Unit 2:
Environmental
Analysis
Topic 1: Environmental Analysis
and Environmental Scanning
BBA-308 Business Policy & Strategy- Ms.
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Soumya
Meaning of Environmental
Analysis(1/2)
• Environmental analysis is a strategic tool. It is a
process to identify all the external and internal
elements, which can affect the organization’s
performance.
• The internal components indicate the strengths and
weakness of the business entity whereas the
external components represent the opportunities
and threats outside the organization.
BBA-308 Business Policy & Strategy- Ms.
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Soumya
Meaning of Environmental
Analysis(2/2)
• 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.
BBA-308 Business Policy & Strategy- Ms.
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Soumya
Need of Environmental Analysis(EA)
Identification of Strength
Identification of weakness
Identification of opportunities
Identification of threat
Optimum use of resources
Survival and growth
To plan long-term business strategy
Environmental scanning aids decision-making
Source: [Link]
BBA-308 Business Policy & Strategy- Ms.
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Examples
• Many humans made their living from diaper service
companies. Suddenly Procter & Gamble brought out
pampers (disposable diapers) and others joined the
parade.
• Copies were made by typing stencils. These were put
on duplicating machines made by firms such as A.B.
Dick Company. Xerox, IBM and others came along
with a new product which captured the market from
the stencils.
BBA-308 Business Policy & Strategy- Ms.
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Soumya
Characteristics of EA
Continuous Exploratory
Process Process
Dynamic Holistic
Process View
BBA-308 Business Policy & Strategy- Ms.
Source: [Link] 6
Soumya
Importance of EA with Examples
(1/2)
First Mover Advantage- Awareness of environment helps an enterprise to
take advantage of early opportunities instead of losing them to competitors.
For instance, Maruti Udyog became the leader in the small car market
because it was the first to recognize the need for small cars on account of
rising Middle class.
Early Warning Signal- It makes a firm aware of the impending threat or
crisis, so that the firm can take timely action to minimize the adverse effects
if any.
For instance, A MNC entering in to the Indian market would act as a early
warning signal for Indian Firms.
Focus On Customer- Environmental Understanding makes the management
or Business organization sensitive towards the changing needs and
expectations of customer.
For instance, Several FMCG companies have launched small sachets of
shampoo and other products realizing the wishes of customers.
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Importance of EA with Examples
(2/2)
Strategy Formulation: Environmental Monitoring provides relevant
information about the business environment. such information serves as
the basis for strategy formulation.
For Instance, ITC realized that there is a vast scope for growth in the travel
and tourism industry in India and therefore ITC planned New hotels in
India.
Continuous Learning: Environmental analysis keeps the organization in
touch with the changing scenario so that they are never caught unaware.
With the help of Environmental learning, managers can react in an
appropriate manner and thereby increase the success of their organization.
For instance, Swiggy launched, Swiggy Go- Pick and Drop Service
BBA-308 Business Policy & Strategy- Ms.
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Soumya
Categorization of EA
Categorization
of EA
Internal
Environment
Micro Environment
External
Environment
Macro
Environment
BBA-308 Business Policy & Strategy- Ms.
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BBA-308 Business Policy & Strategy- Ms.
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Soumya
Approaches to Environmental
Scanning
Systematic
Approach
Ad hoc Approach
Processed
Approach
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Examples: SWOT Analysis
Strong sporting goods brand
High product innovation Imitability of some products
Global supply chain Low level of business diversification
Global distribution and sales network
SWOT Analysis- Puma
Growth through strategic partnerships with
other firms
High competition
Growth based on higher sporting goods
market penetration in developing economies Imitation of athletic shoes, apparel, and
accessories
Growth in other markets or industries via
business diversification
BBA-308 Business Policy & Strategy- Ms.
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Summary & Recommendations – SWOT
Analysis of Puma
Need to develop protective measures against competitors, as well as strategies that
could create new opportunities in the sporting goods industry and beyond.
A possible way of addressing the threat of imitation is to ensure that Puma’s market
mix or 4P includes strategies and tactics that highlight the originality of the
company’s products.
This recommendation relates to building the sporting goods corporation’s brand
and popularity among target customers.
For strategic management throughout the organization, aside from the results of
this SWOT analysis, additional information about the external strategic factors can
be obtained through other business analysis tools, such as a PESTEL/PESTLE
analysis of Puma SE.
SWOT ANALYSIS
STRENGTHS: WEAKNESS:
Strong global brand tied to consumer electronics Dependence on Android OS
Semiconductors and electronics manufacturing expertise Lack of a competitive comprehensive platform for hardware,
Synergistic support among divisions or subsidiaries software, and services
SWOT Analysis- Samsung
OPPORTUNITIES:
THREATS:
Strategic partnerships with software developers
Competition, especially in the consumer electronics industry
Strategic partnerships with online service firms
Imitation of consumer electronics products
Business growth through product development
Legal restrictions and lawsuits
Business growth through diversification
Summary & Recommendations –
SWOT Analysis of Samsung
• Samsung use the previously mentioned partnerships or develop its
own platform to target certain services that could open new
opportunities for growing its business.
• In addressing the issues identified in this SWOT analysis, the
corporation can expect a continuously strong industry position, and
possible mitigation of the effects of competition, imitation, and other
strategic issues.
