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CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment

A packaged-snacks company in India is studying the broad forces outside its control that affect the whole industry, such as tax policy, consumer demographics, technology shifts and environmental regulations. Which of the following describes this activity?

The activity is analysis of the macro environment using the PESTEL framework. Taxes, demographics, technology and environmental rules are external forces that affect all firms in the industry, whereas value chain and strengths concern internal analysis and a single competitor comparison is much narrower.

  1. AAnalysis of the macro environment using the PESTEL frameworkCorrect
  2. BAnalysis of the firm's internal value chain
  3. CPreparation of a SWOT matrix limited to strengths
  4. DBenchmarking against a single direct competitor

Explanation

Political, economic, social, technological, environmental and legal forces beyond the firm's control make up the macro environment, and PESTEL is the framework used to scan them. The value chain and strengths relate to the internal environment, and benchmarking a single competitor is too narrow for macro forces.

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