There are Two Fundamental Assumptions that Underpin Environmental Analysis$-$

First, strategic analysis assumes that it is possible to learn from past events. This assumption is important because strategy is essentially about future actions.

Second, such a study implicitly assumes that the future is predictable in some way $$ otherwise, there would be little point in drawing any lessons from the analysis. Both these assumptions may rest on shaky foundations.

'Learning from the past' may examine a strategic environment with strategic perceptions and definitions that no longer apply: for example, the traditional market for air travel has been revolutionised by redefining it as being just like getting on a bus where aircraft seats are readily available without lengthy booking procedures.

In the same way, $$predicting the future$$ always runs the risk of making an incorrect prediction: for example, who would have predicted $15$ years ago how the AI would develop?

Perhaps, in developing new strategies, we cannot learn much from the past. Perhaps we cannot usefully predict the future. In which case, what purpose is served by PESTEL Analysis, Porter$$s Five Forces, etc.?

Task:

Critically discuss the role and purpose of external business environment analysis in strategy formulation.