Placing Organisations in Context

An organisation's context involves its “operating environment.” The context must be 
determined both within the organisation and external to the organisation. It is important to 
understand the unique context of an organisation before starting the strategic planning. 

To establish the context means to define the external and internal factors that the organizations 

must consider when they manage risks. An organization’s external context includes its outside 

stakeholders, its local operating environment, as well as any external factors that influence the 

selection of its objectives (goals and targets) or its ability to meet its goals. An organization’s 

internal context includes its internal stakeholders, its approach to governance, its contractual 

relationships with its customers, and its capabilities and culture (Pojasek, 2013). 

Context matters because it determines the influence and priority of stakeholder roles. It also 

helps determine how readily sustainability programs can be adopted and even whether they can 

help get the organisation to where it needs to be to address its social license to operate. If 

customers or principal stakeholders come from different contexts, this may systematically 

influence the statement of the goals and other operating requirements no matter what kind of 

organisation is involved.

Three valuable tools to establish context for an organisation are : 

1. SWOT Analysis

SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face.

When using SWOT analysis, be realistic about the strengths and weaknesses of your organisation. Distinguish between where your organisation is today, and where it could be in the future. Also remember to be specific by avoiding grey areas and always analyse in relation to the competition (i.e. are you better or worse than competition?). Finally, keep your SWOT analysis short and simple, and avoid complexity and over-analysis since much of the information is subjective. Thus, use it as a guide and not a prescription.

2. Porter's Five Forces

The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.

Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.

3. PESTLE Analysis

PESTLE analysis is in effect an audit of an organisation's environmental influences with the purpose of using this information to guide strategic decision-making. The assumption is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes.

A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an organisation is operating. Specifically a PESTLE analysis is a useful tool for understanding risks associated with market (the need for a product or service) growth or decline, and as such the position, potential and direction for an individual business or organisation.