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Prepared by: S. Mujtaba Haider MBA 4 th Prepared 4: Gr8 Madam Humaira Khan Environmental Analysis Ch #2

Environmental Analysis  Environmental Analysis is the process of monitoring the environment to identify both present and future threads and opportunities that may influence the firms ability to reach its desired goals.  Organizational environmental is the set of all factors both outside and inside the organization that can effect its progress toward attaining those desired goals.

The main reasons of performing Environmental Analysis are listed below: 1.To access organizational environment so that management can react to it appropriately and thereby enhance organizational success. 2.Environmental Analysis is used to provide the management with the ability to respond to critical issues in the environment. 3.The purpose of Environmental Analysis is also to explore future condition of the organizational environment for the purpose of better decision making. 4.Another major purpose in taking environmental analysis is to identify current emerging issues that are significant to the company, assign priorities to those issues and develop a plan for handling each of them. Purpose Of Environmental Analysis

1- The policy-oriented Role The main purpose of policy-oriented Environmental Analysis is to improve organizational performance by simply keeping top management informed about major trends emerging in the environment. Environmental Analysis that is policy oriented is normally unstructured, indirect and informal networks. 2- The integrated strategic planning Role The main purpose of this kind of Environmental Analysis is to improve organizational performance by making top managers & divisional managers aware of issues that arise in the firm environment by having a direct impact on divisional planning. Roles of Environmental Analysis in organizations

The main purpose of this kind of Environmental Analysis is to improve organizational performance by providing environmental information concerning the effective performance of specific organizational function. 3- The function-oriented Role

The General Environment The General Environment is made up of such components that are normally broad in scope and have little immediate application for managing an organization, the main components of The General Environment are: 1-Economics Component The economic component indicates the factors like GDP, inflation rate, productivity, employment rates, interest rate, tax rates and consumer income, debt and spending. 2-Social Component The social component of the general environment describes the characteristics of the society like literacy rates, educational levels, customers belief, values, lifestyle, age, geographic distribution and mobility. Cont…….. Environmental Structure

3-Political Component The political component of the general environment describes those elements that are related to government affairs. like the type of government in existence, government attitude toward industrial sector etc. 4-Legal Component The legal component of the general environment consists of legislation that has been passed like consumer product safety act of 1972, the clean Air act of 1963, the occupational safety and health act of 1970 etc. 5-Technological Component The technological component of the general environment include new techniques for producing goods and services.

2- The Operating Environment The operating environment is that level of the organization external environment made up of comments that normally have relatively specific and more immediate implication for managing the organization, the main components of The Operating Environment are: 1- Customer Components The customer component of the operating environment reflect the characteristics and behavior of those who buy goods and services provided by the organization. 2- Competitive Components The competitive component of the operating environment consist of those with whom an organization must “do battle” in order to obtain resources. Cont……..

3- Labor Components The labor component of the operating environment consist of the supply of the workers available to perform certain desired organization operation. 4- Supplier Components The supplier component of the operating environment include all those who provided resources for the organization. 5- International Components The international component of the operating environment describes the factors that are involved in doing the business on international basics like laws, political practices, culture, and economic components.

3- The Internal Environment 1.Organizational Aspects 2.Personal Aspects 3.Marketing Aspects 4.Production Aspects 5.Financial Aspects The Internal environment is that level of the organization environment which exists inside of the organization and normally has immediate and specific implication for managing the organization, the main components of The Internal Environment are listed below:

Guidelines for Performing An Environmental Analysis Determining the relevance of Environmental Levels The various environmental levels exhibit different degrees of relevance the method that is used mostly for the purpose of determining the relevance of the environmental levels to organizations is to consider the organization size and its degree of involvement in international business. As an organization increases in size, its becomes more involved in international business and the general environment comments become more relevant to successful management. Conversely, the smaller the organization, the less involved it is likely to be in international business will be and the factors in the general environment tend to be less relevant to its successful management.

A strategic issue is an environmental factor, either inside or outside the organization, that is likely to have an impact on the ability of the enterprise to meet its objectives. It is very simple that one strategic issue that is sensitive for one organization may be even not relevant for the other organization. Determining the relevance of strategic issues

Environmental Scanning: Environmental Scanning is the process of gathering information about events and their relationship within an organization internal and external environments the purpose of gathering information is to help management determine the future direction of the organization. Basically it involves reviewing and evaluating the information that is gathered from several distinct sources. Implementing Environmental Analysis Techniques

1-Irregular Scanning System Irregular Scanning involves reviewing environment on urgent basics like for example the occurrence of some crisis In Irregular Scanning the focus is mainly on the past related event occurrence. 2-Regular Scanning System These system revolves around a regular review of the environment or significant environmental components. Mostly Regular Scanning is taken on the annual basics. 3-Continuous Scanning System These systems constantly monitor components of the Organizational environment. such scanning is an ongoing activity for an established segment of the organization structure. Methods of Environmental Scanning

Threats & Opportunities Analysis The purpose of performing an environmental analysis is to identify the existence of opportunities and threads that may effects organizational progress toward attaining its goals One method of performing a Threats & Opportunities analysis is simply to categorize them in term of environmental levels, threats potential and opportunities potential. The management can summarize the implication for future organizational direction that emerge.

Environmental Forecasting is the process of determining what conditions will exits within an organization's environment at some future time Methods of environmental forecasting are listed below: 1.Expert opinion 2.Trend extrapolation 3.Trend correlation 4.Dynamic modeling 5.Cross-impact analysis 6.Multiple scenarios 7.Demand/hazard forecasting Environmental Forecasting

Evaluating the Environmental Analysis Process 1- A Successful Environmental Analysis is linked conceptually & practically to current planning operations. 2- A Successful Environmental Analysis is continually supported by internal, Top management of the organization. 3- A Successful Environmental Analysis is run by a Successful environmental Analysis who understand what skills are necessary to be a strategist. Some of the important characteristics of appropriately implemented environmental analysis are listed below: