Environment Analysis And

Diagnosis:
MHA2nd
Part –1
Index
• Concept of environment and its component
• Approaches to environment scanning
• Techniques of environmental scanning
• SWOT analysis
• Business Analytics & Business Intelligence
Concept of environment
• Environment means the surroundings, external objects or
circumstances under which something exists
• Organizations environment is –the aggregate of all conditions
• Business Environment is the interaction and influence of business
and the environmental factors.
Why environment analysis is important
When a company doesn’t react to environment changes it cant achieve
its objective in long run
•Provide information on current and potential changes in the
environment
•Provide inputs for strategic decision making like change in demand
,pricing, change in preference
•Facilitate strategic thinking
Understand environment influences
Organizations have to make a detailed planning irrespective of
predictability of environmental factors to understand the
environment ,management has to make a framework
Framework can make following ways
1.Understanding environment: uncertainty ,complexity
2.Impact of environment on organization: continuity ,growth ,profit
3.Handling competition:
Problems in understanding environment
• Multifaceted impact: dynamic environment, difficult to put in statistic

• Uncertainty :technology ,social ,global communication

• Personal opinion :managers individual perception on things
Relationship between organization and
environment
• Exchange of information :Demand, pricing ,supply, product
availability
• Exchange of resources : man, material ,machine, money from society
to society
• Exchange of power and resources :Govt control
Cont…
Macro environment component are treated as broad component
•Economic : GDP, unemployment, buying power of consumer, income
distribution ,stock market condition
•Demographic : population size, income distribution, education, ethnic
•Global
•Technological : business opportunity, operations, risk and uncertainty
•Legal-political : Law and order, political stability
•Socio culture : slow/conservative ,cautious/adaptive ,confident/
agreesive
Component of business environment
Environment scanning
Environment scanning can be defined as the process by which
organizations monitor their relevant environment to identify
opportunities and thereafter affecting their business for the purpose of
taking strategic decision
Factors to be consider for environmental
scanning
1. Events are important and specific occurrences taking place in
different environmental sectors.
2. Trends are the general tendencies or the courses of action along
which events take place.
3. Issues are the current concerns that arise in response to events and
treats.
4. Expectations are the demands made by interested groups in the
light of their concern for issues
Example: Gas leakage accident

• Event The accident and the resulting holocaust

• Trend The authorities and Organizations to be conscious about
safety from hazardous exposure to chemicals
• Issue A rising concern about environmental pollution
• Expectation To legislate changes in rules and regulations
pertaining to safety measures and stricter enforcement through
various mechanism
Approaches to environmental scanning
Source of information for environmental
scanning
• Documentary or secondary sources of information
• Mass media
• Internal sources
• External agencies
• Formal studies
• Spying and surveillance
Methods and Techniques used for
Environmental Scanning (ES)
Strategists may choose one which suit their needs in terms of the
•Quantity
•Quality
•Availability
•Time lines
•Relevance
•Cost of environmental information
Le Bell and Krasner have outlined 9 groups
of techniques
• Single – variable extrapolation :In mathematics, extrapolation is the
process of estimating, beyond the original observation range, the value
of a variable on the basis of its relationship with another variables.
• Theoretical – limit envelopes :this includes methods such as sizing
calculations ,high and low limit calculations and worst case analysis
• Dynamic modes :Strategy Dynamics explains how business
performance has developed up to the current date, and how to develop
and implement strategies to improve future performance. The
approach emphasizes building and sustaining the resources and
capabilities needed to succeed.
Cont..
• Strategy Dynamics focuses on performance over time .this model
include historic or time series analysis
• Mapping : A strategy map is a diagram that is used to document the
primary strategic goals being pursued by an organization or
management team
• Multivariable interaction analysis: Two independent variables
interact if the effect of one of the variables differs depending on the
level of the other variable. techniques include are input –output
models, factor analysis and regression analysis
Cont..
• Unstructured expert opinion :This includes methods such as role
playing ,use of consensus panels and scenario generation. forecasting
change is sometimes made easier by scenario generation
• Structured expert opinion :this includes Delphi method, highly
structured interviews and online computer interactions
• Structured inexpert opinion :questioner ,surveys and structured
interviews
• Unstructured in expert speculation :interviewing people in public
places and brainstorming
Mapping
Fahey, king and Narayana
1. Scenario writing
2. Simulation
3. Morphological analysis
4. Game theory
5. Cross impact analysis
6. Input –output analysis
Game theory
• 2 thief (A) + 2 thief ( B )
Options
• If A and B each betray the other, each of them serves 5 years in
prison
• If A betrays B but B remains silent, A will be set free and B will serve
20 years in prison (and vice versa)
• If A and B both remain silent, both of them will only serve 1 year in
prison (on the lesser charge)
Cont..
• In game theory, a player's strategy is any of the options which he or
she chooses in a setting where the outcome depends not only on
their own actions but on the actions of others. A player's strategy will
determine the action which the player will take at any stage of the
game.
Cont
Day to day pricing decisions taken by firms
•Falling oil prices – if one airline decides to lower their fares as oil
prices decline, will others follow?
•Price wars between businesses battling for market share - for example
pricing decisions by the makers of game consoles
Cont..
Oligopoly
•Uncertainty about each firm's objectives (profit max, market share,
revenue etc)
•Uncertainty about each firm's strategies (cooperative, competitive, follow
the price leader)
•Price leadership / price collusion 
Strategic alliances (cooperation) between businesses
•Increasingly many multinational businesses are entering into joint
ventures to grow their business and achieve market penetration and
power in different markets and industries around the world.
Pitfalls in environmental scanning
1. Too much focus on environment
2. Overload of information
3. Politics
4. Far from realities
Reference
• https://www.thoughtco.com/extrapolation-and-interpolation-difference-3126301
• Strategy notes- JHA
• https://www.slideshare.net/lindobonito/complexity-management-42229040
• https://www.slideshare.net/AssaadMouawad/chaos-theory-the-butterfly-effect
• https://www.slideshare.net/gunjs1/swot-analysis-27003882
• https://www.slideshare.net/srudra25/business-intelligence-vs-business-analytics
• https://en.wikipedia.org/wiki/Strategy_dynamics
• https://books.google.co.in/books?
id=7bbTVYIXstMC&pg=PA122&lpg=PA122&dq=Krasner+techniques+in+strategy&source=bl&ots=JsnulRROM
o&sig=apz7-
MuUdm5Xv74CRfYK_d1Orbc&hl=en&sa=X&ved=0ahUKEwjW0cHB4OzUAhXHOo8KHSz0CioQ6AEIITAA#v=on
epage&q=Krasner%20techniques%20in%20strategy&f=false