STRATEGIC MANAGEMENT TEST 3

 Write a note on environment and its components.

Ans:
 Introduction:
 Business establishes, grows or operates and dies in environment. It exchanges
resources I environment.
 It collects inputs i.e. Man money, materials, machines etc. And provides output i.e.
Goods and services in the environment.
 Environment means surrounding. Business environment defines as a force that
effect on organizational performance.
 It includes internal an eternal factors.
 The combination of internal and external factors that influence a company's
operating situation.
 The business environment can include factors such as: clients and suppliers; its
competition and owners; improvements in technology; laws and government
activities; and market, social and economic trends.

 Characteristics of environment:
 It is complex: it consists of many interrelated factors.
 It is dynamic
 It is multifaceted: The environment developed is perceived differently by different
people
 It has a far reaching compact: the growth and profitability of the organization
critically depends upon its environment.

 Components of a Business Environment:

 Internal environment:
 It is defined as all the forces or conditions that are available within an
environment that affects on organization and business.
 It is also known as controllable factors because business can control them.
 It includes;
 Employees:
 Business hires employees. It is the major internal factor. It works inside the
business.
 It can be controlled by the business. Employees differ in skill, knowledge,
morality, and attitude and so on.
 When managers and employees have difference in goals and beliefs then
conflict may arise.
 The task of management is to divide the work and assign the work to the
suitable employee and handle the conflict.
 Shareholders:
  Management deals with many shareholders.
 Shareholders have the right of ownership, power of management and
voting right.
 The actual management of organization is carried out by elected
representative of shareholders jointly known as boar of directors.
 Boards of directors have the responsibility of overseeing the management
of organization.
 It plays the major role in formation of objectives, policies, strategies of the
organization as well as their implementation.
 Organization structure:
 It is located inside the organization.
 The arrangement of various facilities, pattern of relationships among the
various department, responsibility, authority and communication is the
organization structure.
 It also included specialization and span of control.
 Organization culture:
 The sets of values that help the members to understand what organization
stand for how it does work, what it considers, cultural values of business
forces of business and so on.
 It helps in direction of activities.

 External environment (PEST):

 All the forces and condition that cannot be controlled by the business is called
external environment.
 It is also known as uncontrollable factors because business can’t control them.
 It is located outside the business. It affects on organizational performance.
 It includes:
 Economic environment:
 It indicates the condition of economy in which business organization
operates.
 It has continuous and great impact on business.
 It includes national income, production, inflation, savings, investment,
price, government activities.
 Business person must have constant watch on this factor.
 Political or legal environment:
 It is defined as rules and regulations determined by the government.
 Business must fulfill demand of government.
 There should be non-violation of rules and regulation of government.
 Business should avoid unfair trade and should provide essential
information to the government.
 Social environment:
  Business must have good environment where a business can be established
neatly.
 Business also helps in employment opportunities generation.
 There should be socio cultural understanding and application of anti-
pollution measures.
 Technological environment:
 It defines about the methods available for converting resources into
product or services.
 It transforms inputs into output. Inputs means material, capital, man,
machine. It affects on business.
 It helps to change the level of job, skill, and product and so on.
 There can be innovation, development of scientific techniques which
encouraged mass production and distribution.
2) What is environmental scanning and appraisal? Explain techniques of
environmental scanning.
Ans:
 Introduction:
 Every organization has an internal and external environment.
 In order for the organization to be successful, it is important that it scans its
environment regularly to assess its developments and understand factors that can
contribute to its success.
 Environmental scanning is a process used by organizations to monitor their external
and internal environments.
 Environmental Scanning:
 The purpose of the scan is the identification of opportunities and threats affecting the
business for making strategic business decisions.
 As a part of the environmental scanning process, the organization collects information
regarding its environment and analyzes it to forecast the impact of changes in the
environment.
 This eventually helps the management team to make informed decisions.

 As seen from the figure above, environmental scanning should primarily identify
opportunities and threats in the organization’s environment.
 Once these are identified, the organization can create a strategy which helps in
maximizing the opportunities and minimizing the threats.
 Before looking at the important factors for environmental scanning, let’s take a quick
peek at the components of an organization’s environment.

 Important Factors for Environmental Scanning:

 Before scanning the environment, an organization must take the following actors into
consideration:
  Events – These are specific occurrences which take place in different
environmental sectors of a business. These are important for the functioning
and/or success of the business. Events can occur either in the internal or the
external environment. Organizations can observe and track them.
 Trends – As the name suggests, trends are general courses of action or
tendencies along which the events occur. They are groups of similar or related
events which tend to move in a specific direction. Further, trends can be positive
or negative. By observing trends, an organization can identify any change in the
strength or frequency of the events suggesting a change in the respective area.
 Issues – In wake of the events and trends, some concerns can arise. These are
Issues. Organizations try to identify emerging issues so that they can take
corrective measures to nip them in the bud. However, identifying emerging
issues is a difficult task. Usually, emerging issues start with a shift in values or
change in which the concern is viewed.
 Expectations – Some interested groups have demands based on their concern
for issues. These demands are Expectations.

 Approaches to environmental scanning:

 System Approach:
 In this approach information for environmental scanning is collected
systematically.
 Information related to markets and customers, change in legislation and
regulation, etc. have a direct impact on the business therefore it is continually
monitored for relevant facts.
 This approach is beneficial for strategic management and operational activities.
 Ad-hock Approach:
 An organization may conduct a special survey related to specific environmental
issues from time to time, such studies may be undertaken when an organization
has to take up new projects or update existing strategies.
 Changes and unforeseen developments may be investigated which affects the
organization.
 Processed form of approach:
 The organization under this approach uses information in a processed form
available from both internal and external environment.
 E.g. information supplied by government agencies, private institutions, it uses
secondary data method.

