Environmental Analysis
Environmental analysis is a process by which strategists monitor the environment to determine opportunities for and threats to their firm. The main objective of external environment analysis is to assess the likely opportunities and threats arising. An opportunity is a condition in the general environment that if exploited effectively, helps a company achieve strategic competitiveness. A threat is a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness.
Process of Environmental Analysis
Environmental analysis is an ongoing process. The following is the process of environmental analysis.
I. Scanning:
Environmental scanning involves gathering information from the environment to assess its nature. It helps identify the early signals of potential changes in the environment. It also detects changes that are already underway. It normally reveals ambiguous, incomplete, or unconnected data and information. The scanning system should be aligned with the organizational context. Hence, a scanning system designed for a volatile environment may be inappropriate for a stable environment. Many organizations even use special software and the internet for environmental scanning.
2. Monitoring:
Monitoring is auditing the environment. It involves observation of environmental changes to see the trend. It detects meaning in different environmental events and trends. It helps to identify the effects of the environment in terms of opportunity and threat.
Scanning and monitoring are particularly important when a firm competes in a highly volatile environment. They help gather knowledge about markets and other components.
3. Forecasting:
Scanning and monitoring are concerned with events and trends in the general environment at a point in time. Forecasting involves developing feasible projections of what might happen and how quickly, It is done on the basis of changes and trends. Forecasting is a challenging job. In other words, it assesses what is likely to happen in the future.
4. Assessing:
Assessing determines the timing and significance of the effect of environmental changes and trends that have identified. It specifies the implications of that understanding. Assessing connects the data and information with competitive relevance. Equally important is interpreting the data and information to determine the trend as an opportunity or threat for the organization.
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