Business Environment Analysis

Environment Analysis is a systematic process to identify environmental factors, assess the nature and impact of these factors, auditing their impact on the business, and positioning the various profiles to arrive at conclusions to formulate the right strategies.

Environment Analysis Process consists of scanning, monitoring, analyzing and forecasting.  Environment Analysis is a dynamic process.  It keeps changing depending on the situations.

Identifying Environment Factors: Internally, the factors include systems, internal structure, strategies followed, and culture of the organization.  These are functional areas.

Externally, the business interacts with the customers, competitors and suppliers; also other stakeholders such as trade unions, media, and pressure groups.  Add to these the social, political, economic and technological factors also.

Scanning and Selecting Key Factors: Analysis is made only on the `relevant` factors to the company.  All factors are not important and affect the company.  Choosing and focusing on the `relevant` factors paves the way for proper environmental analysis and forecasting.

Defining Variables for Analysis: Variables have to be defined in any analysis.   Similarly, the political situation as stable, unstable, reliability, long term effect, etc. should be measured using the variables.  Economic environment should be classified into GDP, Per-capita, economic policies, etc.  Variables should compared, grouped and correlated and predicted to find the clearer picture of the broader concept.

Use of Different Methods, Tools and Techniques: Some methods used for analysis are Scenerio Building, Benchmarking, and Network methods.

Some of the techniques used are Delphi, Brainstorming, Survey and Historical Enquiry.

Analysis Tools can be statistical ones.  Finance, Human Resources, and Marketing use different tools specific to their area of operation.

Forecasting Environmental Factors: Analyzing the past information to predict the future is the objective of this step.  It is a comprehensive process to analyze the information collected by using different tools and techniques.

Defining Profiles: Analyzed Environmental Factors are thus recorded into profiles.  Internal areas are recorded in Strategic Advantage Profile (SAP), and external areas are recorded in Environmental Threat and Opportunity Profile (ETOP).  Both profiles can be combined into Strengths, Weaknesses, Opportunities and Threats (SWOT) profile.

Strategic Position and Report Writing: The Manager should identify the relevant environmental factors, then analyze using different tools and techniques to find out the actual situation.  It is a SWOT analysis.  The manager should then choose the best alternative strategy to take the company forward.

Questions:

• What do you understand by Environmental Analysis?
• Explain the `defining of variables for analysis`.