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ENVIRONMENTAL ANALYSIS AND DIAGNOSIS

TECHNIQUES OF ANALYSIS AND DIAGNOSIS

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ENVIRONMENTAL ANALYSIS AND DIAGNOSIS

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  1. ENVIRONMENTAL ANALYSIS AND DIAGNOSIS

  2. CONCEPT OF ENVIRONMENT ENVIRONMENT refers to the surroundings, influences and circumstances which affect some person or organisation. # According to Keith Davis, “Business environment is the aggregate of all conditions, events and influence that surrounds and affect it”. # According to Andrews, “The environment of a company as the pattern of all external influences that affect its life and development”.

  3. N A T U R E O F E N V I R O N M E N T 1. EXTERNAL FORCES :-                                          Business environment is aggregative in nature. It represents the sum total of all the external forces that have influence on  the working of a business. 2. DYNAMIC :-                             Business environment is dynamic in nature; it keeps on          changing. 3. UNCERTAINITY :-                                       Business environment creates uncertainty for the           business firms as it is very difficult to predict the trend of any                       environmental force with full accuracy. 4. IMPACT:-                   Business environment has both long term and short term impact. Environment therefore has different effects on different firms inthe same industry 5. COMPLEX:-                      Business environment is compound in nature. Environment consists of a number of factors, events, conditions and influences    arising from different sources which impact business thus making           the business complex.

  4. Types of ENVIRONMENT #1. INTERNAL ENVIRONMENT refers to the culture, members, events and factors within an organization that has the ability to influence the decisions of the organization, especially the behaviour of its human resource. Here, members refer to all those people which are directly or indirectly related to the organization such as owner, shareholders, managing director, board of directors, employees, and so forth.                                                                                   :- The internal environment                                                                                       :- An external #2. EXTERNAL ENVIRONMENT  environment is a group of factors or conditions that are outside the organization but affect it in some extent. In business, this term commonly applies to elements related to out of control dimensions such as society, economy, regulations and political system.

  5. INTERACTION BETWEEN BUSINESS AND ENVIRONMENT *Environment is closely related with business. There is a constant ‘give and take’ relationship between environment and business. The business receives inputs, information and technology from the environment and gives it back in the form of outputs (goods and services). *If these outputs are accepted by the environment, the environment- business interaction continues but if they are unacceptable to the environment, firms adapt to the environmental requirements and change their operations. The forces in the environment may present both THREATS or NEGATIVE Constrants and OPPORTUNITIES or Positive Stimulants for the business.

  6. COMPONENTS OF EXTERNAL ENVIRONMENT LOREM IPSUM DOLOR  1. ECONOMIC ENVIRONMENT :-                                                                          Economic environment refers to the nature of company (capitalist, socialist and mixed), economic policies of the government, markets for materials, labour, capital, etc., business firms and institutions such as banks, insurance companies, transport companies, etc and level of income of the people. MEDIUM TEXT The main components of economic environment are as follows : * Structure of the economy in terms of relative role of private and            public sectors. *Expansion of power, transportation and communication facilities. *Rates of growth of GDP and per capita income. *Planned outlay in private and public sectors. *Agricultural and industrial production trends. *Rates of saving and investments. *Service sector trends. *Capital market trends.

  7. 2. POLITICAL ENVIRONMENT:- environment comprises political parties and their ideology, type of government(single party or multi-party coalition), stability of government, government policy towards business, government policy regarding international business and multinational corportions(MNCs).                                                                               Political LOREM IPSUM DOLOR  The main components of political environment are as follows : *Nature of political leadership and profile of political leaders. *Political institutions like government and allied agencies. *Political ideology and policies of the ruling party. *Prevailing political system in the country.

  8. 3. LEGAL-REGULATORY ENVIRONMENT:- LOREM IPSUM DOLOR  Legal environment of business is determined by constitutional provisions, economic laws, commerical laws, industrial and labour laws, government regulations under various laws and court decisions. The main components of legal-regulatory environment are as follows : *The constitutional framework-directive principles, fundamental rights and division of legastive powers between central and state governments. *commerical and economic laws and govt. policies under the laws relating to licensing, foreign investment, etc. *Govt. policies related to foreign direct investment, imports and exports. *The extent and nature of govt. intervention in business.