PESTEL/PESTLE Analysis- Examples
Facebook
POLITICAL FACTORS
SOCIAL FACTORS
ECONOMICAL FACTORS
TECHNOLOGICAL FACTORS
ENVIRONMENTAL FACTORS
LEGAL FACTORS
•Political •Increasing •Increasing •Increasing use •Increasing •Improving
stability in stability of preference for of mobile emphasis on patent laws
developed developing high quality devices business worldwide
countries countries services (opportunity) sustainability (opportunity)
(opportunity) (opportunity) (opportunity) •Increasing (opportunity) •Increasing
•Popular •Rapid •Increasing number of •Increase regulatory
governmental economic online buying online social complexity of support for
support for growth of (opportunity) media waste disposal free Wi-Fi
globalization developing •Increasing companies standards (opportunity)
(opportunity) countries support for (threat) (opportunity) •Internet
•Political (opportunity) corporate •Diversification •Climate regulation in
barriers in the •Increasing social of online retail change China (threat
Chinese disposable responsibility firms (threat) (threat & &
market incomes (opportunity) opportunity) opportunity)
(threat) (opportunity) •Increasing
•Political regulation on
action on online data
online data (threat)
(threat)
Recommendations – PESTEL Analysis
of Facebook Inc.
• Facebook Inc. address issues with China’s government to penetrate the
country’s social media market, which is among the biggest in the
world.
• The objective is to have the ban on the social network lifted.
• The company should develop new products that support online
retailers to create new revenue streams for the corporation.
• Facebook should diversify its business. Diversification can reduce the
firm’s market risk exposure.
PESTEL/PESTLE Analysis- Examples
Amazon
POLITICAL FACTORS ECONOMICAL FACTORS SOCIAL FACTORS
•Political stability of developed countries, •Economic stability of developed markets, •Increasing wealth disparity (threat)
especially the U.S.A. and European especially the U.S. and European countries •Increasing consumerism in developing
countries (opportunity) (opportunity) countries (opportunity)
•Governmental support for e-commerce •Increasing disposable incomes in •Increasing online buying habits
(opportunity & threat) developing countries (opportunity) (opportunity)
•Increasing governmental efforts on cyber- •Potential economic recession of China
security (opportunity) (threat
TECHNOLOGICAL ENVIRONMENTAL LEGAL FACTORS
FACTORS FACTORS •IRising product regulation (opportunity)
•Changing import and export regulations
•Rapid technological obsolescence (threat & •Rising interest in environmental programs (opportunity)
opportunity) (opportunity) •Rising environmental protection
•Increasing efficiencies of IT resources •Rising emphasis on business sustainability regulations on businesses (opportunity)
(opportunity) (opportunity)
•Increasing rates of cybercrime (threat) •Increasing popularity of low-carbon
lifestyles (opportunity)
Recommendations – PESTEL Analysis
of Amazon
• To expand the company’s operations into developing markets, which
present rapid economic development and high e-commerce growth
potential.
• Also, the company must address IT security issues by continuing and
enhancing its current strategies for IT security and integrity.
• These issues affect consumer confidence and the stability of the
company’s remote or macro-environment.
• Amazon should boost its brand strength through a corporate social
responsibility strategy that addresses current issues that link the
business to the natural environment.
Practice Question
Categorize the factors into PESTEL and suggest recommendations
Factors:
1. Growing free trade relations (opportunity)
2. High growth of developing countries (opportunity)
3. Rising health consciousness (opportunity)
4. Political stability of most countries (opportunity)
5. Political issues in the European Union (threat)
6. Decreasing cost of transportation based on technological efficiencies (opportunity & threat)
7. Increasing business efforts on sustainability (opportunity)
8. Increasing complexity of environmental programs (opportunity)
9. Increasing wages in developing countries (opportunity & threat)
10. Strengthening international patent laws (opportunity)
11. Strengthening consumer rights laws (opportunity)
12. Economic stability of developed countries (opportunity)
13. Rising environmentalist behaviors (opportunity)
14. Gradual dismantling of the gender divide (opportunity)
15. Rising business automation (opportunity & threat)
16. Rising interest in business environmentalism (opportunity)
17. Increasing complexity of environmental regulations (opportunity)
18. Rising business automation (opportunity & threat)
Practice Question (Answer)
Factors:
1. Growing free trade relations (opportunity)- P
2. High growth of developing countries (opportunity)-Eco
3. Rising health consciousness (opportunity)- S
4. Political stability of most countries (opportunity)- P
5. Political issues in the European Union (threat)-P
6. Decreasing cost of transportation based on technological efficiencies (opportunity & threat)- T
7. Increasing business efforts on sustainability (opportunity)-Env
8. Increasing complexity of environmental programs (opportunity)- Env
9. Increasing wages in developing countries (opportunity & threat)- Eco
10. Strengthening international patent laws (opportunity)- L
11. Strengthening consumer rights laws (opportunity)-L
12. Economic stability of developed countries (opportunity)-Eco
13. Rising environmentalist behaviors (opportunity)-Env
14. Gradual dismantling of the gender divide (opportunity)-S
15. Rising business automation (opportunity & threat)-T
16. Rising interest in business environmentalism (opportunity)-Env
17. Increasing complexity of environmental regulations (opportunity)-Env
18. Rising business automation (opportunity & threat)-T
Recommendations- Unilever
• The company’s strategies must include the external factor of rising health
consciousness among consumers.
• Company must improve its sustainability programs to address opportunities
regarding business sustainability.
• Another recommendation is to take rising business automation as a significant
threat that empowers Unilever’s competitors, especially smaller ones in local
markets.
• For example, local companies can increase their competitive advantage by
automating their production processes.
References
• Strategic Management, Azhar Kazmi, Adela Kazmi McGraw Hill
Education (India) Private Limited, 2015
• Strategic Mangement, OM S Trivedi, Carvinowledge Press, 7
Ed 2018
• [Link]
