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Environmental Analysis

Introduction

Managers are responsible for the success of an organization and concerned about the effect that factors in the external environment have upon it.

They cannot control the external environment but they need to identify, evaluate and react to those forces outside the organization which may affect them.

The way in which managers attempt to achieve this is by means of a qualitative assessment of signals they receive which are relative to outside influences. There is therefore a need to carry out an analysis of these forces by means of methods we are going to discuss in details later, and this is called the environmental analysis.

Managers are also concerned in the ways in which organizations can most clearly identify their current position in the market. It is against the background of the picture that emerges from this analysis that the strategist should then be in a far better position to begin the process of deciding upon the detail of the organization’s future direction and the ways in which strategy is formulated.

The starting point of this process is a detailed audit. An audit produces wealth of information which will help management to decide on both short term and long term planning.

In order to establish where an organization is placed in its environment with respect to its competitive position, it is necessary to examine the relative strength and weaknesses of its competitors. To achieve this comparison the organization needs to scan the environment continuously and monitor key indicators.

It is also important to consider the strategies used by competitors. This type of knowledge is useful when looking at how competitors have dealt with the forces within their environment in the past. It also gives an indication of how they are likely to act in the competitive environment in the future. This is the basis of ‘competitor analysis’, which broadly means looking at who the competition is, and how they perform, what...