Recent political and economic developments and associated changes in the practice and delivery of health and social care have led managers and professionals to recognise the importance and links between problem solving and decision-making skills.
However, the greatest challenges to business success may be a consequence of the external environment over which a company has little, if any, control.
To address these challenges, business leaders conduct an environmental analysis and develop policies and processes that adapt company operations and products to this environment. External Environment The external environment consists of a general environment and an operating environment.
The general environment consists of the economic, political, cultural, technological, natural, demographic and international environments in which a company operates. Both the general and operating environments provide business opportunities, harbor uncertainties and generate risks to which a business must adapt.
For example, countries with large populations may coincide with a large market size for particular products. However, to offer its products in these markets, a company may be required to contend with a government that erects obstacles to trade in the form of tariffs, product standards and customs procedures.
Purpose of Environmental Analysis Successful businesses adapt their internal environment -- including human and financial resources, policies, technologies and operations -- to the external environment. The company performs an environmental analysis to identify the potential influence of particular aspects of the general and operating environments on business operations.
For example, a company may consider the impact of operating in a communist country and the threats posed by government-controlled resources. A company might also consider the opportunities of a government-controlled market in terms of competing products, the implications of well-educated and well-paid consumers to product development and sales and the impact of the location of its primary suppliers in a country in economic crises.
Environmental Analysis Process An organization relies on strengths to capture opportunities and recognize weaknesses to avoid becoming a victim of environmental threats.
A company performs an environmental analysis to gain an understanding of these strengths, weaknesses, opportunities and threats.
The environmental analysis then influences corporate planning and policy decisions. This environmental analysis is a three-step process in which a company first identifies environmental factors that affect its business.
The company then gathers information about the selected set of environmental factors that are most likely to impact business operations. For example, the company might review International Trade Center surveys that relay information about trade barriers that companies face in particular countries.
This information serves as input to a forecast of the impact of each environmental factor on the business.
For instance, a company might project the volume of products likely to be sold in a country in light of existing poor economic conditions and significant trade barriers. Limitations of Environmental Analysis An environmental analysis reviews current environmental conditions to forecast a future business environment.
As a result, the analysis does not guarantee business success. The benefit of the analysis is also limited by the reliability and timeliness of data used in the analysis. During her career, she has published business and technology-based articles and texts.
Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance.An environmental analysis reviews current environmental conditions to forecast a future business environment.
The static nature of the analysis ensures that unexpected environmental changes are not considered in a company's business projections.
The politico-legal dimension of the general environment refers to the government law of business, business-government relationship and the overall political and legal situation of a country. Business laws of a country set the dos and don ts of an organization.
International business activity is one of the key features of the contemporary global economy. The decision to venture abroad involves the evaluation of alternative entry modes, bearing in mind the degree of risk and the suitability of the business environment in a potential host.
Most important factors of micro environment of business are as follows: 1. competitors, 2. customers, 3. suppliers, 4. public, 5. marketing intermediaries, 6. workers and their union! The micro environment of the organisation consists of those elements which are controllable by the management.
An analysis of the organizational structure in terms of flexible response to new situations must focus on the business environment. Rapidly changing marketplace conditions favor use of a matrix organization, while hierarchical organizations perform effectively in mature, stable markets.
4 Additional information about conducting an external analysis for the farm business can be found in the presentation entitled External Environment Analysis.