Environment Analysis An organization seeks to create its own environment out of the total external environment.

This environment is called the enactment. This is a process essentially to limit the scope of the environment to which the organization would react. Within this environment the organization creates its own domain domain in essence is its territory within the environment. The established domain consists of the markets to serve, products to offer and services rendered. The organization serves to limit its focus on these 3 areas. It is important for the organization to agree on the domain of the organization which is known as the domain consensus. Task environment specifies the range of products to be offered, technologies to be employed and strategies used. This environment is the one which would need to be constantly monitored and surveyed aggressively. Objective and use of environmental study Environmental analysis and diagnose gives strategists time to anticipate some opportunities and to plan optimal responses to these opportunities. It helps them develop early warning signal to prevent threats or develop strategies to turn these strategies into firms advantage. It also helps in strategists understanding the linkages and the impact of the environment on businesses and to take a long term approach and not just a short term approach. Process of Environmental analysis 1. scanning analyzing the environment for the identification of factors that impact or have implications for the business. Identification of emerging / ensuing trends is critical purpose. Scanning identifies indicators of fore-runners of change and issue. E.S. is thus aimed at alerting the environment to potentially significant impingement before it is fully formed or crystallized. Successful E.S. will draw attention to possible changes and events before they occur allowing time for suitable action. Exploratory in nature. 2. monitoring is a perspective follow up and a more in depth analysis of relevant trends identified at the scanning stage. Effort is more focused and systematic than scanning. The purpose is to have enough data to discern whether patterns are emrging or not. At the initial stages the patterns are likely to be hazy because they are outputs of scanning and the analyst may have only a vague idea of what he is looking for. 3. Forecasting anticipating the future for identifying the threats and opportunities and for formulating strategic plans. It is concerned with development of plausible directions, scope ,speed and character of environmental change to lay put the evolutionary path of anticipatory change. The characteristics may change and call for re-forecasting 4. Assessment purpose of Env. Analysis is to assess the impact of env. Factors on org. business. Assessment involves drawing up of implications / possible impacts. In assessment the focus shifts from understanding the environment steps 1 to 3 to identifying what the understanding of environment means for the org.

Approaches Macro broad view , long term perspective and develops alternative acenario . the implication of the industry and organization are drawn with reference to the different scenarios. Micro view is a narrower view of the environment and it forecasts the immediate future environment on the basis of ongoing environmental monitoring and derives implications for the firm out of it. Techniques for EA refers to the methods of gathering relevant information for appraising the environment. ( William Glueck ) 4 techniques 1. Verbal & written some information may be revealed only verbally , maybe on conditions of anonymity or confidentiality also verbal information could be obtained if information has changed after it was written. While looking at written information what is important s the purpose for which it was prepared , the methodology used, reliability of sources , the ideology orientation of the person who has prepared the report 2. Search & scanning required information exists but is not readily available. Search and scanning is required to identify source of information, timely availability of require information. MIS ( management info system ) gathers , processes, stores and disseminates info. 3. Spying obtain confidential information. 4. Formal forecasting :Steps in formal forecasting i. Identification of relevant environmental variable Identify those env.variables which are critical to the firm. All variable are not relevant to the same extent. Relevance will also change across sectors. Inclusion of variable which are irrelevant and exclusion of variables which are relevant will have misleading effects. Keeping the list manageable could be thru - include all variable which have an impact on business irrespective of their prob. - Disregard major disasters such as war - Aggregate when possible into gross variable - If the value of one variable is dependent on another , separate the dependent variable ii. Collection of information - identify sources of info, determine types of info, data collection methods and collection of info. iii. Selection of forecasting techniques would depend on nature of forecast, information accuracy , availability of time and the competence of the forecaster. iv. Monitoring monitor the changes as the variable could keep on changing . Types of forecasts

Economic forecast general economic conditions, GDP growth rate, per capita income, distribution of income, trends in different sectors, BOP trends and trade etc. sources would include World bank , IMF , UN etc besides the govt. itself. Reliable forecasts help in planning and strategy. Social forecasts ethnic compostion, migration ,rural- urban distribution , political forecast change of the political party, ideology etc. Some changes are sudden and unexpected but some can be reasonably predicted. Technical forecasts tech changes the pace and extent of penetration of these changes.

Techniques for environmental forecasting Econometric technique casual models to predict major economic indicators. When there is a well established relationship between 2 variables , the casual relationship can be used to forecast the future. Demand is a function of income , then a change in the income could be used to forecast a change in the demand. Multiple regression analysis and time series analysis are examples of some of these techniques Trend Extrapolation time series model assume that the past is an indicator of the future and it extrapolates the historical data to the future . Scenario development When it is not possible to accurately forecast the future, alternative scenarios help managers to formulate strategy to cope with the future situation. Steps 1. Identify the strategic environmental factors that are likely to affect the industry and rank them in order of their importance. 2. select the most important issue as the focus for scenario development. List the org. assumptions with respect to these issues and identify the variables in these issues. 3. Prepare a preliminary description of these issues and how they evolved. Include key influence and take the help of outside experts, 4. draw out the imp;lication of the issue for the org. performance. What has the org. done and what can it do to cope with the issues. Identify those variables shaping the issue that the management can control , partly control , not control. 5. Develop detailed descriptions of the future in the form of scenario. Worst case , best case and normal cases. Draw the implication of these scenarios for the firm 6. discuss and refine the scenario 7. develop contingency plans Method of scenario building

Premising method A series of premises are drawn up on the basis on which projections are made. The premises might consist of basic assumptions about certain variables, current trends etc. For example, assume that the government will continue to give tax exemptions to the firms operating in SEZs. This exemption will continue to be available to firms to the tune of 100%. This would mean that the firm will have the earnings available for reinvestment instead of borrowings or raising fresh capital. Systems diagram method seeks to explore policy and strategic options based on the present system of the organizations capabilities. A publishing firm for example could think of expanding into media. Or a frozen / packaged food firm could think of expanding into the restaurant business or vice versa. Critical site method bases the scenario projection on policy making structure of an organization by identifying the key decisions making points and dynamics of the system. It focuses on the critical sites where the decisions are taken such as the meeting of board of directors, annual government budget, critical meeting of WTO /OPEC etc. Scenarios are drawn up on the basis of anticipation of possible critical decisions and their implications. Newspaper headline A hypothetical headline is imagined for example the XYZ firm invents a revolutionary cleaning system which cleans the office/homes by itself. Then try and map out the various possible developments during the course and chart out t he companies strategy to meet with the same. Logical possibilities method is a supplement method. Used to generate alternative scenarios Judgement models involves the use of opinion of people who have intimate knowledge of relevant factors. For eg. Sales force opinion of the sales potential , reaction to new product etc. Brainstorming creative method of generating ideas and forecasts. A group of people are encouraged to have a free-wheeling discussion in order to generate ideas , discuss them and make forecasts on that basis. The members are encouraged to speak out and no idea is criticized on put down , even if it sounds improbable or crazy or just not done. Members can use anothers idea to build on it. Discussion and evaluation is after the ideas are generated. Delhi method - uses a panel of expert to gather opinion/information through a questionnaire /interview method. The opinions are then consolidated and circulated anonymously for further comments and inputs and reviewing of opinion in light of feedback. This method is used to circumvent the process of group think and to overcome the geographical distances as interviews /questionnaire cam be conducted across distance as well

Strategic issues analysis qualitative technique which is used to assess emerging strategic environmental issues. It consists of systematically monitoring the social regulatory and political changes that can affect corporate performance and identifying the impact on the firm.