Environmental Analysis

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Environmental Analysis

01. Introduction:

Every organization whether business or non- business has its own environment. The strategic managers need to understand the complexities and challenges of both the remote environmental factors and the immediate operating environmental factors. The remote environmental factors are external and largely uncontrollable; on the other hand, the operating environmental factors are those in the immediate competitive situations of a company, often called task or competitive environment. The strategic manager must consider conditions both in the remote environment and the operating environment. This way, they can become more proactive in strategic planning and more dynamic in grabbing opportunities.

1.1. Background of the report:

Leadership and management are two distinctive and complementary systems of action both are necessary in today’s business Environment.

Management is about coping without complexity. Leadership is about coping with change. – John p. kotter.

Business and managers are now faced with highly dynamic and ever more complex operating environments. – Robert Paton.

Environmental analysis is the most important chapter strategic management. Then environmental analysis is the essential matter or subjects of any organization.

There are two types of Environmental analysis:

# External or Macro environment

# Internal or Micro environment

Both the types of environment affect an organization’s operations

1.2. Objectives:

The special objectives of the study are given below:

# To gather knowledge on environmental analysis.

# To explain the meaning & concept of organizational environment.

# To understand the need and objectives.

# To determine strategic challenges for emerging organization.

# To recommend some guideline to overcome the problem.

1.3. Limitations of the Study:

The major limitations of this study are given us follows:

# Library facilities were not available.

# Sufficient records, publications regarding were not available as per


# Lacks of sufficient manuals.

Chapter # 02

Methodology of the study:

Correct and smooth completion of any study requires adherence to some rules and methodologies. Rules were followed to ease the data collection procedure. Accuracy of study depends on the information and data analysis.

2.1. Sources of data:

Information used in this study has been collected from both primary and secondary sources.

The primary data was collected from:

Practical work experience in the organization.

Relevant field study ad provided by the officer concern.

The secondary data were collected from:

Website of those institutes.

Journal and relevant books.

Newspaper and magazines.

2.2. Methods of collecting data:

The methods of data collection used in this study are: Interview method

Face to face interview

Communicating with other respective personnel of the organization.

Informal discussion.

2.3. Data analysis & presentation:

Both qualitative and quantitative data has been collected for the stud

Chapter # 03.

Organizational Overview:

Organizational Overview is one of the most important matters for any organization. We can understand the overall situations form the organizational overview. So organizational overview is more essential for successful organization.

The environmental analysis is based on the premise the local people, working together, cam identify and solve problems, and realize opportunities that will enhance the quality of life in the area. Area plan is developed and updated as part of an ongoing long range planning effort.

This area plan provides the basis and direction for the activates of the council. It is develop with input from the local community identify a common vision, with agreed on mission, to meet a specified set of desired goals, to strive for by the setting and attaining objectives by carrying out specifics strategic based on the resource needs of the area with the desires of the local people.

3.1. Vision:

Vision is a more important for the any organization.

A strategic vision is a road map of a company ‘s future providing specifics about technology and customers focus, the geographic and product markets to be pared , the capabilities it plans to development the kind if company that management is trying to create.

Vision is a growing diverse local economy, based on sustainable development of its natural and human resources, and guided by the decisions of a well represented cross section of the borough community.

3.2. Mission:

Mission is another important matter for the organization. Without vision & mission we cannot successful organizational goals.

Mission should define the organizations line/ lines of business, identify its products and services and specify the markets it serves at present and the near future.

3.3. Core objectives:

Objectives are defined as the important ends toward which organizational and individual activities are directed.

An objective is defined as a specific commitment to achieve a measurable result within a given time frame.

Chapter # 04.

Main body of the topics:

4.1. The concept of organizational environment:

Organizational environment is essential subjects for successful organizational. Organizational environment is always dynamic. It is ever changing. Every organization, whether business or non business, has its own environments. Environment of an organization consists of its surroundings anything’s that affects its operations, favorably or unfavorably. Managers cannot make appropriate and sound strategy simply on the basis of their guesses and instincts. They must use relevant information that directly flows from the analysis of their organization environment.

