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Environmental Analysis
“Businesses and managers are now faced with highly dynamic and ever more
complex operating environments.” - Robert Paton.
This chapter has two major sections: Section A deals with the
analysis of the external environment and Section B discusses the
analysis of internal environment.
Section A:
Analysis of External Environment
2
The World Trade Organization (WTO) was created on 01 January 1995 through
abolition of GATT. Bangladesh is one of the first signatories to the WTO Agreements.
For details about WTO, its functions, agreements and other relevant issues, readers may
visit its web site: www.wto.org
C H A P T E R 3 Environmental Analysis 45
Business organizations operate their businesses in markets
consisting of people. These people are likely to become customers
when they have purchasing power. And purchasing power depends
on income, prices, savings, debt and availability of credit.
Therefore, business organizations must pay attention to the income
and consumption patterns of the customers. However, all the
economic variables in the economy must be treated holistically for
clear envisioning of the entire economy and the market.
Socio-cultural environment: Socio-cultural forces include culture,
lifestyle changes, social mobility, attitudes towards technology, and Socio-cultural forces
people’s values, opinion, beliefs etc. These forces dictate a include culture,
particular set of values and attitudes with resultant lifestyles. A lifestyle changes,
society’s values and attitudes form the cornerstone of a society. social mobility,
attitudes towards
They often drive the other conditions and changes. The demand for technology, and
many products changes with the changes in social attitudes. people’s values,
Socio-cultural factors differ across countries. In many countries, opinion, beliefs etc.
worker diversity is now a common phenomenon. We find in some
countries the increasing life span of population, trend toward fewer
children, movement of population from rural areas to urban areas,
increasing rate of female education, entry of more and more
women into the mainstream workforce, etc. All these have a
primary effect on a country’s social character and health. Therefore,
it is very important for managers of business organizations to study
and predict the impact of social and cultural changes on the future
of business operations in terms of meeting consumer needs and
interests. Business firms must offer products in the society that
correspond to its values and attitudes.
Technological environment: Technological dimensions include
information technology, the Internet, biotechnology, global transfer
of technology and so forth. None can deny the fact that the pace of Technological
change in these technological dimensions is extremely fast. dimensions include
Technological changes substantially affect firm’s operations in information
many ways. Advancement of industrialization in any country technology, the
depends mostly on technological environment. Technology has Internet,
biotechnology, global
major impacts on product development, manufacturing efficiencies, transfer of technology
and potential competition. The business organizations that face and so forth
problems with changing or unstable technology are always in
difficulties in terms of predictability than those organizations that
have stable technologies. The effects of technological changes
occur primarily through new products, processes and materials. An
entire industry may be transformed or revitalized due to use of new
technology.
Strategy formulation is linked to technological changes. An
intelligent response to the ever-increasing technological advances
should be entrepreneurial rather than reactive.3 Strategic managers
need to monitor developments in technology for their particular
industry when formulating strategy. Quick and thorough study of
3
S. C. Bhattacharya, Strategic Management: Concepts and Cases, op. cit., p. 21.
46 Strategic Management / Dr. M A Mannan
4
The world’s population reached six billion in October 1999.
C H A P T E R 3 Environmental Analysis 47
all of them in an interrelated fashion to understand and visualize the
‘whole of the environment.’
Section B
Analysis of Internal Environment
TERMS USED
Environment
Environmental analysis
Industry analysis
SWOT
Value chain
General environment
Remote environment
PESTLED Model
External analysis
Internal analysis
PRACTICE QUESTIONS
1. Suppose you are responsible in your company for dealing with the
environmental influences. Make a list of the approaches that you
would adopt for dealing with the external influences on your business
enterprise.
2. Talk to the manager of a bank, ask him/her to give you information
regarding various resources of the bank and then prepare a list of the
financial, human, and physical resources of the bank.
3. From the knowledge that you have gained from the study of
internal environmental analysis, you could understand that company
image is a very important internal environmental factor. Explain your
view about the importance of company image on the basis of your
study of a company like the producer of MUM or paper tissue of
Bashundhara.