WHY ENVIRONMENTAL ANALYSIS?
When the company does not react to the demands of the environment by changing its strategy, the result is declining performance of the company in the market
Utility of Environmental Analysis
From environmental analysis strategists get time to anticipate opportunities and to plan to take optional responses to these opportunities. It also helps strategists to develop an early warning system to prevent threats or to develop strategies which can turn a threat to the firm's advantage.
It is clear that because of the difficulty to assessing the future, not all future events can be anticipated. To the extent that some or most are anticipated by this analysis and diagnosis, managerial decisions are likely to be better. The managers can concentrate on these few instead of having to deal with all the environmental
Purpose of Environmental Analysis
In general, environmental analysis has three basic goals as follows:
Organizational environment consists of both external and internal factors. Environment must be scanned so as to determine development and forecasts of factors that will influence organizational success.
Environmental scanning can be defined as the process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business for the purpose of taking strategic decisions. It is the process of gathering information regarding company’s environment, analysing it and forecasting the impact of all predictable environmental changes. It helps the managers to decide the future
path of the organization.
Scanning must identify the threats and opportunities existing in the environment. While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another.
The factors which need to be considered for environmental scanning are events, trends, issues and expectations of the different interest groups. These factors are explained below: