Need for Environment Analysis
- Primary influencers – Environmental analysis gives the strategic manager time to anticipate opportunities & to plan alternative responses to those opportunities. It also helps them to develop an early warning system to prevent threats or develop strategies that can turn a threat to the organization’s advantage.
E.g.: – Standard chartered bank is the oldest foreign bank operating in India, since 1858. But it had missed the opportunity that suddenly opened up for the multinational banks in India in the eighties. Over the years it has acquired the image of a standby player in the market dominated by aggressive competitors. The bank could not understand its environment in advance. Once the CEO of the bank stated that “a lack of directions, a lack of focus & the absence of clearer perception of the business has left the bank behind.”Hence the bank went out of business due to their failure in anticipating environmental changes.
- Managers need to search the environment to determine
- a) What factors in the environment present threats to the company’s present strategy & accomplishment of objectives?
- b) What factors in the environment present opportunities for a greater accomplishment of objectives through an adjustment in the company’s strategy?
3 Without systematic environmental search & diagnosis, the time pressure of managerial jobs can lead to inadequately thought out responses to environmental changes.
- Firms that do environmental analysis are more effective than those which don’t. Successful firms do more & better analysis than the failing firms.
- The extent & sophistication of the analysis must meet the demand of the environment.