Use of Environmental Analysis in Strategic Management

The changing environment

All over the world environment is undergoing radical’s changes which are significant, not only because of the pace at which they are going on but also because of their effect on the every system of the commercial. During the recent time period, the integration of the world economy both in multilateral framework of WTO and in regional contracts like the European Union, the SAARC and the ASIAN and the liberalization of the financial side of many Third World nations are some instances of such changes.

The technological revolution in data technology, resources and materials research, genetic engineering, etc. has extended far and extensive. Markets (product variety, rise in volume of transactions, globalization, and so on) have continuous to accelerate. Likewise, social principles (( a Current increase of consumerism, ecological consciousness, sex-role, etc.) have become all pervasive (Shukla 1996)

Most experts agree on the following environmental elements as the following business realities:

• Changing demographics; more females and minorities in the workforce;
• Further geographically dispersed workforce;
• Heightened sense of ethics and society;
• Environment, ecology, and health care have become serious agenda items;
• Globalism and increasing international alliances and connections;
• Networking and alliances between business, government, and educations;
• Added complexity in doing business in a global marketplace; and
• Information technology has become embedded in everything we do.

In Nepal too, the emergence of similar patterns are changed. The recent changes toward a more liberal and decontrolled economy have created numerous and simultaneous pressure for the business firms. There are more demands on the firms now, to deal with intensifying competition; advance a more customer response strategy; globalize by way of alliances and collaborations; develop the competency of management; improve; enhancement and acquire new technologies, and so on. Such pervasive changes are making it more and more important for business firms in Nepal to develop appropriate corporate strategies for coping with these emergency environmental trends.

Concept of strategic management

Strategic management has become progressively essential today for business firms for sustaining and improving their performance. Traditional management tended to emphasize the interior affairs of business firms. Contemporary management extends this approach to take into consideration exterior changes and improvements. Strategic management has thus grown from modest extensions of the planning functions to more analytical and complex representations of organizational environmental interaction.

W.F.Glueck(1980) defines strategic management as:

“That set of decision and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives”.

D.B Jemison (1981) describe strategic management as:

“The process by which general managers of complex organization develop and utilize a strategy to co-align their organization's competencies with the opportunities and constraints in their environments.”

1. B. Prasad (1983) views strategic management as:

“A process that identifies present and future critical issues for the organization and develops ways to resolve them within the organization’s resources and external constraints.”

A synthesis of the three definitions suggests that strategic management is a systemic way and process of relating the business firm’s resources and therefore dynamic and adaptive to its environment. Strategic management is the means to achieve the objectives of a firm.

Strategy, organization, and environment

Strategic management process involves several steps:

• Goal formulation,
• SWOT analysis,
• Identification of strategic alternatives,
• Strategy formulation,
• Strategy implementation,
• Measurement and evaluation, and
• Reformulation of strategy.

A business firm’s strategy can be seen as an optimum match between the environment opportunities and threats and the organizational strengths and weakness. This matching expresses itself in the form of a definition of organizational goals and objectives, and its plans for achieving them. The figure shows this relationship between strategy, environment and the organization.

As indicated in the figure , the environmental analysis provides information to the business firm to identify key opportunities and threats in its environment. Considerate the key opportunities and threats facing a firm helps managers identify realistic options from which to choose an appropriate strategy. Such understanding may also give the business firm a competitive advantage within the industry, epically if its rivals are less proactive in this sphere.

An analysis of the environmental forces helps the managers in finding answers to the following questions: where are we now and where are we directed if we maintain the same course? What are our strengths and weaknesses? What are our human and economic resources? Where are we with respect to our aims? Have we uncovered any facts in this or the uncontrollable force analysis that requires goals to be deleted or modified? Should new aims be added? A careful scrutiny, monitoring and evaluation of the firm’s business and strategies in the context of the environmental realities are thus required to answer these questions.

Use of environmental analysis in strategic management

A force likely to have a marginal influence poses little threats to an organization. Such force needs only a minor commitment of managerial time and attention. A force likely to make an important optimistic impact requires a commitment of managerial time and effort to take advantage of an opportunity. Higher organizations have to face and respond to a number of environmental forces. This creates more complexities in the management process.

Due to complex and changing environmental forces, managers cannot be sure that decisions taken today will be appropriate in the future. This uncertainty makes their jobs especially challenging. The basic steps, which the managers generally follow to understand and manage these environmental forces are to:

• List the number and comparative strength of the forces that affect their administrations the most.
• Analyze the technique changes in these forces may result in opportunities and threats for their organizations.
• Draw up a strategy including how they propose to take benefit of those opportunities and counter those threats.
• Choose what kind of resources they will need to do so.

There are three principal ways in which managers can increase their organization’s ability to manage the environment:

• Reducing the impact of the environmental force
• Creating an organizational structure and control system and
• Practicing boundary-spanning activities.

• Reducing the impact of environmental forces.

Managers can raise their environmental by decreasing the potential impact such forces. Thus, discovery ways to reduce the potential impact of forces is the job of all managers. Top managers devise strategies that will allow an organization to take advantages of opportunities and counter threats. Middle manager’s resources more efficiently to hold down costs.

• Creating an organizational structure and control system.

Another way to respond to a complex and changing environment is to plead attention to the organizational structure and control system. Managers must develop internal structure and controls system that allow them to respond appropriately to the specific forces in the external environment. Their task is to find an appropriate match between the organization and its environment so that the organization’s structure and control system respond well to the forces.

• Boundary-spanning roles.

The ability of managers to gain access to the information, they need to forecast the future and choose appropriate courses of action is critical to their success. They can learn to perceive, interpret and appreciate their organization’s environment by practicing boundary spanning. It is a method of interacting with individuals and groups outside the organization to obtain valuable information.

References

• https://books.google.com/books?isbn=8174463178
• https://books.google.com/books?isbn=812594267X
• Pant, P. R. (2009). Business Environment in Nepal (SIXTH ed.). Kathmandu, Nepal: Buddha Academic Publishers and Distributers.