Significance of Environmental Analysis Essay Example

Significance of Environmental Analysis Paper Environment refers to all factors, the forces of influence of which have a bearing on functioning of the business. These factors may be internal such as the personnel and internal mechanism of the organization; or external such as competition, government policies, customer preferences, etc. Internal factors are controllable in nature. They include human resources, financial strength, marketing resources, physical assets, technological competitiveness, management structure and nature, company image and brand equity, value system, etc. These factors highlight the strengths and weaknesses of the organization. Weaknesses must be minimized or they may prove fatal to its survival. External factors are beyond the control Of the organization. They refer to the external environment – Macro-environment (General environment) as well as Micro-environment (Operating environment). Micro-environmental factors tend to have a direct impact on the firm and are more intimately linked with the company than Macro-environmental factors. Micro- environmental factors include customers, competitors, channel intermediaries, suppliers, etc. Macro-environmental factors may be Demographic such as population size and density, literacy rate; Economic such as economic and fiscal policies of government, national and international trade situation, demand and supply factors; Physical environment and ecological factors such as availability Of natural resources, pollution situation; Technological factors such as availability of latest and competitive technology; or Political and Legal factors such as structure of legislature and stability of ruling political party. The success of every business firm or organization depends on adapting itself to the environment within which it operates. For example, when there is a change in the government policies, it has to make necessary changes to adapt it to new policies. Similarly, a change in technology may render existing reduces obsolete, as we have seen that the introduction of computer has replaced the typewriters. Again a change in the fashion or customers’ taste may shift th e demand in the market for a particular product, e. We will write a custom essay sample on Significance of Environmental Analysis specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Significance of Environmental Analysis specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Significance of Environmental Analysis specifically for you FOR ONLY $16.38 $13.9/page Hire Writer . , the demand for jeans reduced the sale of other traditional wear. Hence, it is very necessary to have a clear understanding of the concept of business environment and the nature of its various components. Strategic Management Every business must have a strategic management mechanism in order to ensure its survival in the present competitive world. Strategic management involves formulating, implementing and evaluating Ross functional decisions that will enable the organization to achieve its objectives. It is the process of specifying the organization’s objectives, developing policies and plans to achieve these objectives and allocating resources to implement the policies and plans to achieve the organization’s objectives. It, therefore, combines the activities of all the various functional areas. It ensures correct direction for the enterprise. Strategic management does not replace traditional management activities such as budgeting, planning, monitoring, marketing, reporting and controlling. Rather, it integrates them into a broader context, taking into count the external environment, internal organizational capabilities and organization’s overall purpose and direction. It is an ongoing process that assesses the business environment, sets goals and plans to meet the prevailing competitiveness, and evaluates the performance of the enterprise, thus creating a fit between the organization and its external environment and providing a process of coping with change and organizational renewal. STRATEGIC MANAGEMENT PROCESS [pick] Environmental Analysis Organizations scan the environment in order to understand the external forces of change so that they may develop effective responses which secure r improve their position in the future. They scan in order to avoid surprises, identify threats and opportunities, gain competitive advantage, and improve long- and short-term planning. Organizations usually scan their environments randomly, regularly as well as continuously. To the extent that an organization’s ability to adapt to its outside environment is dependent on knowing and interpreting the external changes that are taking place, environmental scanning constitutes a primary mode of organizational learning. Environmental scanning includes both looking at information (viewing) and looking for information (searching). Environmental scanning is considered as one of the critical ingredients in the strategic formulation process. It can provide early warning signals to organizations from emerging environmental uncertainties, risks, threats and opportunities and hence reduce the chance of being blindly shielded. With effective environmental scanning, organizations would be able to obtain more accurate market and industry insights, and thereby be more likely to satisfy current customers and explore new market segments, successfully develop and market a new product or service based on trend analysis, or establish a utter brand image, all Of which would ultimately contribute to the financial performance. MEANING DEFINITION Environmental Scanning means an examination and study of the environment of a business unit in order to identify its survival and prosperity chances. It means observing the business environment both external and internal and understanding its implications for business opportunities. It also involves knowing beforehand the risks and uncertainties as well as threats to the business unit. Environmental Analysis is the monitoring, evaluating and disseminating of information from the external and the internal environment to key people thin the organization. It IS a process of gathering, analyzing and dispensing information for tactical or strategic purposes. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering. Definitions â€Å"The process by which strategists monitor the economic, governmental/ legal, market/competitive, supplier/technological, geographic and social settings to determine opportunities and threats to their firms† â€Å"Environmental Analysis is the monitoring evaluating and disseminating f information from the external and the internal environment to key people within the corporation† Conceptual Map [pick HISTORY The idea of environmental scanning was developed by Jugular (1 967: Introduction). Jugulars definition was widely adopted in scanning literature (e. . , Albright in 2004; Coho in 1993. Later studies reinforced his definition without substantially altering this perspective, but more attention was given to searching than viewing, and environmental scanning was gradually extended to be a more complete and systematic information process. Daft and Wick (1984) looked at environmental scanning as an organization learning process, which could be divided into scanning (information seeking), interpretation (giving meaning to the collected data) and learning (taking action based on the data). Lester and Waters (1989) defined environmental scanning as a management process with three key components, I. E. Obtaining, analyzing and using information about the environment. Hough and White (2004) view environment scanning as a sequence of procedures of identifying, collecting, processing and translating information about external influences into useful decisions and plans. Albright (2004) defined environmental scanning as the internal immunization of external information about issues that may potentially influence an organization’s decision-making process. Albright suggests that a formal environmental scanning process has five integrally linked steps: identifying the organization’s scanning needs of the organization, gathering the information, analyzing the information, communicating the results, and making informed decisions. IMPORTANCE Environmental Scanning is essential because of following reasons: 1) Prime Influence Environment is a prime influence on the effectiveness of business strategies. If strategic planning is done without considering environment, it is keel to be defective. Besides, the success of the implementation of the strategy depends on the environmental factors. 2) A tool to anticipate Changes Environmental scanning is a very useful tool not only to understand business surroundings, but also as a good instrument to anticipate the changes and be prepared to face the challenges of such changes. 3) Time for adjustment A business unit cannot change the business activities overnight. It needs time to adjust with the changing environment. If it has to face the changed environment suddenly, it may be possible to make immediate hangers according to the demand of the changed environment.