Environmental analysis is careful study of various
factors influencing the business. It is the process by
which
organization
monitor
their
relevant
environment to identify opportunities and threats
affecting their business.
Environment analysis helps to identify opportunities
and to plan to take appropriate action to avail these
opportunities. It also helps in developing an early
warning system to prevent threats or to develop
strategies which can turn a threat to the firm’s
advantages. Environment analysis is the study of
technological factor, political factors, global factor etc.
By carefully analyzing the environment, the
businessmen come to know the opportunities provided
and threat posed by environment. Keeping in view, its
strengths and weakness, it can avail benefits of
available opportunities and face threats.
Objectives of Environment Scanning/
Analysis:
1. To Understand Current and probable
Change In environment: it is importance
that one must be aware of existing
environment and changes in various factors of
environment like-changes in economic
environment, technological environment,
political environment, global environment,
etc.
TO PROVIDE INPUT FOR DECISIONMAKING: DECISION-MAKING MEANS TO
SELECT AN ALTERNATE AMONG THE
VARIOUS AVAILABLE ALTERNATES. IN
THIS
PROCESS,
WE
NEED
INFORMATION
FOR
ANALYZING
VARIOUS ALTERNATES, SO THAT THE
BEST
ALTERNATE
IS
SELECTED.
ENVIRONMENTAL ANALYSIS PROVIDE
SUCH INFORMATION TO DECISION
MAKER.
To Formulates Appropriate Strategy:
Environmental analysis helps in
developing strategies and long policies
of the firm, by analysing opportunities
and threats to the business. For
example development of timely action
plans to deal with technological
advancement: and formulation of
effective counter-measures to face
competitor’s moves.
To ensure Optimum Utilisation of
Resources:
The key of business
success lies in the most effective
utilization of the company’s resources.
All these involves the evaluation of
company’s strengths and weakness in
the light of the environmental threats
and
opportunities
and
taking
appropriate measures to avail the
opportunities or to face the threats.
Other Objectives:
1.
To identify the threats and opportunities
of environment.
2. To identify the strengths and weakness
of the business.
3. To diversify the business in new areas
and to keep the business dynamic.
4. To forsee the impact of various helps the
organization of business environment.
Thus, environmental analysis helps the
organization to identify, understand and
adapt to external issue; to anticipate
the consequences of the environmental
factors and to develop well thought out
plans and polices.
Process of environment scanning/Analysis:
The process of environment analysis includes various
steps like monitoring various sources OF relevant
information related to environment factors affecting our
business, searching and scanning the required
information, making necessary forecasts on the basis
of information so collected. Later these information
and forecasts are assessed and evaluated to
understand various environment changes and their
impact on business. Various steps in the process of
environment analysis are discussed below:
1. Monitoring: It means to understand
the various environment factors which
affect the business and to identify
published or unpublished sources of
information which affects our business.
These sources can be:
A) Newspapers: Economic Times,
Financial Express, Business standard,
Times of India, Hindustan Times, etc.
b) Magazines and Journals: Business
India, Business World, Economic and
Political Weekly, Harward Business Review,
India Today. The Sunday Observer, Yojana,
Southern Economist, etc.
c) Government Publication: Census of
India reports, Five Years plan reports,
periodical reports like economic survey,
annual survey of Industries, annual reports
of ministries, RBI bulletins, Books of
publication Division, etc.
d)
Institutional publications:
1. Bombay Stock Exchange Directory
2. Publication of National Council for Applied
Economic Research (NCAER)
3. Publication of centre for Monitoring Indian
Economy (EMIE)
4. National Sample Survey organization Reports
5. Annual Company Reports
6. Publication of Trade and industry federations
etc.
e)
International publication:
International institutions like World Bank,
International monetary fund, World trade
organization. United Nations Conference on trade
and Development (UNCTAD), United Nations
organization (UNO) etc., conduct surveys and
publish their reports. Some of the publications are:
1. World Development Reports
2. Human Development Reports
3. UNCTAD handbook of Statistic
4. World Trade Report
5. World Investment Report
2. Searching and Scanning: Even when the
sources of required information's exist, these may not
be readily available. Search and scanning are
therefore needed to manage the timely availability of
required information. A number of organizations have
‘Clipping Service’ which constantly scan newspaper,
periodicals, etc. and prepare clipping containing
information required by different departments or
executives of organization. Many organizations have
management information system for systematic
gathering,
processing,
storing
and
providing
information.
