Environmental Analysis

Give the Brief Introduction of environmental analysis

Environmental analysis may be a strategic tool. It is a method to spot all the external and internal parts, which may have an effect on the organization’s performance. The analysis entails assessing the amount of threat or chance the factors may gift. These evaluations are later translated into the decision-making method. The analysis helps align methods with the firm’s atmosphere.

To perform environmental analysis, a constant stream of relevant information is required to find out the best course of action. Strategic planners use the information gathered from the environmental analysis for forecasting trends for future in advance. The information can also be used to assess operating environment and set up organizational goals.

When did the environmental analysis has been started and whom.

Donald Worster's widely quoted 1988 definition states that environmental history is the "interaction between human cultures and the environment in the past". In 2001, J. Donald Hughes outlined the topic because the “study of human relationships through time with the natural communities of that they're an area so as to elucidate the processes of modification that have an effect on that relationship”. and, in 2006, as "history that seeks understanding of masses as they need lived, worked and thought in relationship to the remainder of nature through the changes brought by time". "As a technique, environmental history is that the use of ecological analysis as a method of understanding human history...an account of changes in human societies as they relate to changes within the natural environment”. Environmental historians are fascinated by "what individuals suppose nature, and the way they need expressed those concepts in folk’s religions, standard culture, literature and art”. In 2003, J. R. McNeill outlined it as "the history of the mutual relations between humans and also the remainder of nature".

What was the need of this environmental analysis?

• Identification of strength:

Strength of the business firm means capacity of the firm to gain advantage over its competitors. Analysis of internal business environment helps to identify strength of the firm. After identifying the strength, the firm must try to consolidate or maximise its strength by further improvement in its existing plans, policies and resources.

• Identification of weakness:

Weakness of the firm means limitations of the firm. Monitoring internal environment helps to identify not only the strength but also the weakness of the firm. A firm may be strong in certain areas but may be weak in some other areas. For further growth and expansion, the weakness should be identified so as to correct them as soon as possible.

• Identification of opportunities:

Environmental analyses helps to identify the opportunities in the market. The firm should make every possible effort to grab the opportunities as and when they come.

• Identification of threat:

Business is subject to threat from competitors and various factors. Environmental analyses help them to identify threat from the external environment. Early identification of threat is always beneficial as it helps to diffuse off some threat.

• Survival and growth:

Systematic analyses of business environment help the firm to maximise their strength, minimise the weakness, grab the opportunities and diffuse threats. This enables the firm to survive and grow in the competitive business world.

What is the uses of these environmental analyses?

• Identifying:

First, the factors that influence the business entity are to be known, to boost its position within the market. The identification is performed at numerous levels, i.e. company level, market level, national level and world level.

• Scanning:

Scanning implies the method of critically examining the factors that extremely influence the business, as all the factors known within the previous step effects the entity with a similar intensity. Once the necessary factors are known, ways may be created for its improvement.

• Analyzing:

In this step, a careful analysis of all the environmental factors is made to determine their effect on different business levels and on the business as a whole. Different tools available for the analysis include benchmarking, Delphi technique and scenario building.

• Forecasting:

After identification, examination and analysis, lastly the impact of the variables is to be forecasted.

What is the Criticism of environmental analysis?

Michael Porter’s five forces model was also harmed of other author’s criticism, such as Lynch who says that the model assumes that there are no changes in the industrial environment but in fact, the market is very flexible. This is shown for example on the enormous growth of the e-commerce sector. If you use this tool, you have to repeat this analysis continuously. The main reasons why Porter’s five forces has endured much criticism are that the world radical economic changes has occurred since the time the model has been developed; there is a very strong impact of internet on the industry. Of course, the recent years, there are authors, investigating the strategic planning in the business and one of them Larry Downes stated that Porter’s five forces are no longer viable. Due to that reason, Downes has developed three new forces, which are: “Digitalization, Globalization, and Deregulation”.