 Factors affecting Environmental Scanning/ Environmental Appraisal:

 Strategist related factor:
 Since strategist play a central role in formulation of strategies, there
characteristics such as age, education, experience, motivation, cognitive style,
 ability to withstand time pressure and responsibility have an impact to the extent
to which they are able to appraise the environment.
 Organizational related factors:
 Characteristics of the organization which affect the environment are nature of
the business, its age, size, and complexity, nature of its market, product or service
that it provides.
 Environmental related factors:
 The nature of environment faced by the organization determines how its
appraisal could be done.
 The nature of environment depends upon its complexity, volatility, hostility and
diversity.

 Techniques of Environmental Scanning/ Environmental Appraisal:

 SWOT Analysis
 ETOP Analysis
 ANSOFF Matrix
 BCG Matrix
3) Write a note on;
a) SWOT analysis under environment:
 Introduction:
 A SWOT analysis is a comprehensive look at a company's strengths and weaknesses,
or internal factors, as well as external factors it faces in the market.
 A company usually starts a SWOT analysis by studying its strengths, such as a strong
brand name or good reputation, and weaknesses, like inexperienced management or
poor distribution.
 Subsequently, an external environment SWOT analysis enables a company to
ultimately determine how it can exploit its strengths and minimize weaknesses to
compete.
 SWOT analysis is a business analysis process that ensures that objectives for a
project are clearly defined and that all factors related to the project are properly
identified.
 The SWOT analysis process involves four areas: Strengths, Weaknesses,
Opportunities and Threats. Both internal and external components are considered
when doing SWOT Analysis, as they both have the potential to impact the success of
a project or venture.

 SWOT Analysis
 Strengths
 Strengths in SWOT analysis are the attributes within an organization that are
considered to be necessary for the ultimate success of a project.
 Strengths are resources and capabilities that can be used for competitive
advantage. Examples of strengths that are often cited include:
 Strong brand names
 Good reputation
 Cost advantages of proprietary know-how
 Weaknesses
 The factors within the SWOT analysis formula that could prevent successful
results within a project are Weaknesses.
  Weaknesses include factors such as an abundance of rivalry between
departments, a weak internal communication system, lack of funding and an
inadequate amount of materials.
 Weaknesses can derail a project before it even begins. Other Weaknesses include:
 Weak brand name
 Poor reputation
 Ineffective and high cost structure
 Opportunities
 Opportunities are classified as external elements that might be helpful in
achieving the goals set for the project.
 These factors could involve vendors who wish to work with the company to help
achieve success, the positive perception of the company by the general public,
and market conditions that could make the project desirable to the segment of
the market.
 Additional Opportunities include:
 Arrival of new technology
 Unfulfilled customer needs
 Taking business courses (training)
 Threats
 These external factors could gravely affect the success of the project or business
venture.
 The possible threats that are critical to any SWOT analysis include a negative
public image, no ready-made market for the final product and the lack of vendors
who are able to supply raw materials for the project.
 Some other threats include:
 Trend changes
 New regulations
 New substitute products
 Advantages of SWOT Analysis:
 It is simple to use low cost is involved it is flexible and can be adapted to varying
situations
 It leads to clarification of issues.
 It helps in development of goal oriented objectives.
 It is useful as a starting point for strategic management.
 Disadvantages of SWOT Analysis:
 Realities may be more complex than represented by SWOT Matrix due to simplicity
of its use.
 It may result in compiling of lists rather than focusing on organizational objectives.
 Strengths may sometimes be confused with opportunities.
 The person conducting the analysis may be biased towards a viewpoint and may
misinterpret the situation.

b) Business analytics and business intelligence

 Business Intelligence:
 Business Intelligence is the process comprising of technologies and strategies
incorporated by the enterprise industries to analyze the existing business data
which provides past (historical), current and predictive events of the business
operations.
 Business Intelligence uses past and present available data to drive the present
business successfully. Business Intelligence maintains, operates, streamlines and
increases the productivity of the on-going businesses.

 Business Analytics:
 Business Analytics is the process of technologies and strategies used to continuously
exploring and to extract the insights and performance from the past business
information to drive the successful future business planning.
 Business Analytics uses past data to drive current business planning successfully.
Business Analytics gathers and analyses the data by using predictive analytics
method and provides rich visual reports to the viewers about the current business
operations and its’ operations efficiency.
 Comparison between Business Intelligence v/s Business Analytics:

Basis for
Business intelligence Business analytics
Comparison

Analyses past and present to

Analyses past data to drive
Definition drive current business
current business
needs

To run current business To change business operations

Usage
operations and improve productivity

Ease of For current business

For future business operations
Operations operations

SAP Business Objects,

Word processing, Google docs, MS
Tools QlikSense, TIBCO, PowerBI
Visio, MS Office Tools etc.,
etc.,

Apply to all large-scale Applies to companies where

Applications companies to run current future growth and productivity as
business operations its goal

Comes under Business Contains Data warehouse,

Field
Analytics information management etc.,

 Conclusion
 In order to operate the businesses based upon requirements, Business Intelligence
and Business Analytics play different roles in their usage causing the business
productivity more and the further requirements are based upon the existing present
and past business data to run the current and future business operations effectively.