was not at adequate depth. This certainly hinders the strategic planning process and execution. In the future, I am hoping to use a combination of SWOT, PESTEL, and the Five Forces to achieve a well-rounded view of the external environment.
Conclusion
The external environment of an organization greatly affects the success or failure of the firm’s strategic plan. Therefore, it is important for business leaders to carefully move through the process of fully evaluating the external environment. One weakness that may be identified within the external industry environment is a low barrier to entry for new competitors. This weakness should be closely monitored and considered in the strategic plan. Finally, while I have mainly used SWOT in making decisions regarding the external environment in the past, I acknowledge that SWOT does not provide adequate depth in assessing every aspect of the external environment. Combining multiple decision models, such as SWOT, PESTEL, and the Five Forces would be a better approach.
References
Chen, L., & Wang, Y. (2024). Platform investment and creators’ quality choice. Managerial and Decision Economics : MDE., 45(5), 2854–2867. https://doi.org/10.1002/mde.4178
Gamble, J. E., Peteraf, M. A., & Thompson, A. A., Jr. (2024). Essentials of strategic management: The quest for competitive advantage (8th ed.). McGraw-Hill Education.
Krogerus, M. & Tschappeler, R. (2017). The decision book. W. W. Norton & Company.
Overstreet, D. (2020). The negative impact of barriers to entry on income inequality. Economic Affairs (Harlow), 40(3), 344-357. to an external site.
Rumelt, R. (2017). Good strategy bad strategy: the difference and why it matters. Profile Books.
Suder, M. (2025). Determinant or moderator? exploring the role of the external environment in the relationship between dimensions of entrepreneurial orientation and firm performance. evidence from the hotel industry. International Entrepreneurship and Management Journal, 21(1), 87. to an external site.
Appendix
Annotated Bibliography Source 1
References
Suder, M. (2025). Determinant or moderator? exploring the role of the external environment in the relationship between dimensions of entrepreneurial orientation and firm performance. evidence from the hotel industry. International Entrepreneurship and Management Journal, 21(1), 87. to an external site.
Summary of Key Points
The goal of this article, and included research study, is to determine how much the external environment of a firm affects entrepreneurial orientation (EO) and firm performance (Suder, 2025). EO is broken down into the dimensions of proactiveness, innovativeness, and risk taking. Instead of using PESTEL or Porter’s Five Forces models to evaluate the external environment, Suder uses four categories to do so – complexity, dynamism, hostility, and munificence. The study indicates that the external environment is less a moderator and more a driver of EO, showing how important the external environment is to the internal business proceedings. The areas in the external environment of complexity and dynamism have the strongest effect on shaping EO. Ultimately, the right external environment can create entrepreneurial orientation in a firm and this can be used to increase firm performance.
Evaluation of the Quality of the Publication
The article appeared in the publication titled International Entrepreneurship and Management Journal. It is a scholarly, peer reviewed international journal that examines entrepreneurship in various contexts. The journal focuses on research that has implications for business leaders, making it a useful tool for looking at practical business strategy. The first volume of the journal was in 2005. While this is newer compared to other journals, two-decades of existence still instills confidence in the publication. The journal has both open-access and subscription model.
Evaluation of the Quality of the Author(s)
Marcin Suder is a Management Faculty member at the AGH University of Krakow in Poland. He has 78 publications related to various entrepreneurship, management, and finance topics. His publications have been regularly cited. Unfortunately, aside from the fact that he has a Ph.D., I was unable to find much more information about him. This could be because he is in Poland. However, the information I was able to ascertain does support his credibility in entrepreneurial research.
Where this fits into the discussion
This source will be used present an additional model for assessing the external environment, using the four areas discussed by Suder. This will be included in the Strategy Process section to expand on other information about a comprehensive external analysis. As Suder extrapolates on an external environment analysis by showing the relationship between the external environment and entrepreneurial orientation, this will be used as an example of how the external environment analysis can provide valuable information to business leaders.
Annotated Bibliography Source 2
References
Overstreet, D. (2020). The negative impact of barriers to entry on income inequality. Economic Affairs (Harlow), 40(3), 344-357. to an external site.
Summary of Key Points
This source by Overstreet (2023) discusses how barriers to entry affect income inequality. The author discusses both natural and artificial barriers to entry, with particular focus being put on the artificial barriers. These artificial barriers, typically created by the government, make it more difficult for new competitors to enter a specific industry and thus protect the current players in that market. The negative effects of income inequality are presented. The research determined that barriers to entry increase income inequality. Additionally, areas with high barriers to entry typically have higher income inequality.
Evaluation of the Quality of the Publication
The article was published in a peer-reviewed, scholarly journal titled Economic Affairs. The journal is associate with Wiley, a well-known educational publisher. The journal began in 1980 and has a focus on applying economic principles the real-world problems. The application emphasis makes this journal a good source for applied business strategy research. Interestingly, the journal encourages new authors to submit their writings, which seems to support the assertions in the cited article promoting low-barriers to entry. While this does assist new researchers in getting published, it hopefully does not decrease the quality of the research selected for publication.
Evaluation of the Quality of the Author(s)
Dallen Overstreet is a PhD candidate at Arizona State University, in the School of Public Affairs. He has a Masters in Public Policy and Bachelors in Economics, both from Arizona State University. While still in his doctoral journey, Overstreet has already published several peer reviewed articles on public policy and economic topics, including the one cited here. It does decrease the credibility of the article that Overstreet has not yet received his PhD. However, the research presented in the article was thorough.
Where this fits into the discussion
This source will be used to provide an opposing view of low barriers to entry. While low barriers to entry are a power source for existing firms, they can have negative effects that should also be considered. This source will also be used to identify the two types of barriers to entry – natural and artificial.
