Short Topic: Environment Influences and Environment Analysis

Problems in understanding the environmental influences

•The first difficulty is in diversity. The environment encapsulates many different influences; the difficulty is in making sense of this diversity in a way which can contribute to strategic decision-making.

•The second difficulty is that of uncertainty. Managers typically claim that the pace of technological change and the speed of global communications mean more and faster change now than ever before.

•Managers are no different from other individuals in the way they cope with complexity.
They tend to simplify such complexity by focusing on aspects of the environment,
which, perhaps, have been historically important, or confirm prior views.

Framework to understand the environmental influences

•Firstly, it is useful to take an initial view of the nature of the organizations environment
in terms of how uncertain it is.

•The next step might be the auditing of environmental influences. Here the aim is to identify which of the many different environmental influences are likely to affect the organization's development or performance. This is done by considering the way in which political, economic, social and technological influences have a bearing on organizations.

•The final step is to focus more towards an explicit consideration of the immediate environment of the organization - for example, the competitive arena in which the
organization operates.

Why Environmental Analysis?

When the company ceases to adjust the environment to its strategy or does not react to the
demands of the environment by changing its strategy, the result is reduced achievement of corporate objectives. From environmental analysis strategists get time to anticipate opportunities and to plan to take optional responses to these opportunities.

Environmental analysis has three basic goals as follows:

1)First, the analysis should provide an understanding of current and potential changes taking place in the environment.

2)Second, environmental analysis should provide inputs for strategic decision making. Mere collection of data is not enough.

3)Third, environment analysis should facilitate and foster strategic thinking in organizations-typically a rich source of ideas and understanding of the context within which a firm operates.

By Admin Team