External Issues Relationship to the Company Scope
The scope of the company explains what the company does and doesn’t do. If it is a steel stamping shop it is unlikely the company also makes cotton candy. If you manufacture parts for a specific industry, your company may not do any design and development. Scope talks about what products and services the company provides. Internal issues are within the company’s control. External issues are usually outside the company’s control. With external issues all the company can do is monitor and react, it cannot control the issues.
External Issues Models
Models used in strategic planning or market research are useful in identifying external issues. There are a large number of models available. One that is effective is PESTEL but any model that allows the company to identify external issues and define how to monitor and react to them can be used.
External Issues Using PESTEL
PESTEL stands for
- Political – taxes, tariffs, labor laws, trade restriction
- Economic – economic growth, interest rates, exchange rates, inflation
- Social – population growth, age distribution, attitudes toward careers and minorities, safety concerns
- Technological – R&D activity, automation, rate of change, production efficiency
- Environmental – weather, climate
- Legal – discrimination, consumer, employment, health and safety, consumer law
Risks and Opportunities with External Issues
The following table shows some examples of an issue, a single concern, the potential risks and opportunities and a method of monitoring them. Most companies will have multiple concerns for each issue.
|Political||Tariffs||Reduces ability to export||Reduces external competition||Monitor USITC|
|Economic||Interest rates||Limit capital availability||Increase capital availability||Meet with bank quarterly|
|Social||Aging population||Smaller workforce||Increased demand for certain products||Strategic planning and Annual Management review|
|Technological||Changing markets||No demand for current products||Large demand for innovation||Industry specific information sources|
|Environmental||New laws||Require investment||Provide new markets||Monitor EPA regulations quarterly|
|Legal||Consumer laws||Increased cost to manufacture||Limits new competition||Set google alerts|
Conclusion – External Issues
The risks and opportunities of external issues can be handled in a very similar manner to internal issues. A key difference between the two is how much control the company has. With internal issues the company management should be able to evaluate and adjust to influence or change the outcome. With external issues the company can only react to the issues.
By looking at the Interested Parties, Internal Issues and External Issues a company can have a better understanding of the business risks and opportunities. With this information they can select a strategic plan which best directs the company to obtain a long-term goal of profitability and longevity.