Submitted ToAjay Sharma SirPresentation on Environmental AppraisalSubmitted ByArsh Koul
What is environment Environment means the surroundings, external objects,influences or circumstances under which someone orsomething exists. The environment of any organization is the aggregateof all conditions, events and influences that surroundand affect it
Characteristics of environment Environment is complex: The environment consist ofnumber of factors, events, conditions and influencesarising from different sources. All these do not exist inisolation but interact with each other to create anentirely new set of influences.
Environment is dynamic: The environment isconsistently changing in nature. Due to many andvaried influence operating, there is dynamism in theenvironment causing it to continuously change itsshape and character.
Environment is multi faceted: What shape andcharacter an environment assumes depends onperception of observer. A particular change inenvironment or a new development may be vieweddifferently by different observers. Environment has a far reaching impact onorganizations. The growth and profitability of anorganization depends critically on environment inwhich it exists. Any environmental change has animpact on organization in several different ways.
Opportunity: It is a favorable condition inorganization’s environment which enables it toconsolidate and strengthen its position.Eg economic boom, favorable demographic shifts,arrival of new technologies etc
Threat: It is an unfavorable condition in organization’senvironment which creates a risk for, or causes damageto organization.Eg economic downturn, demographic shift etc
Benefits of SWOT analysis Simple to use Low cost Flexible and can be adapted to varying situations Leads to clarification of issue Development of goal alternatives Useful as a starting point for strategic analysis
Environmental sectors1. Economic environment2. International Environment3. Market Environment4. Political Environment5. Regulatory Environment6. Socio Cultural Environment7. Supplier Environment8. Technological Environment
Economic EnvironmentThe economic environment consists of macro level factorsrelated to means of production and distribution of wealth thathave on business of organizationSome important factors are1. Economic stage in which country exists2. Economic structure adopted like Capitalistic, socialistic ormixed economy3. Economic policies such as industrial monetary and fiscalpolicies4. Economic planning such as five year plan, annual budget etc5. Infrastructural factors such as banks, mode of transportationetc
International EnvironmentThe international environment consists of all thosefactors that operate at transnational, cross culturaland across border level, having impact on business oforganization e.g.1. Globalization, its process, content and direction2. Global economic forces, block and forum3. Global trade and commerce, its process and trend4. Global financial system, sources of financing5. Geopolitical situation, equation, alliances andstrategic interests of nations
Market EnvironmentThe market environment consist of factorsrelated to group and other organization thatcompete with and have an impact on anorganizations marketSome factors are as below1. Customer or client factors such as need,preference2. Product factors such as demand , image3. Marketing intermediary factors like deliverysystems
Political EnvironmentThe political environment consist of factorsrelated to management of public affairs andimpact on business organization1. The political system and its features like natureof political system2. The political structure, its goals and stability3. Political processes like operation of partysystem, elections4. Political philosophy, govt role in business etc
Regulatory environmentThe regulatory environment consists of factorsrelated to planning, promotion and regulation ofeconomic activities1. The constitutional framework , directiveprinciples2. Policies related to licensing, monopolies andforeign investment3. Policies related to distribution and pricing andcontrol4. Policies related to import and exports
Socio Cultural environmentThe socio cultural environment consists of factorrelated to human relationship within society, thedevelopment, forms and function of suchrelationship and learned and shared behavior ofgroups of human being having a bearing inbusiness of organization
Some of important factors and influencesoperating in social environment1. Demographic characteristics likepopulation, density2. Socio cultural attitudes and values such asexpectation of society from business, socialcustom3. Family structure and changes in it4. Role and position of men, women, children andaged in family and society
Supplier environmentThe supplier environment consists of factorsrelated to cost, reliability and availability of factorsof production or services that have impact onbusiness of an organizationSome important factors are1. Cost availability and continuity of supply of rawmaterial2. Cost availability of finance3. Cost , reliability and availability of energy usedin production4. Cost ,availability and dependability of humanresource
Technological EnvironmentThe technological environment consist of thosefactors related to knowledge applied and materialand machines used in production of goods andservices that have impact on business of anorganizationSome important factors are1. Sources of technology like company source ,external sources and foreign sources2. Technological development, stages ofdevelopment change and rate of change oftechnology3. Communication and infrastructural technologyin management
Environmental scanningEnvironmental scanning can be defined asprocess by which organizations monitor theirrelevant environment to identify opportunities andthreats affecting their business for purpose oftaking strategic decisions
Factors to be considered forscanningThe external environment in which an organizationexists consists of a bewildering variety of factors.These are as below:1. Events are important and specific occurrencestaking place in different environmental sectors2. Trends are general tendencies or the coursesaction along which events take place.3. Issues are current concerns that arise inresponse to events and trends.4. Expectations are demands made by interestedgroups in light of their concern for issues.
Approaches to environmentalscanningKubr has suggested three approaches which couldbe adopted for sorting out information forenvironmental scanningThese three approaches areSystematicapproachesAd hocapproachProcessed-formapproach
Systematic ApproachUnder this approach, information forenvironmental scanning is collectedsystematically. Information related to markets andcustomers, changes in legislation and regulationsthat have a direct impact on organizationsactivities etc. It could be collected continuously tomonitor changes and take the relevant factorsinto account. Continuously updating suchinformation is necessary not only for strategicmanagement but also for operational activities
Adhoc ApproachUsing this approach an organization may conductspecial service and studies to deal with specificenvironmental issues from time to time. Suchstudies may be conducted for instance when anorganization has to undertake special project,evaluate existing strategies or devise newstrategies.
Processed-Form ApproachFor adopting this approach the organization usesinformation in processed form, available fromdifferent sources both inside and outside theorganization. When an organization usesinformation supplied by Govt. agencies or privateinstitutions, it uses secondary source of data andthe information is available in processed form.