Business Environment

Environmental Analysis
Scanning
Monitoring Forecasting Assessment

Scanning
General surveillance of all environmental factors
To identify early signals

Detect change
Make sense of vague, ambiguous and unconnected data It is an ill structured and ambiguous environmental analysis

Monitoring
Tracking trends
Sequence of events

Involves following signals

Purpose of monitoring is to assemble sufficient data to discern whether certain trends and patterns are emerging Monitoring turns imprecise to precise

continued
Outcomes of monitoring
- Will give a specific description of environmental trends and data - Helps in identification of trends - Identification of areas for further assessment

Forecasting
The need for forecasting is to use outcome of scanning and monitoring It is concerned with developing future projections of the direction, scope and intensity of environmental change
Forecasting is more focused and is deductive and complex activity

Assessment
Scanning , monitoring, forecasting are not end in itself
The strength interpreting the information and its implications for the organization. It is about assessing how and why current and projected environmental changes affect strategic management of organization

Approaches to Environmental analysis

Outside in (Macro) approach - Helps formulate long term strategies - Scenario analysis is done- which helps forecast occurrence of complex environmental events, this helps in understanding emergence of future conditions. Inside out (Micro) Approach - This takes a narrow view of the environment, focusing on immediate future environment and its implications.

Techniques for Environmental Analysis

Verbal and written Information

Search and Scanning Spying

Steps in Environmental Scanning

Identification of Relevant Environmental variable Collection of Information
Selection of forecasting Technique Monitoring

Types of Forecast
Economic Forecast
Social Forecast Political Forecast Technological Forecast

Techniques of Environmental Forecasting

Econometric Technique Trend Extrapolation Scenario Development Judgement Method Brain Storming

Delphi Method
Strategic Issue Analysis

Importance of Environmental Analysis

Makes one aware of environment Organization linkage Helps organization identify opportunities and Threat Gives a right picture of factors influencing the business

Helps understand transformation of business

Helps identify future opportunities Helps make future strategies Helps modify strategies Keeps manager informed and alert

Limitation of Environmental Analysis

Selection of variables in a predictive model Selection of the functional form for linking predictor variable to predicted variable
Estimation of correction values for predictor variable

Concluding Remark on Environmental analysis

Environment refers to all the external forces which have a bearing on the functioning of business, these factors are largely or totally beyond the control of individual industrial enterprises. these are givers within which all organizations have to operate in a specific country and this varies from country to country

Contd.
The environment provides the threat and the opportunity for organizations to exploit .The factors are : Natural and Technological The systematic application of scientific knowledge to tasks Economic : The forces which have an economic impact on business. Political : Influence by legislature,executive and judiciary

 Global : Companies are forced to view business from a global perspective Social and Cultural : Such factors like people attitude towards work and culture role of family etc .

Knowing Environment
The environment factors described above will provide a mass of information, to make relevance of this mass of information, we need to narrow down on factors that influence our specific business, the following three would help us do that.

3 concept on Environment
Enacted Environment: An organization create its own environment out of the total external environment. This environment is called enacted environment,by scoping and narrowing and scanning the external environment, it creats an environemnt to which it reacts. Not all fcators influence its business.
Example: Exchange rate may not influence a company that has no international dealings

 Domain and Domain consensus: It is a part of enacted environment which organization carve out for itself. This means identifying itw own territory with products offered, population served and services rendered.
Ex Luxury goods manufacturer bothered about changing lifestyle and preferences of HIG rather than anyone else.

 Task Environment : The specific range of products offered, the technology to be adopted and productive strategy to be adopted for specific product.
Example : Paper manufacturer being bothered about specific technological advancements in his production process

Strategic Management and Environmental Analysis

The link between the two: Environmental scanning Strategy Formulation Strategy Implementation Evaluation And control

 Environmental analysis and diagnosis give strategist the time to anticipate opportunities and to plan to take optional responses to these opportunities. It develops strategist to develop an early warning system Without environmental analysis managers may give an inadequate response to environmental changes The extent to which these factors can be predicted , the managerial decision are likely to be better.

Strategic Management process

Determination of mission Establishment of objectives SWOT Analysis Consideration of strategic alternatives Choice of strategy Implementation Evaluation and control

Strategic management
The determination of basic long term goals and objectives of an enterprise and the adoption of course of action and allocation of resources necessary to carry out these goals.
Strategic management involves decision making which have 1) wider ramifications, 2)Have long term perspective 3) Use critical resources towards perceived opportunities or threats in environment

Formulation of mission and objectives

It is the first step in the strategic management process, it is means to achieve objectives, objectives should not be static and they should be dynamic. Any change in environment may call for modification of objectives
It essentially has to answer certain fundamental questions like what business, what should it be, what will be, etc.

SWOT Analysis
Swot are cornerstone of business policy formulation Environment may provide opportunity but company should have the stregth to take it and vice versa. The liberalization has expanded the scope of business by removing restrictions, companies have entered segments which were earlier restricted. We now talk about international product lifecycle, what companies used to manufacture themselves are being imported.

 The Environmental opportunities and therats will have to be viewed by companies in light of their strength and weakness of internal factors comprising finance, technonolgy, production ,marketing etc.
This is the reason perhaps fro HUL being a leader in Indian market, despite the fact that Pand G is the leader in other markets.

 The general success of Japanese car makers and electronic goods is attributed to right choice of products and market, based on proper understanding of environment and their internal strengths.

Strategic Alternatives and Choice of strategy

A company can be confronted by many alternatives like: Should it continue in same business Should it grow by expanding Should it diversify to reduce risk Indigenous manufacturing or import Enter into licensing etc/.
The final choice should be based on evaluation of various alternatives.

Implementation
There are three levels at which strategy can be implemented:
Corporate level: To achieve overall objectives of firm SBU Level: To achieve specific objectives of unit. Functional level: To achieve objectives of individual department like Rand D etc

Evaluation and Control

Evaluation is that phase in which the managers determine whether their choice as implemented is meeting the objectives of eneterprise.
Failure may arise because of any one of these reasons: Improper implementation of strategy Environmental changes not anticipated while formulating strategy Inappropriate strategy

Conclusion
The key to success is most effective utilization of companys resources not only existing but those that can be mobilized and this involves evaluation of S and W in light of environmental challenges and take appropriate measures to harness them.