Page 44 - BA1 Integrated Workbook STUDENT 2018

Chapter 4

Pros and cons of external analysis

6.1 Advantages of external analysis

Advantages include:

 helps the business identify threats and opportunities

 assessment of competition

 ensuring stakeholder needs are met

 help the organisation to understand its position – allowing it to create
suitable strategies

6.2 Drawbacks of external analysis

Drawbacks mainly surround the accuracy of external analysis – many
industries are now very volatile due in part to:

 changing technology

 weakness in the global economy (may affect predictability of demand
for products or services)

 globalisation (companies are now affected by events in many
different markets)

 development of high-growth emerging economies (the so-called
BRIC economies in particular)

In addition, external analysis (and especially over-reliance on models) can suffer
from both bias and bounded rationality.

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