Environment Analysis

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Business Environment Analysis Background Environmental analysis is a systematic process that starts from identification of environmental factors, assessing their nature and impact, auditing them to find their impact to the business, and making various profiles for positioning. A common process of environmental analysis or scanning is discussed in the following section. Environmental Analysis Process A business manager should be able to analyze the environment to grasp opportunities or face the threats. Organizations need to build strength and repair their weakness available in the business environment. Therefore, this process consists not only a single steps but a process of various steps. Environmental analysis comprises scanning, monitoring, analyzing, and forecasting the business situation. Scanning is to get the relevant information from the information overload. It is to focus on the most relevant information. Monitoring is to check the nature of the environmental factors. Analyzing requires data collection and use of different required tools and techniques. Forecasting is to find the future possibilities based on the past results and present scenario. Environmental analysis process is not static but a dynamic process. It may differ depending on the situation. However, a general process with few common steps can be identified as the process of environmental analysis these are a) Monitoring or identifying environmental factors, b) Scanning and selecting the relevant factors and grouping them, c) Defining variables for analysis, d) Using different methods, tools, and techniques for analysis, e) Analyzing environmental factors and forecasting, f) Designing profiles, and g) Strategic positioning and writing a report. Brief discussion is made on each of the step of this environmental analysis process. Identifying environmental factors First of all a strategist should identify all the relevant factors that might affect his or her business. In this process, one should first know what the internal areas of the business are. This includes all the systems, internal structure, strategies followed, and culture of the organization. All these areas can be covered into the five functional areas in classical approach. Similarly, a business daily interacts with the close environmental components outside the business such as customer, competitor, and supplier. It might cover all other stakeholders such as trade union, media, and pressure group. Furthermore, general such business environment factors as political-legal, economic, sociocultural, and technological factors are to be identified

Scanning and selecting relevant and key factors Out of all the business environmental factors, a strategist should focus only on the relevant factors for further analysis. All the factors are not equally important and affecting to the business. In this context, a strategist has to scan the environmental trend to select only the most affecting environmental factors from the information overload. This step paves the way of environment analysis and forecasting. Defining Variables for Analysis Selected environmental factors are to be further specified into the variables. A concept can be interpreted into different variables. For example, political situation can be measured using few variables such as instability, reliability, and long-term effect. Economic environment might cover many variables such as Per Capita, GDP, and Economic policies that can be further classified into many other variables. Variables are the basis of measurement in environmental analysis process. Variables can be compared, grouped, correlated, and predicted to find the clearer picture of the broader concept. It is, therefore, necessary to define the variables first in any kind of analysis including the environmental analysis. Using Different Methods, Techniques, and Tools Different types of methods, tools, and techniques are used for analysis. Some of the major methods of...
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