C H A P T E R 3 Environmental Analysis
reside outside the organization, which can lead to opportunities or threats. For convenience of analysis, we can divide externalenvironmental factors into two groups: (a)
(or remote environment), and (b)
(or immediateoperating environment). The strategy-makers must understand thechallenges and complexities of both the remote environmentalfactors and the immediate operating environmental factors. Theyneed to appreciate that the remote environmental factors arelargely uncontrollable because of their distantly located externalnature. However, they can undertake appropriate strategies to dealwith these factors, usually collectively with other actors in theindustry, to reduce the intensity of their impact on the businesses.On the other hand, the operating environmental factors are those inthe immediate competitive situations of a company. These are oftenregarded as ‘task environment’ or ‘specific environment.’ Thesefactors basically constitute the competitive environment of acompany. When strategists take into cognizance of both the remoteand operating environments, they can become more proactive instrategic planning and more dynamic in grabbing opportunities. Inthe following discussions, you will find a broad description of general environment. The industry environment (operatingenvironment) will be discussed in chapter 4.
3.5 The General Environment
The general environment includes the distant factors in the externalenvironment that are general or common in nature. Its impact onthe operations of the firm, its competitors and customers make itsanalysis imperative. We can use
for theidentification and analysis of the factors in the general environment.PESTLED Model covers political, economic, sociocultural,technological, legal, environmental (natural), and demographicaspects. Some authors prefer to use each factor as ‘environment’such as political environment, economic environment etc. In thisbook, we will use both the term interchangeably.A list of the general environmental factors is given below:
Factor-wise PESTLEDEnvironment-wise PESTLED
Political factorsEconomic factorsSociocultural factorsTechnological factorsLegal factorsEnvironmental (natural)factorsDemographic factorsPolitical environmentEconomic environmentSociocultural environmentTechnological environmentLegal environmentEnvironment (natural)Demographic environment
The government of a country intervenes inthe national economy through setting policies/rules for business. In
The strategy-makersmust understand thechallenges and complexities of boththe remoteenvironmental factorsand the immediateoperating environmental factors.We can use
for the identification and analysis of the factorsin the general environment.The government of acountry intervenes inthe national economy through setting policies/rules for business.