BRAINWARE UNIVERSITY

[BBAC601] CLASS NOTES [Business policy and strategy]

2021-22 Prepared by: XXXXXXX ( Brainware University, Barasat)

 BRAINWARE UNIVERSITY
[BBAC601] CLASS NOTES [Business policy and strategy]

2021-22 Prepared by: XXXXXXX ( Brainware University, Barasat)

 BRAINWARE UNIVERSITY
[BBAC601] CLASS NOTES [Business policy and strategy]

Environmental Analysis/Environmental Scanning

Environmental Analysis can be defined as the process which examines all the

components whether internal or external that has an influence on the performance
of the organization. Here, the internal components indicates the strength and
weaknesses of the business entity whereas the external components indicates the
opportunities and threats outside the organisation.
In other words, Environmental Analysis is the process through which an
organisation monitors and comprehends various environmental forces so as to
determine the opportunities and threats that lie ahead in the future.
Further, Environmental Analysis is also known as Environmental Appraisal or
Environmental Scanning.

CHARACTERISTICS OF ENVIRONMENTAL ANALYSIS

Some of the features or characteristics of Environmental Analysis are:


Holistic View: Environmental Analysis is a holistic exercise in the sense that
it must comprise a total view of the environment rather than viewing a trend
piecemeal. The corporate must scan the circumference of its environment in
order to minimize the chances of surprises and to maximize its utility.


Continuous Process: The analysis of environment must be a continuous
process rather than being an intermittent scanning system. It must operate
continuously in order to keep track of the rapid pace of development. So,
Environmental analysis becomes essential due to the dynamic nature of the
environment.


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[BBAC601] CLASS NOTES [Business policy and strategy]


Exploratory Process: While the Monitoring aspect of the environment is
concerned with the present development, a large part of the process seeks to
explore the unknown dimensions of possible future. The analysis emphasizes
on "What could happen" and not necessarily "What will happen."


IMPORTANCE OF ENVIRONMENTAL ANALYSIS

The Importance of Environmental Analysis are:


First Mover Advantage: Awareness of environment helps an enterprise to
take advantage of early opportunities instead of losing them to
competitors. For instance, Maruti Udyog became the leader in the small car
market because it was the first to recognize the need for small cars on account
of rising Middle class.


Early Warning Signal: Environmental awareness serves as an early warning
signal. It makes a firm aware of the impending threat or crisis, so that the firm
can take timely action to minimize the adverse effects if any. For instance, A
MNC entering in to the Indian market would act as a early warning signal for
Indian Firms.


Focus On Customer: Environmental Understanding makes the management
or Business organization sensitive towards the changing needs and
expectations of customer. For instance, Several FMCG companies have
launched small sachets of shampoo and other products realizing the wishes of
customers.



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[BBAC601] CLASS NOTES [Business policy and strategy]

Strategy Formulation: Environmental Monitoring provides relevant

information about the business environment. such information serves as the
basis for strategy formulation. For Instance, ITC realized that there is a vast
scope for growth in the travel and tourism industry in India and therefore ITC
planned New hotels in India.


Change Agent: Business leaders acts as the agents of change. They create a
drive for change at the grassroot level. In order to decide the direction and
nature of change, the leaders need to understand the aspirations of people and
other environmental forces through Environmental Scanning.


Public Image: A business firm can improve its image by showing that it is
sensitive to its environment and responsive to the aspirations of public.
Environmental understanding enables the business to be responsive to their
environment.


Continuous Learning: Environmental analysis keeps the organization in
touch with the changing scenario so that thet are never caught unaware. With
the help of Environmental learning, managers can react in an appropriate
manner and thereby increase the success of their organization.


PROCESS OF ENVIRONMENTAL ANALYSIS/SCANNING

The Process of Environmental Analysis/Scanning consists of the following

steps:


Environmental Scanning: It means the process of analyzing the environment
for identifying the factors which may influence the business. Environmental

2021-22 Prepared by: XXXXXXX ( Brainware University, Barasat)

 BRAINWARE UNIVERSITY
[BBAC601] CLASS NOTES [Business policy and strategy]

Scanning alerts an organization to potentially significant forces in the external

environment, so that suitable strategic initiatives may be taken before the
organization reaches to a critical situation.


Environmental Monitoring: At this stage, the information from the relevant
environment is collected. Once this information is collected, adequate data is
gathered so as to find out the patterns and trends of the environment. Further
Monitoring is a follow up and deeper analysis of environmental forces.
Several techniques such as company records, spying, publication and verbal
talks with the customers, employees, dealers and suppliers are the main
sources of collecting data.


Environmental Forecasting: Environmental Forecasting is the process of
estimating the events of future based on the analysis of past records and
present behavior. Further it is necessary to analyze or anticipate the future
events before any strategic plans are formulated. Forecasts are made for
economic, social and political factors. Several techniques such as Time series,
Graph method, Delphi method etc. are used for this purpose.


Assessment Or Diagnosis: At this stage, Environmental factors are assessed
in terms of their impact on the organization. Some factors in the environment
may entail an opportunity while others may pose a threat yo the organization.
For this purpose, SWOT analysis and ETOP analysis are used.


