Posted at 11.01.2018
Environmental research is a very important part of decision making. Managers need to take this facet of taking decisions very really. It's been proved again and again that decisions that are made from gut thoughts or instincts may well not work the way the administrator envisioned it to work through. It is always better for research to be achieved and different scenarios to be exercised to see how a decision can work out. This reduces the risk associated with taking decisions. This process of analyzing the surroundings is a vibrant process not a static process. The surroundings in which an organization works in is split into internal and exterior environment its particular factors. The next article talks about the tools and techniques which are being used in inspecting the factors of the business environment.
Strategic management is also known as institutional management. It is the art and technology of the creation of strategies and ideas, the execution and evaluation of the strategies and ideas which helps a business to accomplish its long-term objectives. In this process the organization's objective, vision and objectives are mentioned and developed. After these aims are developed, the procedures, plans, regarding jobs and programs, are designed, and then resources are allocated or budgeted to put into practice them and achieve the goals. (wikipedia n. d. )
Strategic management includes a couple of activities that come under establishing goals and over the process of piecing together tactics to achieve these goals and targets. How proper management is carried out depends upon the organizational structure of the business. The Panel of Directors, the management team as well as other stake holders of the company can be involved in these activities that fall under strategic management.
Strategy can be explained as "unified, comprehensive and involved plan that maps the strategic advantages of the organization to the issues of the surroundings. It is designed to ensure that the main objectives of the organization are achieved through the correct execution by the organization. " (Jauch and Glueck 1988)
Formulating a technique for achieving a target or a set of goals is a combines three main processes which can be:
By examining the situation, analyzing themselves and contrasting themselves using their opponents i. e. interior and external as well as micro-environmental and macro-environmental.
After this assessment, the targets are decided. These objectives should be created with respect to a time-line; where some are short-term yet others are long-term goals. This involves setting up a vision declaration, a mission declaration, setting commercial level, strategic business device level and tactical level goals.
These goals should be analyzed along with the results of the problem analysis and a proper plan can be formulated which will provide information on how to attain these objectives.
Environmental analysis begins from the recognition of environmental factors (inside and exterior), evaluating their characteristics and the impact of the factors and making various information for setting of the organization. All of the decisions used by the business and the impact of the decisions rely upon the organization's inside and exterior environmental factors. These environmental factors should be carefully analyzed before taking any decisions. Environmental examination is made up of the functions which scan, screen, analyze, and forecasts the situations which the company can face and factors of the surroundings. Scanning is done to get information from the surroundings. Monitoring is performed to test the impact of environmentally friendly factors. Analyzing handles data collection and the utilization of tools and techniques to study and measure the environmental factors. Forecasting is a method to find the options into the future predicated on the historical data and present scenario. (Business Environment Research n. d. )
Different tools, methods, and techniques are used for environmental research. A number of the major methods of examination are benchmarking, scenario building and network methods. Scenario building gives an overall picture of the full total system with the factors which impact it. Benchmarking is the process of locating the best standards within an industry and assessing the talents and weaknesses of the firm with these determined benchmarks. The network method can be used to examine organizational systems and its external environment to find the strengths, weaknesses, opportunities and risks faced by a business. (Agarwal n. d. ) Few of the techniques of major information collection are brainstorming, the Delphi strategy, conducting surveys, and historical enquiry. The Delphi approach collects 3rd party information from the experts without blending them. Brainstorming is performed with an organization of individuals usually cross-functional which discuss the problem in hand and make an effort to come up with solutions irrespective of whether the solution is possible or not. Executing a survey first involves the look of questions and then asking these questions to people who end up being the individuals. The historical enquiry approach is an instance analysis of earlier time periods. Evaluation tools can be descriptive tools such as mean, median, method, rate of recurrence or tools can be statistical such as ANOVA, correlation, regression, factor, cluster, and multiple regression research. (BADU 2002)
A analysis of the inner and the external environment is a crucial component of the strategic planning process. The firm's interior environmental factors can be grouped as strengths (S) or weaknesses (W), and those factors which become external providers to the organization can be categorized as opportunities (O) or dangers (T). That is called SWOT research. (QuickMBA n. d. ). This evaluation offers information that pays to in matching the organization's resources and abilities to the surroundings in which it works.
A matrix of the factors can be constructed. This matrix will be helpful in developing the strategies for the company. The SWOT matrix (also known as a TOWS Matrix) is shown in the next page:
S -O strategies - helps to pursue recognized opportunities fit well regarding to strengths of the firm.
W-O strategies - helps to get over weaknesses to go after opportunities identified.
S-T strategies - recognizes ways in which the firm can use its strengths to lessen its vulnerability to external threats.
W -T strategies - establishes strategies to conquer the firm's weaknesses and less prone to external threats.
The organizations should modify themselves and their strategy to the exterior environment which is constantly changing. The external environment is also known as macro environment. These pushes of the external environment cannot be manipulated and can be examined using a variety of tools and techniques such as Environmental Scanning and Infestation analysis.
Environmental scanning is defined as the process that looks for information about incidents and connections in a firm's environment, the data which help top management chart the firm's future. Environmental scanning can be used to gather information from the surroundings.
In this process, the exterior environment is split into areas or areas such as political, economic, cultural, technical and further research such as Infestation analysis can be done after scanning the environment. Information is accumulated by monitoring and forecasting any changes that occur to the factors of the surroundings that have been identified earlier. This assortment of information helps the organizations to learn where they are lacking and what exactly they need which helps them in formulating the strategies. (Acar 1995)
PEST analysis recognizes the external causes that affect the organization such as Politics, Economic, Sociable and Technological motorists. It is very useful for the business when used as well as other tools such as the SWOT research. (wikipedia n. d. )
These factors may have a direct or an indirect impact on what sort of organization operates. Laws and regulations made by the government may have a huge impact on the way business is conducted by the business.
Economic factors including the market prices and market cycles which in turn influences the buying electric power and the habit of the organization's customers.
Sociological factors are the life-style, demography characteristics, and the ethnical habits and characteristics of the customers. These factors have an enormous sway on the requirements and wants of the customers and also influences how big is potential markets.
Technological changes own an important role in modeling how organizations operate with the resources they have. Technology is a factor which is very important to get a competitive benefit within the closest competition. Technologies can also enhance the efficiency of development, rate and quality. Evolving systems will change how organizations operate.
Michael Porter is acknowledged for his five pushes model of competitive strategy. The energy of each of the pushes varies from industry to industry, but taken collectively they determine long-term profitability. These five factors will affect the strategies which is adopted by the business and hence should be carefully examined. To be successful, the organization must react in an efficient manner to the environmental pressures exerted onto it. (Kazmi 2002)
The diagram given on another site shows the five causes of the model.
The resources, advantages, behaviors, weakness and distinctive competences are major components of the internal environment of an organization. A business uses different types of resources that assist them achieve their aims and the way in which they utilize their resources can be the source of their advantages or weaknesses. This can even be thought as organizational capabilities which is employed to build up the strategies and aims which the organization can perform and these should not unrealistic matching to its capacities.
Some of the the different parts of the inner environment of an organization are:
These are the tangible and intangible inputs used in the organization to build the outputs of the organization's product or services.
The action of an organization demonstrates is the result of forces functioning internally that may determine the abilities of the organization or constraints in the consumption of resources.
Competency of an organization is the capability to do what its competition cannot do or the capability to do better than what they can do. This concept is used for strategy formulation.
It is seen that the research of the environment is critical to the success of the decisions that managers have to make that have widespread effect on the functions and functions of the business.