4.2. Understanding environmental influences:

Environmental factors influence the businesses in many ways. The influences may be positive or negative. There are some forces in the environment that may retard the growth of a business organization. Similarly, there are some forces that may give a sudden boost to the growth of an organization. It is therefore, essential for the strategy managers to understand the importance of environmental influences on the operations of their business.

Managers are benefited in several ways when they have a deep understanding and appreciation of the impact of environmental factors on business.

Knowledge of environment helps managers identify the direction to which they should proceed.

Managers can isolate those factors, especially in the external environment, which are of changing direction.

They can develop crisis plan for overcoming crises affect organization.

They key to achieving organizational effectiveness in understanding the environment in which the organizations operates in businesses.

4.3. Types of organizational environment:

There are two types of organizational Environment.

Such as:

# Macro environment or External environment.

# Micro environment or internal environment.

Both the types of environment affect organizations operations.

Therefore, it is essential for the managers to make in depth analysis of the elements of the environment so that they can develop in themselves an understanding of the internal and external situations. Based on their understanding they will be better able to set appropriate objectives for their organizations and formulate strategic to achieve those objectives.

4.4. External Environment or Macro environment:

The institutions and people outside business organizations that affect it these include national and local government, trade unions, competitors, customers, suppliers etc. The external environment in one of the contingency factors that has to be taken into account in designing an organization.

Macro environment consists of an organization’s external factors that affect business factors. The macro environment factors reside outside the organization, which can lead to opportunities or threats.

For convenience of analysis. We can divide macro environment factors into two groups. a) General environment b) Industry environment.

The total external environment impact is given below:

This total Impact is created out of the intersection of remote external environment (general environment) and immediate industry environment.

Business firm

Area of total external

Environment impact

Remote Industry

General Environment


Figure: Interaction between the general and industry environment

4.5. The General Environment:

The general environment (often called remote external environment) includes the distant factors in the external environment that are general or common in nature. The general environment factors such as demographic factors are common in the sense that they affect all organization in all types of industries, not only a particular organization in a particularly industry.

The general environment of a business organization consists of the following factors:

We can use PESTLED model for the identification and analysis of the factors in the general environment.

Factor – wise PESTLED

Political factors

Economical factors

Socio cultural factors

Technological factors

Legal factors

Environmental natural factors

Demographic factors

Environmental- wise PESTLED

Political environment

Economic environment

Socio culture environment

Technological environment

Legal environment

Environmental (mature)

Demographic environment

4.6. The industrial environment:

The industrial environment is the immediate external environment of a company that substantially affects its operations such as supplies or customers. In the industry environment, a company competes on its performance. Every company operates its business in an industry and therefore company’s activities are directly affected by any change in the industry environment.

Elements of industry environment:

As a manager or entrepreneur .we should be able to identify the various elements of industry environment so that we can take appropriate steps to respond to them effectively in order to survive in the industry.

The factors that constitute industry environment in general are suppliers, customers, competitors, substitute products, and industry – related economic forces, technological factors and the like.

The elements of industry environment are given below:

Supplier’s customers


Competitors Industry related other forces substitute products

Figure: Elements of Industry Environment

We now turn our attention the t details of the elements of the industry environment:


Suppliers are sources of resources such as raw materials, components, financial support, service, equipment and other suppliers. In order to ensure long term survival and growth of a company, it is essential to develop a dependable relationships between a business firms its suppliers. In relation to its competitive position with suppliers, a company should address the following question:

a) Are supplier’s prices competitive? Do suppliers 0ffer attractive quantity discounts? How costly are their shipping charges?

b) Are vendors competitive in terms of production standards? In terms of deficiency rates?

c) Are supplier’s abilities, reputation and services competitive?

d) Are suppliers reciprocally dependent on the firm?