  9. 4. SOCIO-CULTURAL ENVIRONMENT:- Socio-cultural environment is shaped by social factors such as attitude of people, cultural heritage, beliefs and customs of people, education system, consumers' organisations, trade unions, and other non-government organisations. The main components of socio-cultural environment are as follows : LOREM IPSUM DOLOR  *Demographic factors like birth and death rates, life expectancy, proportion of males and females in the total population, etc. *Share of working population in the total population. *Caste and occupational structure. *Share of women in the workforce. *Educational system and literacy rates. *Life styles of different segmentsof population. *Population shifts from rural to urban areas.

  10.                                                                                                                                                                                                      Technological environment refers to the state of science and technology in the country and related aspects such as rate of technological progress, institutional arrangements for development and application of new technology, etc.  Every organisation has to be actively engaged in technological forecasting. Advancements in automation and information technology will create challenging situations for the organisations in the near future. 5. TECHNOLOGY ENVIRONMENT:- LOREM IPSUM DOLOR  6. INTERNATIONAL ENVIRONMENT:- International environment is very significant for the firms engaged in imports and exports and also for the firms having manufacturing operations in other countries. International environment includes trade policies of foreign governments, international organisations such as World Trade Organisation (WTO), World Bank, ec. , and Multinational Corporations (MNCs).

  11. 7.COMPETITIVE or MARKET ENVIRONMENT The competitive forces have an important influence on the survival and growth of any business. The nature and degree of competition in an industry is determined by the following forces: *THREAT OF NEW ENTRANTS: If the demand of an industry is increasing and it is more profitable than other industries, new units will be attracted to the industry.  *BARGAINING POWER OF CUSTOMERS: If the customers costitute a powerful group, they will ensurelower prices which means lesser profits for the business firm. *BARGAINING POWERS OF SUPPLIERS: If the suppliers are united and powerful, they can increase the price of materials.  *AVAILABILITY OF SUBSTITUTES: If cheaper substitues are available, the business firm will be left with lower demand and lowr profit *JOCKEYING FOR MARKET SHARE: The individual units within an industry might compete with each other for attaining the commanding position.

  12. ENVIRONMENT ANALYSIS AND DIAGNOSIS Environmental analysis is the process of monitoring the economic and non-economic environment to determine the opportunities for and threats to a business. Environmental analysis enables the management to predict future developments and take timely actions to make a costructive use of developments. Diagnosis of environment involves assessment of opportunities and threats in the external environment. On the basis of available data, the strategist must decide as to which types of information to rely on and which types to ignoe, and sort out the more important from the less important information. This is indeed a difficult task for a large enterprise where the available information is so diverse and voluminous. 

  13. TECHNIQUES OF ENVIRONMENTAL ANALYSIS AND DIAGNOSIS 1. Environmental Threat and Opportunity Profile Analysis (ETOP) ETOP is considered as a useful device that facilitates an assessment of information related to the environment and also in determining the relative significance of external environment threats and  opportunities to systematically evaluate environmental scanning.  ##Steps involved in preparation of ETOP## *Dividing the environment into different sectors. *Analysing the impact of each sector on organisation. *Sub dividing each environmental factor into subfactors for a                        comprehensive ETOP. *Analysing the impact of each subfactor in form of statement. *Preparing a summary to show the major factors for the sake of simplicity.

  14. 2. SWOT ANALYSIS SWOT analysis stands for strengths, weaknesses, opportunities and threats analysis of a business environment. Strengths and weaknesses are an organization’s internal factor while threats and opportunities are considered as external factors. So, the process of SWOT analysis includes the  systematic analysis of these factors to determine an effective marketing strategy. It is a tool that is used by the organization for auditing purposes to find its different key problems and issues.

  15. TOWS MATRIX An alternative model for comparing the strengths and weaknesses of an organisation with the market opportunities and threats has been suggested by Heniz Weihrich. It is known as TOWS Matrix, which takes into account Threats(T), Opportunities(O), Weaknesses(W), and Strengths(S) and enable a more integrated approach to the task of strategic planning. TOWS matrix helps in resolving the problems which managers face in the process of strategic choice on the basis of SWOT analysis. TOWS matrix :

  16. COMPETITOR ANALYSIS : In his five forces analysis, Michael E. Porter has described five forces which shape competition. Five forces analysis must be supplemented by competitor analysis because the outcome of fight for market share is ultimately determined by competitors' behaviour. In an industry, competitors are those companies that satisfy the same customer need; for example, all companies in soft drink industry attempt at satisfying the same customer need though their product positioning differs. In analysing. competitors, a company faces two types of issues: () Identification of Competitors, and (ii) Analysis of Competitors' approach. THANK YOU

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