Question

External Environment Analysis (STEEP Analysis) to explore the opportunities and threats. Then, analyse the strengths and weaknesses of your selected firm. Draw a TOWS matrix (SO, ST, WO, and WT). Finally, explore two ideas to cope with the opportunities with the firm's strengths or to overcome threats with firm's strengths. Select the better idea by analysing the potential risks and benefits of each of two ideas.

Answer 1

The STEEP analysis is an approach to conduct the external environmental analysis of organizations. It is a set of factors which are outside an organization’s control but influence its operations such as Sociological, Technological, Economical, Environmental and Political factors. For this analysis, the company Google is considered.

Social factors which affect Google’s operations are as follows:

· Increased preference towards social media

· Growing number of internet users in developing countries

· People are increasingly becoming conscious about sharing their personal data due to allegation against tech companies related to monitoring affecting user privacy

· Establishing regulations to secure intellectual property rights and privacy of users.

Technological factors which influence Google’s operations are as follows:

· The increase in internet connectivity and ease of accessibility to people even in developing countries

· Increasing demand for mobile phones with internet connections

· Growth in cloud based business models

Economic factors which affect Google’s operations are as follows:

· The growth of developing countries has increased the demand for services offered by Google

· The economic growth in its major markets has increased the demand for internet and its subsequent use for information search

Ecological factors include the following.

· The green consciousness of people and the awareness about the implications of environmental hazards

· Strategic partnerships with suppliers adopting sustainable and socially responsible business practices        

Political factors that influence Google’s operations are as follows.

· A large number of free trade agreements between countries allows it to expand globally with ease.

· The stable governments in its target markets support its growth

· The government restrictions on information sharing hinder its operations, especially search engine results.

TOWS Matrix

A TOWS matrix assist in determining the conditions of the business such as its strengths, weaknesses, threats and opportunities as well as strategies to cope up with these conditions for increased business performance.

TOWS Matrix	Strengths Brand identity Support to different languages Ease of accessibility	Weakness Threats from hackers Restricted materials in search results Reduced processing speed due to increase in web traffic
Opportunities Strategic partnerships with social media platforms Increase internet connectivity in developing markets	SO Setting up of strategic alliances with technology companies Market expansion into developing countries	WO Improve processing speed Entering into partnership with local companies in developing countries
Threats Legal claims against privacy issues Competition from other search engine providers Partnership between competing technology companies	ST Setting competitive pricing models Engage in advertising campaigns	WT New product development and budget allocation for research and development Using defensive measures against competitors

Strengths-opportunities (SO) strategies

By setting up strategic alliances, Google would be able to manage costs and gain access to a diversified customer base. This would assist the company to further improve its economies of scale. As the developing nations are showing an increased demand for internet and information sharing, it has to leverage this opportunity to expand into Asian and African regions.

Strengths-threats (ST) strategies

Google has to set competitive prices when compared to its competitors to gain leadership position. This would increase the demand for Google service and reduce the influence of its competitors. To enhance its market share and target its customers, Google has to engage in advertisement campaigns to showcase its services and competitive prices.

Better idea

When comparing the SO and ST strategies, entering into strategic alliances is the best choice. This is mainly because of the advantages in terms of cost and access to customer base. Though there is a risk of knowledge or intellectual property theft of partnered companies, the benefits are higher. Whereas, if Google opts for cost reduction strategy, then its competitors might imitate the same and the customers would assume that quality would reduce with lower price. Though advertising campaigns would be helpful in attracting customers, it is not confirmed that they would opt for Google services. However, with strategic alliances, there is a confirmed access to a varied customer base.