Companies always operate in a certain environment; the formulation and implementation of business strategy are also restricted by the particular environmental factors. (Osborn & Hunt 1974) In other words, environment decides the enterprises’ strategy, decisions making, organizational structure and management styles. The environmental awareness has become the starting point of the environment analysis. (Sethi 1979) In general, the corporate strategy has two environment factors to consider, internal and external environments. Furthermore, because the influence degrees are different, the outside environments divide into the macro environment and industry environment. The productivity and operation of modern enterprises have been increasing impact from the external environment. (Osborn & Hunt 1974)
The strategic management for the organization need has an overall and objectives analysis about the change of the external environment, based the research result to set up the organizational goals and strategy plans. The enterprise and its external operation conditions are in an interaction and interrelated relationship.(Osborn & Hunt 1974) The purpose of study on the peripheral environment is supporting a chance to the organizations to finger out the possible developing opportunity and potential threat, use them to be the conditions and limitations to develop the business strategy. (Sethi 1979)
There have a close contact between business and environment. On the one hand, the environment is the basis for enterprise survival, the elements the business needs all obtained from the external environments, such as human resource, materials, energy, capital, technology, information, etc. Meanwhile, the company's products must be marketed through the external market. On the other hand, the company is a kind of dynamic social organization, it is not only been dictated by the environment, but also be adapted to the environment and impact on it, promoting social progress and economic prosperity. (Sethi 1979) So, the companies must analysis the environment and adapt to being survive and development.
Generally, corporations divide their macro environment into four main pieces to analysis; they are Politics, Economics, Social and Technology. It called PEST analysis, firms through indentifies the change of PEST factors to effect on their organizational strategic managements.
Michael Porter’s Five Forces Model provides a healthy and time-tested framework for analysing the industry environments, reflected in the strength of the five forces. (Porter 1980) This framework provides a basis for firms to recognize the opportunities and threats. To analysis these five forces determines the ultimate profit potential in an industry, where profit is measured in terms of long term returns on capital invested (Porter 1980).
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