Spying although, regarded unethical
by many, is not very uncommon is
business. This has been used to a
considerable extent to obtain secret
information regarding defenses and
space
research.
Some
private
agencies also provide information on
competitor’s plans and activities which
are essential for strategic planning.
3. Forecasting: Monitoring and scanning
provide a picture of what has already taken place
and what is happening. Strategic decision-making,
however, requires a future orientation. So,
forecasting is an essential element in environment
analysis. Forecasting is concerned with estimation
of direction and intensity of changes in
environment factors. Forecasts of important
components of business environment like
economic environment, social environment,
technical environment and political environment
help in formulating plans and strategies.
For example, forecasting the
general economic conditions, per
capita income, and growth rate of
population, expenditure pattern of
population; technical advancement,
etc. play a vital role in business
decision-making
and
strategy
formulation.
Evaluation and Assessment:
Monitoring,
scanning and forecasting are not ends in
themselves. They simply provide information
regarding current business environment and future
business environment. But in assessment, we
identify and evaluate as to how these
environmental changes will affect our business so
that appropriate counter strategies can be made
well in time. Assessment provides us answer to the
key issues presented by the environment and their
impact on business.
In brief, in monitoring, sources
of information are identified. In
scanning, required data and
information is collected from
identified
sources.
In
forecasting, changes in future
are identified. In assessment,
affect of these changes on
business is assessed.
Techniques of Business environment
scanning: Techniques of environmental
scanning
refer
to
methods
of
monitoring various sources of relevant
information, searching the required
information and making forecasts on
the basis of information so collected.
Various
methods/techniques
of
environmental scanning are discussed
below;
Monitoring the published or unpublished
sources of information:
In monitoring
various sources of published or unpublished
sources of information are identified which affect
our business. Experts/Top executives identify the
relevant sources of information like relevant
newspapers, magazines, government publications,
institutional publications, international publications,
etc. While identifying the published sources of
information, reliability of sources of information,
assumptions made and methods used for data
collection by published sources are taken care of.
If the information of published sources is not reliable
or assumption/methods used by published source do
not match with our requirements, then the whole
purpose of environmental scanning will go waste. In
such situation, first hand information, i.e. primary data
is collected. Primary information is often used along
with secondary sources of information. While collecting
primary data, trained investigators are used who
design questionnaire, conduct survey of the potential
market area and collect the relevant information. Many
a time, verbal information like news from electronic
media, panel discussion on T.V. debates, workshops,
seminars, conferences, etc. are used along with above
stated data.
Searching the required information: After
identifying the sources of information, the required
information is searched from published sources and it
is supported with primary and verbal information. A
number of organizations have clipping services which
constantly scan newspapers; periodicals etc. and
prepare clipping containing information required by
different departments or executives of organization.
Many organanisation have management information
system for systematic gathering, processing, storing
and providing information.
Spying, considerable extent unethical
by many is not very uncommon in
business. This has been used to a
considerable extent to obtain secret
information regarding defence and
space research. Some private agencies
also provide information on competitors
plan and activities which are essential
for strategic planning.
Forecasting: Monitoring and searching of the
required information provide a picture of what has
already happened and what is happening strategic
decision making and policy making. However, require
a future orientation. So forecasting is essential and
most
important
for
environmental
scanning.
Forecasting of various components of business
environment helps in formulating plans and strategies.
Different
quantities
and
qualities
forecasting
techniques are used for environment forecasting. The
main methods of environmental forecasting are as
follows:
1. Executive Opinion method: It is also known
executive judgement method/jury method. In this
method, business environmental forecasting is based
on opinion and views of top executives. These top
executives are working at high ranks in different
departments such as marketing, production, research,
finance, etc. A panel/jury/committee is formed
consisting of these top executive. Each member of jury
gives an estimate of future events for a particular time
period based on available information, judgement and
experience. Their individual opinions are analysed and
discussed in the panel meeting. At the end, collective
decision is taken regarding business forecasts for a
specific time period.
2. Expert opinion method:
In this
method, business forecast is based on the
opinion of outside experts. Opinions of
outside experts or specialists form the basis
of this method. These experts have best
knowledge about the market conditions,
tastes and preferences of target customers,
level of competition, government’s policies,
political conditions etc. in this method also;
panel of outside experts is made.
The experts give their opinions. Their
opinions are analyzed, discussed and then
collective decision is taken regarding
business forecast. This method is almost
similar to Executive Opinion method. The
only difference is that in Executive opinion
method, executives of business unit itself
discuss their opinions and reach at final
estimate, while in expert’s opinion method,
services of outside experts are hired and
estimate is based on opinion of these
outside experts.
