Strategic Management

Environmental Analysis

Dr. Sanjay Jain

Associate Professor
Institute of Management Studies
Ghaziabad
sanjayudr@gmail.com
Concept of Environment

 Environment literally means the

surroundings, external objects, influences or
circumstances under which someone or
something exists.
 The environment of any organization is “the
aggregate of all conditions, events and
influences that surround and effect it”.
Characteristics of Environment

 Environment is complex
 Environment is dynamic
 Environment is multi-faceted
 Environment has a far reaching impact
Environment Scanning

 External Environment
 Macro/Mega environment
 Micro/Related environment
 Internal Environment
External-Mega Environment

 Socio-Cultural
 Economic
 Technological
 Political & Legal
Some Important Variable in Mega Environment

Economic
GDP trends
Interest rates

Inflation

Type of

economy
Income

Disposable

income
Wage-price

control
Money

supply
Some Important Variable in Mega Environment

Economic Technological
GDP trends Spending by govt
Interest rates on R&D
Inflation Industry spending

Type of on R&D
Focus of
economy
Income technology
Patent protection
Disposable
Productivity
income
Wage-price Communication &

control Infrastructural
Money New products

supply Commercialization

of technology
Some Important Variable in Mega Environment

Economic Technological Political & Legal

GDP trends Spending by govt Type
of Govt.
Interest rates on R&D Tax Laws

Inflation Industry spending 

Foreign trade
Type of on R&D regulations
Focus of
economy Constitutional

Income technology framework

Patent protection Anti trust litigation
Disposable
Productivity
income Labor laws

Wage-price Communication & 

Attitude toward
control Infrastructural foreign co.
Money New products Stability of govt

supply Commercialization

of technology
Some Important Variable in Mega Environment

Economic Technological Political & Legal Socio-Cultural

GDP trends Spending by govt Type
of Govt. Life-Style

Interest rates on R&D Tax Laws Religion

Inflation Industry spending 

Foreign trade Language

Type of on R&D regulations Customs

Focus of
economy Constitutional Age distribution
Income technology framework Languages
Patent protection Anti trust litigation
Disposable Growth rate of
Productivity
income Labor laws
population
Wage-price Communication & 
Attitude toward
control Infrastructural foreign co.
Money New products Stability of govt

supply Commercialization

of technology
Constituents of Microenvironment
 Suppliers
 Customers
 Competition
 Marketing intermediaries
 Type of market & demand condition
 Financial institution
 Skill level of workforce
 E-commerce
Strengths & Weaknesses
Marketing
 Product/services
 Ability to gather needed market information
 Channels of distribution
 Effective sales organisation
 Pricing strategy
 Product/services image
 After sales-service
 Good will/brand loyalty
 Effective communication
Strengths & Weaknesses

Finance & Accounting

 Ability to raise short-term capital
 Ability to raise long-term capital
 Cost of capital
 Tax considerations
 Relations with investors and stockholders
 Various ratios
 Working capital
 Financial planning & budgeting practices
 Cash flow
Strengths & Weakness
Production/Operation
 Access to raw material
 Raw material cost & availability
 Location of facilities
 R&D, Technology and Innovation
 Productivity & capacity utilisation
 Patent, trade marks
 Layout & utilisation of facilities
 Degree of vertical integration
Strengths & Weaknesses
Human Resources
 Employee skill, morale and motivation
 Labor relations
 Efficient and effective personnel policy
 Employee turnover & absenteeism
 Access to talent
 Recruitment & selection policy
 Experience
Strengths & Weaknesses

General Management
 Organisation structure
 Organisation’s past record & history
 Firm’s image & prestige
 Orginasational communication system
 Top management skill, capabilities and
interest
 Overall organisational control system
SWOT-Limitations
 Vague, oversimplified
 Static, not dynamic
 Analytic, not diagnostic
 Where to search for variables / information
 Do not tell impact/intensity of threats and
attractiveness of opportunity
 Do not suggest course of action
 Not identify the interactions among factors
 Organization may have many strengths, but
nothing is useful to be successful (KSF)
Opportunity / Threat Attractiveness

Likelihood of occurrence
High Low

Attractiveness / High Major Moderate

impact
Low Moderate Minor
Other Matrices

 Impact Matrix
 ETOP / SAP
 OCP
 IFAS / EFAS
 TOWS
 SWOT Strategic Framework
 Company’s Situation
to Choosing a Strategy