Environmental appraisal

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  • 1. • EnvironmEntal appraisal• 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 affect it.” Since the environment influences an organization in multi-dimensional ways, it is of crucial importance to understand it. The concept of environment can be understood by looking at some of its characteristics.
  • 2. But before we do that, let us recount ten of the following events andinfluences: First Five Year Plan (1951): State-directed planning commences with the states taking up entrepreneurial functions. The Mundhra Scandal (1957): India’s first major scam when a businessman rigged the share prices of his company. First Indian heads an MNC (1961) P.L Tandon becomes the first Indian to be the Chairman of Hindustan Lever. Braindrain (1965 onwards): The Indian scientists and technologists start migrating to Western countries in search of high end opportunities. Licensing era (1965-73): The license raj started in 1956 resulted in severe restrictions on industry and private investments. First Reliance Public Issue (1977): The first public issue of the shares of Reliance Industries heralds the equity culture in India. Telecom Revolution (1986): Sam Pitroda, the technology advisor of Rajiv Gandhi leads the transition of digital switching system. Liberalization (1991 onwards): Dr. Manmohan Singh as Finance Minister in Narsimha Rao’s Ministry, starts the process of liberalization and globalization marking a sharp turn down of events in the course of India’s industrial history.
  • 3. Let us now discuss some of the important and obvious characteristicsof environment: Environment is multi dimensional and complex. It consists of a number of factors, events, conditions and influences arising from different sources. All these do not exist in isolation but interact with each other to create entirely new set of entirely new set of influences. It is a complex phenomenon relatively easier to understand in parts but difficult to grasp in its totality. Environment is dynamic. It is constantly changing in nature. Environment is multi faceted. What shape and character an environment will assume depends on the perception of an observer. Changes may be viewed differently by the observers. Environment has far reaching impact on organization. The growth and profitability of an organization depends critically on the environment in which it exists. Since environment is multi faceted, thus dividing it into internal and external components enables us to understand it better.
  • 4. The external environment includes all the factors outside theorganization which provide opportunities to pose threats to theorganization. The internal environment refers to all the factors withinan organization which impart strengths or cause weakness of astrategic nature. The environment, in which an organization exists, cantherefore be described in terms of opportunities and threats operatingin the external environment apart from the strengths and weaknessesexisting in the internal environment. The four environmental influencescould be described as follows:• An opportunity is a favourable condition in the organization’s environment which enables it to consolidate and strengthen its position.• A threat is an unfavourable condition in the organization’s environment which creates a risk for, or causes damage to the organization.• ‘Strength’ is an inherent capacity which an organization can use to gain a strategic advantage.• ‘Weakness’ is an inherent condition of limitation or constraint which creates strategic disadvantages.
  • 5. • An understanding of the external environment, in terms of opportunities and threats and the internal environment, in terms of strengths and weaknesses, is crucial for the existence, growth and profitability of any organization.
  • 6. • An understanding of the external environment, in terms of opportunities and threats and the internal environment, in terms of strengths and weaknesses, is crucial for the existence, growth and profitability of any organization.