3. Delphi
Method:
Delphi method of
forecasting is an extension of experts’ opinion
method. This method is used to consolidate the
different expert opinions so as to reach a common
estimate. This method involves no panel formation.
In this method, consensus of different experts is
reached without direct interaction among them. In
this method, opinion of first expert is provided to
second expert and second expert is asked to form
his opinion on the basis of his knowledge and
considering opinion of the first expert.
Then final opinion of second expert is
handed over to third expert and then the
third expert is asked to give his opinion
considering the previous opinion and his
own knowledge. This procedure goes on,
depending upon number of experts hired by
the business unit. The last expert forms the
final opinion about sales forecasts. In this
method, no collective meeting of experts is
arranged.
4. ECONOMIC INDICATORS ANALYSIS METHOD: In
this method, forecasting is based on certain indicators
affecting business unit. After through analysis of these
economic indicators, forecasting is done. For example,
a) If government has announced liberal loan policy for
farmers, then tractor manufacturing units will forecast
their sales at higher levels. B) If government makes
the use of helmet compulsory for both driver and pillion
rider, then helmet manufacturing units will estimate
their sales at higher level.
5.
Past Projection Method: The assumption
of this method is that past events will have
their impact on future. In his method, results
of immediate previous years or average of
past few years are taken as base. Estimates
made using this method are more reliable
and are free from guesswork. But if there
are major changes in components of
business environment, then forecasts of this
method may not prove useful.
6.
Statistic Methods: Beside the
survey and opinion-base methods,
certain statistic methods are also used
in environmental forecasting. These
methods are more scientific and
estimates made through these methods
are more reliable. In statistic methods,
an element of subjectivity is minimum.
Following
are
commonly
used
statistical methods:
Trend Projections: This method is based on
time series analysis. In this method, a trend
equation and a trend line is framed keeping
in view the past behavior (trend) of data. On
this basis forecast of future period is made.
Trend Equation in time series analysis is
based on least square method. The basic
formula is
Y
Y
X
a
=
=
=
=
b
=
a + bX, where
Dependent Variable
Independent variable
value of dependent variable on the
basis of given change in
Dependent.
Rate of change is dependent
variable on the basic of given
change in dependent variable.
In this
method, simple and multiple
regression equations are used
to estimate the value of
dependent variable on the basiS
of given value of independent
variable /variables.
b)
Regression
Analysis:
There are various methods for
environmental forecasting. All the
methods have their own merits and
demerits. The selection of right kind of
method depends upon purpose of
forecasting, availability of relevant data,
available time, available finance,
convince etc. Some business units use
more than one method for forecasting
so as to get reliable estimates.
7. Scenario
Development
Method:
Scenario development method is a popular
method of forecasting when it is possible to
make precise forecast of future. It is used for
scanning complex environmental events.
While analyzing socio-cultural and political
environment, this method is much used. In
this method, different alternative scenarios
are developed. Generally, three possible
alternative scenarios are developed:
1. Scenario under worst conditions
2. Scenario under best conditions
3. Scenario under most likely
conditions
For all these alternative scenarios,
future course of action, strategy
and contingency action plans are
developed.
These contingency action plans help the
business managers to face the future
uncertain events with more confidence and
diligence. Even our planning commission
makes three types of GDP growth estimates:
1. Under pessimistic/worst conditions
2. Under Optimistic or most favourable
conditions
3. Most likely conditions
8. Brainstorming method: Brainstorming is a
technique used to generate new, innovative and
unique ideas and forecasts. In this method, group
member are encouraged to generate ideas,
discuss them and make forecasts. In this method,
a problem is assigned to a group. The group
members are asked to generate innovative ideas
using their creative thinking, so that various
possible alternative ideas are generated. At the
stage of idea generation, these ideas are not
evaluated so that members feel free to generate
more and more ideas. At later stage, these ideas
are critically evaluated.
Business Barometer method: This method
is
used
for
forecasting
economic
environment. Index numbers are used as
business barometer for measuring economic
trends. The index numbers help to analysis
long-term trends, seasonal fluctuations and
cyclical movements in the economy. Index
numbers measure the growth rate and the
direction in which economy is moving.
Other Techniques:
1. SWOT Analysis: SWOT analysis is an
analysis undertaken by business firms to
understand their external and internal
environment. The terms SWOT consist of
four words.
