Which analysis technique assesses political, economic, social, technological, environmental, and legal factors to identify external opportunities and threats?

• A. PESTEL analysis
• B. VRIO framework
• C. Value chain analysis
• D. Porter's Five Forces

Answer: (A)

The main idea here is examining the broad external environment to spot opportunities and threats that could affect strategy. PESTEL analysis does exactly that by organizing factors into six areas—Political, Economic, Social, Technological, Environmental, and Legal. By systematically assessing each domain, you can uncover trends, regulations, market shifts, or environmental pressures that could open up opportunities or create risks for the business.

This approach is distinct from the others because it focuses on the external macro-environment rather than internal resources, activities, or competitive forces. VRIO looks at internal resources and capabilities to gauge competitive advantage. Value chain analysis dissects internal activities to understand cost and value creation. Porter's Five Forces examines how industry structure shapes rivalry and profitability. None of these cover the full external macro-environment as comprehensively as PESTEL.