Strategy managers must understand the composition of the company’s customers. With this end in view, they need to develop an exhaustive customer profile of both the present and potential customers.

Competitors (existing and potential):

A company needs to analyze the competitors, that is, competitive position in the industry in order in improves its change of designing winning strategies.

Substitute Products:

In an industry there may exists many substitute products which compete with each other for the same group of customers. This warrants a clear understanding and knowledge of the nature of substitute products in the industry.

4.7. How Do Organizations respond to external environment?

A business organization can employ several ways to respond to its environment. We discuss here some common measures.


Companies can hire strong lobbyists to bargain with regulations to change any law or refrain them from enacting new law that may adversely affect business activities.

Influencing Customers:

Organizations can influence their customers in different ways. Managers may be devise new uses of a product. They may create new set of a product.

Influencing suppliers:

One of the ways to directly influence environment is to establish a long term relationship with suppliers.

Boundary spanning:

A person is called a boundary spanning who collects information from outside the organization while he/ she are working in the field.

Environmental scanning:

Organizations can influence external environment based on information colleted through regular observations and analysis. This is known as environmental scanning.

Strategic response:

A firm may alter its strategy to deal with the environmental changes. The strategy – alteration may take any of the following forms:

# Slight change in the strategy;

# Adopting an entirely new strategy;

# Maintain status quo, which one would better meet the demands of its

# Competitive environment depends on situations that prevail.

Organizational combinations:

In order to enter into new markets or uphold prominence in the current market it for some other strategic reasons, a firm, may resort to merger, acquisition, takeover or alliance.

4.8. The Internal Environment or Micro environment:

The internal environment is the final step in gathering information for the environmental analysis. It consists of identifying resources and capabilities, finding competencies, and determining what competitive advantages the organization has.

The internal environment assessment, along with the external evaluation (macro and micro environment) already completed will provide all the information needed for the final SWOT analysis.

The conditions and forces that exist within an organization constitute its micro environment. Micro environment is an organization in house situation. It has full control over the situations.

Elements of Micro environment of Business Organization are given below:

# Resources of the organization such as physical resources, human resources, financial resources, information resources, and technological # Owners/ stockholders

# Board of Directors

# Organization’s culture

# Organization’s image/ goodwill

4.9. Area usually covered by internal analysis:

Internal analysis is made of various internal issues of a company. Depending on the nature of the company, the following major issues need to be covered in the analysis.

# Financial position

# Product and service positions

# Product and service quality

# Marketing Capability

# Research and development

# Organizational structure

# Human resources

# Conditions of facilities and equipment

# Past and present objectives and strategies

# And many more.

Every area of a company that has substantial impact on the long term survival of the company should be analyzed to determine the strength and weakness of each area.

Framework for Internal Analysis

Strengths weakness

A distinctive competence? No clear vision?

Adequate financial resources? Poor strategic direction?

Excellent competitive skills? Obsolete machinery?

Positive image of the company? Lack of mgt talent?

Access to economics of scale? Lack of competencies?

Proprietary technology? Poor track record in strategy?

Cost advantages? Falling behind in research and develop?

Competitive advantages? Narrow product line?

Product innovation abilities? Weak market image?

Good leadership and management? Competitive disadvantages?

Achievement market leadership? Poor marketing skills?

Well- crafted functional strategies? Inadequate working capital?

Figure: A sample framework for internal analysis of a company

4.10. Conducting Internal Analysis: who to do it?

Products differ from organization to organization for performing internal environmental analysis.

The task of assigning the responsibility for performing internal environmental analysis may not be similar in all organizations.

Usually the following practices are prevalent in different organizations:

Involvement of planning department:

Some organizations involve the planning department for conducting the analysis of internal environment.

Use of outside consultants:

Some organizations use independent consultations for conducting internal analysis.

Forming a team:

Some organizations form a team of line managers with relevant experience.

Chapter # 05.