S =
Strengths
W =
Weakness
O =
Opportunities
T =
Threats
SWOT analysis is applied to formulated
effective organizational strategies. Through
SWOT analysis, the business firm can
match the strength (S) and weakness (W)
existing within an organization ( in internal
environment) with the opportunities (O) and
threats (t) existing in the external
environment. It enables a business firm to
use its strengths to exploit the opportunities
provided by the environment. On the other
hand, threats of environment are reduced by
lowering its weakness to the minimum level.
2.
ETOP Analysis: ETOP analysis stands for
environmental threat and opportunity analysis. In
ETOP analysis, impact of each environmental factor
on business unit is analysed. The favourable change
in any components of business environment brings
opportunities for business units while unfavouable
changes in any component of business environment
poses threat for business unit. Understanding the
opportunities and threats helps the business managers
in designing the appropriate strategy so as to get
maximum gain from the opportunity and to save the
business unit from negative consequences of threat.
Factor
Affecting
Environmental
Scanning: No two business units will
scan the different components of
environment in the same manner.
Various factor affect environmental
scanning. Main factor are:
1. Personal Ability of Strategist: The
persons who are involved in environmental scanning
may be different with regard to their ability, experience,
judgement, interpretation skills, educational level, age,
socio-cultural values, etc. Different persons analyse
the same situation in different manner. Some persons
are pessimistic. One person may perceive a change in
environment as opportunity, while other person may
perceive it as threat. In this way, the results of
environmental appraisal are significantly affected by
the personal ability of strategist.
2. Internal Environmental or organizational
factors: Internal environment of different business
units is different. For a business unit that possesses
huge financial resources, skilled human resources,
large market size, good brand image, corporate image
etc. A change in environment may offer opportunity,
while the environmental change may pose threat to
another business unit which is facing financial crunch,
labour problem like strike. In this way various internal
environmental factors affect environmental scanning.
3. External Environment Factors: If external
environment of a business unit is very
complex,
and
different
external
environmental factors are interdependent,
then scanning of such environment requires
in-depth analysis. It necessitates the use of
various quantitative tools to get reliable
result from environmental scanning. On the
other hand, if external environment of any
business unit is simple and less dynamic
then scanning of such environment is
comparatively easier.
Limitations of environmental Scanning /Analysis:
Environmental analysis has certain limitations.
These limitations are as follows
1. Unexpected Events: Environmental analysis
is concerned with monitoring current business
environment
and
forecasting
the
future
environment of the business. Future is always
uncertain as any unexpected change may take
place in any of the factor affecting business.
Because of these unexpected changes, the results
of environmental analysis may prove wrong.
Environmental analysis is not the only factor in
strategy formulation: Strategy formulation is
based
on
various
inputs,
while
environmental analysis is only one of these
inputs. Hence it is not sufficient guarantor of
organizational effectiveness.
3. Inaccurate
Data:
The result of
environmental analysis will be reliable only when
the data used in forecasting is correct. But it is
quite possible that data used in forecasting is
inaccurate. It may reduce the effectiveness of
environmental analysis.
Too much dependence on information
collected
through
Environmental
Analysis: Success lies in adventure.
4.
Environmental analysis often makes
decision taker too cautious in his
approach. He is likely to miss some
innovative and new ideas which
although appear to be risky, but may
prove beneficial for the business.
Responsibility for Environment Analysis:
Environmental analysis is the work of top-level
officials. The responsibility of environmental
analysis cannot be assigned to lower officials.
Some organizations maintain separate department
of management information system. This
department provides information to the managers
as and when required. The work of environmental
analysis can be assigned as this department
provides information for decision-making and
strategy formulation.
The work of environmental analysis can also be
assigned to the committee consisting of top
officials of various departments like department of
finance, purchase, marketing, R&D etc. The best
alternative is to have a separate department for
environmental analysis to be headed by a
competent official. This would entail additional
expenditure, but the business will gain in terms of
effective decision-making, effective counter
strategies to face competitions and timely action
plans for facing sudden changes in various
component of external environment.
SWOT As A Technique of Environment Analysis:
SWOT analysis is an analysis undertaken by
business firms to understand their external
and internal environment. The term SWOT
consists of four words.
S =
Strengths
W =
Weakness
O =
Opportunities
T =
Threats
SWOT analysis is applied to formulate
effective organizational strategies. Through
SWOT analysis, the business firm can
match the strengths (S) and weakness
within
an
organization
(in
internal
environment) with the opportunities (O) and
threats (T) existing in the external
environment. It enables a business firm to
use its strengths to exploit the opportunities
provided by the environment. On the other
hand, threats of environment are reduced by
lowering its weakness to the minimum level.