2021-22 Prepared by: XXXXXXX ( Brainware University, Barasat)

 BRAINWARE UNIVERSITY
[BBAC601] CLASS NOTES [Business policy and strategy]

So, From this, We have understood What Is The Concept Of Environmental

Analysis or Environmental Scanning, Characteristics Or Nature Of
Environmental Analysis And The Process Of Environmental
Analysis/Environmental Scanning. In short, Environmental Scanning is the
process of monitoring the various environmental forces and taking first mover
advantage in the industry.

What is SWOT Analysis?

A SWOT Analysis is one of the most commonly used tools to assess the internal
and external environments of a company and is part of a company’s strategic
planning process. In addition, a SWOT analysis can be done for a product, place,

2021-22 Prepared by: XXXXXXX ( Brainware University, Barasat)

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[BBAC601] CLASS NOTES [Business policy and strategy]

industry, or person. A SWOT analysis helps with both strategic planning and

decision-making, as it introduces opportunities to the company as a forward-
looking bridge to generating strategic alternatives.
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.
 

 
SWOT Analysis – Internal and External Factors
A SWOT analysis is divided into two main categories: internal factors and external
factors.
 

2021-22 Prepared by: XXXXXXX ( Brainware University, Barasat)

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[BBAC601] CLASS NOTES [Business policy and strategy]

 
It s important to point out that strengths and weaknesses are current or backward-
looking, and opportunities and threats are forward-looking. By performing a
SWOT analysis, we will be able to build a bridge between what the company has
accomplished to date and the strategic alternatives that are going to be generated.
 
Internal:
Internal factors are the strengths and weaknesses of the company. Strengths are
the characteristics that give the business its competitive advantage, while
weaknesses are characteristics that a company needs to overcome in order to
improve its performance.
Examples of internal factors include:
 Company culture
 Company image

 Operational efficiency

 Operational capacity

 Brand awareness

 Market share

 Financial resources

 Key staff

 Organizational structure

 
External:
External factors are the opportunities and threats to the company. Opportunities
are elements that the company sees in the external environment that it could
pursue in the future to generate value. Threats are elements in the external
environment that could prevent the company from achieving its goal or its mission
or creating value.

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 BRAINWARE UNIVERSITY
[BBAC601] CLASS NOTES [Business policy and strategy]

Changes in the external environment may be due to:

 Societal changes
 Customers

 Competitors

 Economic environment

 Government regulations

 Suppliers

 Partners

 Market trends

 
Conducting a SWOT Analysis
To conduct a SWOT analysis, identify the strengths, weaknesses, opportunities,
and threats to your company.
 

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[BBAC601] CLASS NOTES [Business policy and strategy]

 
Strengths:
Consider strengths from an internal and consumer perspective.
 What advantages does your company have?
 What unique resources that you have that others do not?

 What is your company’s Unique Selling Proposition?

 What positive consumer perception does your company have?

 What low-cost resources do you have access to that others do not?

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[BBAC601] CLASS NOTES [Business policy and strategy]

Weaknesses:
Consider weaknesses from an internal and consumer perspective.
 What does your company not do well?
 What weaknesses do consumers see in your company?

 What factors contribute to a weaker brand image?

 
Opportunities:
Consider opportunities from an external perspective.
 What good opportunities are available in the marketplace?
 What are some trends that your company can capitalize on?

 Are there any changes in technology or markets that your company can take
advantage of?

 Are there any changes in lifestyle, social patterns, etc., that your company
can take advantage of?

 
Threats:
Consider threats from an external perspective.
 What obstacles does your company face?
 What are your competitors doing better than you?

 Is a change in technology threatening the position of your company?

 What threats do your weaknesses put you at risk of?

 Do changes in lifestyle, social patterns, etc., pose a threat to your company?

 
Example of a SWOT Analysis
For example, a SWOT Analysis for McDonald’s stock can be constructed as
follows:

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[BBAC601] CLASS NOTES [Business policy and strategy]

 
Strengths:
 McDonald’s serves customers in more countries than any other competitor
in the fast-food industry
 Significant economies of scale

 Wide audience reach

 McDonald’s exercises market power over suppliers and competitors

 The most recognized brand in the fast-food industry

 Competitive price

 
Weaknesses:
 High employee turnover
 Negative publicity (The perception of McDonald’s as an unhealthy food
choice)

 Not much variation in seasonal products

 Quality inconsistency due to franchised operations

 Focus on fast food and not healthier options for consumers

 
Opportunities:
 Being responsive to social changes to healthier options
 Business expansion to new parts of the world

 Allergen-free options and gluten-free food

 Corporate social responsibility

 
Threats:

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 More health-conscious customers

 Threat from competitors in different countries

 Threat of an economic downturn

 Social change to a more balanced meal

 
Key Takeaways from a SWOT Analysis
A SWOT analysis is a simple and effective framework for identifying strengths,
weaknesses, opportunities, and threats that a company faces. It is important to
leverage strengths, minimize threats, and to take advantage of available
opportunities. Conducting a SWOT analysis is useful for strategic planning and for
determining the objectives of a company.

2021-22 Prepared by: XXXXXXX ( Brainware University, Barasat)