Concept of Environment

The environment of any organization is “the aggregate of all conditions,

events and influences that surround and affect it.”
Characteristics of Environment:
• Environment is complex
• Environment is dynamic
• Environment is multi-faceted
• Environment has a far reaching impact
 Internal & External Environment

The internal environment refers to all factors within an organization that impact
strengths or cause weaknesses of a strategic nature.
The external environment includes all the factors outside the organization which
provide opportunities or pose threats to the organization.

Internal Environment
Strength: is an inherent capacity which an organization can use to gain strategic
advantage.
Weakness: is an inherent limitation or constraint which creates strategic
disadvantages.

External Environment
Opportunity: is a favourable condition in the organization’s environment which
enables it to consolidate and strengthen its position.
Threat: is an unfavourable condition in the organization’s environment which
creates a risk for, or causes damage to the organization.
 SWOT ANALYSIS
STRENGTHS
• Favourable Location
• Excellent Distribution
Network
• Established R&D Centre
• Good Management
Reputation
OPPORTUNITIES
• Favourable Industry Trends
• Low technology options
available
• Possibility of niche target
market
• Availability of reliable
business partners
WEAKNESSES
• Uncertain Cash Flow
• Weak Management
Information System
• Low Employee
Commitment
• Absence of Strong USP for
major product lines
THREATS
• Unfavourable Political
environment
• Obstacles in licencing new
businesses
• Uncertain competitor's
intentions
 External Environment
The factors beyond the control of the firm that influence its choice of
direction and action, organizational structure, and internal process.
Remote Environment: Remote environment comprises factors that originate
beyond and usually irrespective of any single firm’s operating situation.
• Social Factors
• Economic Factors
• Political Factors
• Technological Factors
• Ecological Factors
 Industry Analysis & Competitive Analysis
The firm’s executives need to address following
questions:
1. What are the boundaries of the industry?
2. What is the structure of the industry?
3. Which firms are our competitors?
4. What are the major determinants of
competition?
 Operating Environment

• Competitive Position
• Customer Profiles
• Suppliers
• Creditors
• Human Resources: Nature of Labor Market