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External analysis

Quantitative techniques

There are two ways to estimate what direction an organisation may develop in the
future:

 qualitative techniques – e.g. PESTEL, 5 forces. Ignore past results. Aim to
predict the organisations future based on an analysis of its environment.

 quantitative techniques – e.g. linear regression, time series analysis. Ignore
changes in the environment. Aim to predict the organisation’s future based on
past results.

For strategists, qualitative techniques are likely to be more useful.

In an examination, you might be presented with an organisation which has used
quantitative techniques to predict an organisation’s future. There will be two things for
you to do:

– Explain the technique used

– Explain why it is unlikely to be useful for estimating the future (most importantly,
how it has ignored expected changed in the organisation’s environment).

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