Analysis is the most important subject of any organizations.

In this assignment we analyzed environmental analysis. There are two types of environmental analysis. Such as: External environment and internal environment.

A company situation analysis is essential for evaluating the company resources and capabilities. It prepares the groundwork for matching the company’s strategy both to the external market circumstance and its internal resources and competitive capabilities; insightful situation analysis is a precondition for tailoring strategy to company resources and competitive capabilities as well as to industry and conditions.

Analysis of the internal environment or micro environment of an organization is an essential part of situations analysis. The situations of an organization whether business organization or any other type of organization, is expressed in terms of its internal and external environment factors. When an analysis is made of both the type of internal and external environment, managers can have a clear idea of the overall situations of the organization.

While external environmental factors reside outside of the organizations and therefore depict the external situation, the internal environment factors portray the internal situations of the organization. Internal environment helps managers identify the internal strength and weakness of organizations in respect of various internal environment factors. Analysis is made of each factor in different areas of the organizations.

Chapter # 06.


Every organization has some strength, weakness, opportunities, threats. It is a useful tool for analyzing an organization’s overall situations. This attempts to balance the internal strength and weakness of the organization with the external opportunities and threats. It provides a good overview of weather a company’s conditions is healthy or unhealthy.

Strength is something that a company is good at doing. Strength can take form of a skill /expertise, valuable physical assets, fruitful alliances etc. It is a positive side of internal environment. Adequate physical facilities such as land and buildings or machinery, sufficient financial resources, trained and qualified marketing people, well managed information system are some examples of internal strengths.

Weakness is something an organization lacks or does poorly or conditions that puts the organization at a disadvantage. Examples of internal weakness include inadequate physical and financial resources, untrained executives, poor leadership at the top etc.

An opportunity is something that an organization may grab for growth and profitability. Examples of opportunities include opening up of new markers in other countries, deregulation policy of government, reduction of taxes on imported raw materials, government subsidy, increasing demand for products among customers. It is the external opportunities of the organizations.

A threat arises when conditions in the external environment endanger the integrity and profitability of a firm’s business. Frequent advance in technology, entry of foreign competitors, cheap imported products, civil war, unstable political situations in the country, and frequent changes in government regulations, uncontrolled law and order situations are typical examples of threats. It is the externals threats of the organizations

From the above discussion we can say that, Environmental analysis is the most important matter for any organization both internal & external environment. Then any organization has some positive or negative side.

Some organization can overcome threats & weakness situation then some organization can not overcome this situation. Then some organization is gaining strength & opportunity then some organization cannot gain strength & opportunity.

Chapter # 07

Recommendations and conclusions:


SWOT analysis leads to strategy formulation. Vision of a company sets the ground for developing a mission statement. In order for the managers to understand the company situations, they undertake an analysis of company’s strength, weakness, opportunities and threats on the basis of internal and external data respectively. Then based on the SWOT results, they formulate appropriate strength to support the mission through exploiting opportunities and strengths, neutralizing the threats identify in the external environment, and overcoming weaknesses.

After having completed the strategic analysis of a company, managers are now in the possession of a strong pool of information regarding the industry competition, external opportunities and threats, and internal strengths and weakness. Based on the information gathered, they would logically proceed towards setting long term objectives for the organization. Then, they would formulate appropriate strategies is an endeavor to gain competitive advantage in the market.

Internal weakness should be minimized for internal environment.

# Adequate physical and financial resources should be increased.

# Trained executive should be increased

# Increased leadership at the top level

External weakness should be minimized for external environment

# To reduce political instability, hartal, strike etc.

# To established proper government rules and regulations

# Achieving competitive advantage

# Uses of modern technology


An analysis of external environment provides the managers with information about external opportunities and threats. On the other hand, an analysis of internal environment generates information about the organizations internal strength and weakness. It means that the managers can identify their organizations strengths, weaknesses, opportunities and threats from the overall strategic analysis of the organization.