Strengths and Weakness of an organization
are related to internal environment. Strengths and
weakness can be in the form of :
Technological Capabilities
Human resources
Production Facilities
Financial Resources
Marketing Capabilities
A company can be strong or weak
in respect of technology, finance,
human
resources,
marketing
capabilities
and
production
facilities. The task is to make best
use of its strengths and to reduce
the weakness to the minimum
level.
Opportunities and threats are related to
external environment. The environment
might present many opportunities but the
company might not have the strengths to avail
these opportunities; while some other
companies may be strong enough to avail the
opportunities provided by environment.
Similarly the environment might pose a threat
in the form of growing
competitions and the company may or not
have the strength to meet the threat or to avail
the opportunities.
The strength of reliance Industries in raising finance
from the public is established. So this industry is
very strong in capital intensive sector, because of its
strength in raising finance from the public from
national and international markets. The strength of
Japanese companies are very strong in those
industries which need high skills like electronic,
computers, telecommunication etc. For many
companies, the primary strength is in the brand
image, company reputation and marketing. The
strength of Hindustan unilever is in brand image
and it has diversified in many areas because of its
popular brands.
2. Weakness:
The weakness of a firm refers to
limitations of a business firm. It results in significant
disadvantage for a firm in comparison to its competitors.
For example, overdependence of a firm on a single
product line, outdated technology, lack of financial
resources, lack of good quality products, etc. can be
weaknesses of a business unit. It can result in losses in
times of crisis. The weakness of proctor and gamble is
overdependence on a single product line- Vicks. If at any
time, this product line faces competition, the revenues of
proctor and gamble will be badly affected. Similarly,
overdependence of Colgate is on single product linetoothpaste and tooth powder. This company has not
diversified in other consumer goods. It is its weakness.
Opportunities:
The availability of
opportunities is a favourable condition in the
organization’s environment. If a company has
enough strength to avail the opportunities. It
can generate extra profits. For example,
government has made it mandatory for twowheeler’s driver to wear helmet while driving
the vehicle. This has created opportunities for
helmet industry. Similarly, reduction in custom
duty and excise duty by government on
telecommunication products and electronic
products has lead to increase in the demand
for these products.
3.
It is opportunity for manufactures of
telecom products and electronic
products. India has emerged as a
global manufacturing base because of
talented human resource and cheap
labour. MNCs like Toyota, ford,
Hyundai, Suzuki, etc. are taking
benefit of this opportunity by setting
their manufacturing base in India.
4. Threat:
It is unfavourable conditions in the
organization’s environment. It creates a risk for the
organization. Threat can be in the form of growing
competition, change in fashion, unfavourable changes in
government policy, raw material shortages etc. For
example, maruti-Suzuki’s swift and wagon R cars are
facing threat in the form of increased competition from
Hyundai’s i-10, i-20, Ford figo, volkswagen polo, Toyota
Etios, Chevrolet beat, Tata’s Indica etc. Similarly entry of
Reliance and Tata in telecommunication sector has
posed threat to existing companies. Honda Activa
Scooter has captured the market share of kinetic scooter.
Liberal import of chines toys is posing threat to Indian toy
industry.
After the identification of environmental threats and
opportunities and the organsational strengths and
weakness, the management should consider various
strategic alternatives and choose the most
appropriate strategy. Thus, environmental analysis is
an important step towards corporate planning and
business policy formulation. Corporate managers
analysis the strength, weakness, opportunities and
threat that exist for their business. It gives time to
anticipate opportunities and to take appropriate
action to avail these opportunities. It also helps in
developing strategies for preventing the threats to
the business.
Significance/need of the study of Business
environment: It is essential for a business enterprise to
keep itself aware of surrounding environment because
the success of business depends to a great extent on its
awareness about surrounding environment. The
information about changes taking place in the
environment enables business enterprises to adjust itself
accordingly. A business enterprise can expend itself as
and when favourable changes take place in the
environment. If the environment is getting hostile, the
business enterprise, individually or along with other
business enterprises, can make efforts to make
environment hospitable according to the requirement of
business. The benefits of environmental study may be
specified as follows:
1. TO FRAME POLICIES:
The business
enterprise should make it policies keeping in view
the demands of environment. It should change its
policies and strategies with the changes in
environment. The success of business enterprises
depends upon quick adaptability to environmental
changes.
