Environmental Assessment

Introduction:
The strategic management process involves
four major functions: strategy formulation,
strategy implementation, evaluation, and
the control of operations. These functions
en-
compass a wide range of activities,
beginning with an environmental analysis of
external
and internal conditions and an evaluation of
organizational strengths and weaknesses.
These activities serve as the basis for a well-
formulated strategic plan; and by carefully
implementing and controlling this plan, the
MNE is able to compete effectively in the
international arena.

Figure 2.3

Steps in the strategic management process:

1)Basic mission:
Strategic planning typically begins with a
review of the company’s basic mission,
which is
determined by answering the
questions:What is the firm’s business?
What is its reason for
existence? By answering these questions,
the company clearly determines the
direction in
which it wants to go.
Shell Oil, BP Amoco, and Texaco, for
example, see themselves as being
in the energy business, not in the oil
business, and this focus helps to direct their
long-
range thinking. Coca-Cola and PepsiCo see
themselves in the food
business, not in the soft-drink business. One
of their strategic rivals is Nestlé.
After determining its mission, an MNE will
evaluate the external and internal environ-
ment.
External Environmental Assessment:
The goal of external environmental analysis
is to identify opportunities and threats
that will need to be addressed. Based on
opportunity analysis, for example, a
number of
MNEs have been moving into the former
East Germany. Adidas-Salomon now
produces a
large portion of its textiles in this part of
Germany. Metro, a German retailer, now
has a
large presence in Hungary, Poland, the
Czech Republic, and Russia.These
companies all
see the region as having tremendous
financial potential.
Internal Environmental Assessment:
The purpose of internal environmental
analysis is to evaluate the company’s
financial
and personnel strengths and weaknesses.
Examining its financial picture will help the
MNE decide what it can afford to do in
terms of expansion and capital investment.
Examining
its financial picture will also help it to
identify areas where cost cutting or
divestment is in
order. By making an evaluation of its
personnel, an MNE will be able to
determine how
well its current workforce can meet the
challenges of the future and what types of
people
will have to be hired or let go.

Conclusion:
Internal and external analyses help the MNE
to identify both long-range goals
(typically two to five years) and short-range
goals (less than two years). The plan is then
broken down into major parts, and each
affiliate and department will be assigned
goals and
responsibilities. This begins the
implementation process. Progress is then
periodically evalu-
ated and changes are made in the plan. For
example, an MNE might realize that it must
stop offering a particular good or service
because the market is no longer profitable
or it
might create a new product in order to take
advantage of an emerging demand.