Environmental Analysis

Features of Environment
• Complex/multi-faceted.
• Dynamic.
• Challenging.
• Far-reaching impact.
Features of Environmental Analysis
• Holistic exercise.
• Exploratory process.
• Continuous activity.
 Environmental Scanning:
Factors
• Events.
• Trends.
• Issues.
• Expectations.
 SWOT
• Opportunity: A favourable condition in the
organisation’s environment.
• Threat: An unfavourable condition in the
organisation’s environment.
• Strength: Inherent capacity of the
organisation.
• Weakness: Inherent limitation of the
organisation.
Boulton’s Matrix
 IMPACT ON BUSINESS
H M L
High Low
PROBABILITY H Critical Priority Priority

High High Low

OF M Priority Priority Priority

To be Low Low
IMPACT L Watched Priority Priority
QUEST
 QUEST
• QUick Environmental Scanning Technique
• Proposed by B. Nanus.
• A four-step process using scenario-writing
for scanning the environment and
identifying strategic options.
 QUEST: Steps
• Make observations about the major events
and trends in the industry.
• Speculate on the important issues that
might affect the future of the organisation
by scanning the environemnt broadly and
comprehensively.
 QUEST: Steps
• Prepare a report summarising the major
issues and their implications, and three to
five scenarios incorporating the major
themes of the discussion.
• The report and scenarios are reviewed by a
group of strategists who identify feasible
strategic options to deal with the evolving
environment. The options are ranked and
teams are designated to develop strategies.
 Identify
Scan
Industry
Environment
Trends

Review Develop
Scenarios Scenarios
Extended Threat Opportunity
Profile
(ETOP)
 ETOP
• Suggested by Glueck.
• Involves dividing the environment into
different sectors.
• Analysing the impact of each sector on the
organisation.
• Dividing each environmental sector into
sub-factors.
 ETOP
• Describing the impact of each sub-factor
on the organisation in the form of a
statement.
• Indicating the nature of the impact –
favourable, unfavourable, neutral.
 ETOP
• Provides a clear picture of the type of
impact of environmental sectors on the
organisation.
• Helps in taking advantage of the threats
and countering the threats.
 A Bicycle Company: ETOP
• Industry growth rate is 7-8%/year
• For sports cycles, growth rate is 30%
• Largely unsaturated demand
• Technological upgradation of industry in
progress
• Import of machinery is simple
• Mostly ancillaries and associated
companies supply parts and components
 A Bicycle Company: ETOP
• Imported raw materials easily available
• Growing affluence among urban
consumers
• Bicycle industry a thrust area for exports
• Customer preference for sports cycles
• Emerging threat from cheap imports from
China
• Export potential promising
Food Processing Industry

An Example
 Food Processing Industry:
Opportunities
• A high demand potential.
• Rising disposable income.
• Nuclear families.
• Rise in the number of working women.
• Shift in Indian eating habits.
• Spread of TV as an effective advertising
medium.
• Emergence of a retailing culture.
 Food Processing Industry:
Threats
• Conservative governmental policies –
reservation of several items for small scale
sector, over-regulation.
• High taxation.
• Lack of investment in cold chains – cold
storages, refrigerated vehicles.