To ensure optimum utilization of
resources: The study of business environment is
2.
important for optimum utilization of resources
available to any business unit. These resources can
be financial resources, human resources, and
physical resources. Without through understanding
of internal and external environment, resources can
not be used in optimum manner
To
Analysis
competitors’
strategies and formulate counter
measures: By environmental study,
we come to know about the strategies
of competitors and we can formulate
effective counter-plans to face them.
These counter plans will help the
business enterprise in protecting and
increasing its market share.
3.
4.
To keep Business dynamic and Innovative:
Awareness of environmental changes makes the
business managers more alert and dynamic. They
can expand their business as and when any
favourable change is taking place in the market; and
if any unfavourable change is taking place in the
market, then they can prepare themselves for facing
these unfavourable changes with well planned
strategies.
5. To provide input for decision-making:
Decision–making means to select an alternative
among the various available alternative. In this
process, we need information for analyzing various
alternates, so that the best alternate is selected.
Study of business environment and its various
components provides such information to decisionmaker.
. 6 To find out the strengths of business: The
strength of a business organization refers to the
capacity by which an organization can gain
advantage over its competitors. Environmental
analysis helps the business organization to find out
its strengths. After finding strengths, we can make
our policies and strategies to expend our business
and to take advantages over competitors.
7. To identify Weakness of Business: The
weakness of a firm refers to limitation of a business
firm. It results in significant disadvantages for a firm
in comparison to its competitors. Environment
analysis helps us to find out weakness of our
business. For future growth and expansion of the
business, decision-makers should make plans to
overcome weaknesses.
8. To find out the opportunities
Available to business: The availability
of opportunities is a favourable
condition
in
the
organisation’s
environment. If the company has
enough strength to avail the
opportunities, it can generate extra
profits. Environmental analysis helps
us to know the business opportunities
so that we can formulate timely action
plans to take full advantages.
9. To identify threats posed to business: Threat
is unfavourable condition in the organization’s
environment. It creates a risk for the organizations.
By environmental study, we can identify the risk to
the business. This risk can be because of
technological changes, political changes, economic
changes, increase in competitions, change in
fashion, unfavourable changes in government policy,
raw material shortages etc. After analyzing these
risks, the business enterprises can make plans to
manage such risks.
10. To know the internal Environment:
The
business manager should be familiar with internal
environment of the business. Change in internal
environment may affect the business in a positive or
negative manner. For example, strike by worker is a
change in internal environment, with negative effect
on business. So study of internal environment helps
to monitor such changes and make timely
adjustment with these changes.
11. To understand market Conditions:
The
business has to sell its products in the market.
Various components of market viz. consumers,
competitors, supplier etc. affect the success of
business. To understand the market conditions viz.
change in demand and supply of goods, change in
fashion, tastes level of competition, boom or
depression etc., study of business environment is
done.
12. To adjust with technological Advancement:
A business enterprise should make time action plans
to adjust with technological advancement. The firm
which quickly adopts latest technical will have
competitative advantages over others. If in any
corner of the world, any technological improvement
regarding our products has been made, then we
should try to grasp it, to take competitive edge over
river.
Thus,
adapting
latest
technological
development helps the business to improve its
efficiency.
13.To understand international
events and their impact on
business:
Because of increasing
globalisation,
the
impact
of
international events on the business is
increasing. To understand global
events and their Impact on business,
study of international environment is
must.
14. To understand economic policies of
government and their impact on business:
Various polices of government viz, export-import
policy, taxation policy, industrial policy, monetary
policy, foreign investment policy have deep impact
on the business. Changes in theses policies may
pose threat to business or create favourable
opportunities for business. Change in theses policies
should be closely monitored so that timely action can
be taken and effective business plans can be made.
15. To understand political situation and its
effect on business: Political situation within the
country and in other countries affect business.
Ideology of ruling party, political stability, political
pressure, political relations of our government with
other countries etc. affect our business. Study of
political environment will help the business to
understand the effect of political situation on
business.
16.To foresee the impact of SocioCultural Factor:
With the
knowledge of socio-cultural factor like
caste, religion, cultural, value system,
education,
family
size,
family
structure, urbanization, etc. business
enterprise can make timely changes
in its policies, so as to adjust its
products with the change in sociocultural factors.
Conclusion: In general, by environment study, one
can know the opportunities and threats which a
business may face in future. If there is any
favourable opportunity, we can quickly respond to it
and can take competitive advantage. If there is any
threat, we can counter it with well thought out
strategies and can save the enterprise from such
threat.