Business Policy and
Strategy
Unit 2
Introduction
According to Philip Kotler
“ Marketing Environment refers to the external factors or
forces that affect a company’s ability to develop and
maintain successful relationship with its target customers ”
These are the forces which directly or indirectly influence
an organisation’s capability to undertake its business.
The trading forces operating in a market over which a
business has no direct control but which shape the manner in
which the businesses function and is able to satisfy the
customer.
WHAT IS ENVIRONMENTAL ANALYSIS ?
Environmental Analysis is described as the
process which examines all the components ,
Internal or External , that has an influence on
the performance of the organization.
The Internal Components indicate the
strengths and weaknesses of the business
entity whereas the external components
represent the opportunities and threats outside
the organization.
Need and Importance of Environmental Analysis
- They help the managers to achieve the organizational objectives effectively
than other organisations.
- An enterprise cannot achieve its objectives if it does not adapt itself to
Environmental change.
- Systematic analysis enables managers to predict the future and to have
enough time for other activities. This minimises the time pressure for
managers.
Components / Levels of Environmental Analysis
Marketing Environment consists
of 2 components :
INTERNAL ENVIRONMENT : forces
and actions inside the firm
EXTERNAL ENVIRONMENT :
1. Micro Environment
2. Macro Environment
Why is it important ?
An understanding of the micro and macro environment of
business is essential for planning
Helps businesses to compete more effectively against rivals
Assists the identification of opportunities and threats
Enables organisations to take advantage of emerging
strategic opportunities
Micro Environment
It refers to a Company’s immediate environment i.e. those
environmental factors that are in its close proximity.
These factors affect a company’s prospects directly.
Internal Environment
Company Itself
Marketing must consider other parts of the company including
finance, R and D, purchasing, operations and accounting.
Marketing decisions must relate to broader company goals and
strategies
External Environment
Competitors
They are other players in the same market who sell similar products and
services
Identification of competitors is of utmost importance
Conducting competitor analysis is critical to the success of a company
A marketer must analyse and monitor competitor’s offerings to create
strategic advantage
Public
It is defined as “ any group that has actual or potential
interest in or impact on the company’s ability to achieve
its objectives ”
It is very crucial for company to analyse needs of public
and satisfy them in order to build favourable response and
goodwill in the long run.
Environmental Analysis Process
1. Identifying Environmental Factors
2. Scanning and Selecting Relevant key factors
3. Defining Variables for analysis
4. Using different methods, techniques and tools
5. Forecasting environmental factors
6. Designing Profits
7. Strategic Position and Reporting Writing
Limitations of Environmental Analysis
- Lack of forewarning of unforeseen events
- No assurance as to organisational effectiveness
- Not fully reliable
- Absence of Strategic approach
WHAT IS ENVIRONMENTAL SCANNING ?
Environmental scanning is the
process of gathering information
about events and their relationships
within the organisation’s Internal
and External environment.
In short, it is a process of gathering,
analysing and dispensing
information for tactical or strategic
purposes.
Features
Holistic exercise
Heuristic or Exploratory approach
Continuous Process
Importance
At par with Customer needs
Capitalise opportunities
Qualitative information
Intellectual stimulation
Improves Brand image
Procedure
Study the forces and nature of Environment
Determine the sources of information
Audit environmental influences
Identify key competitive forces
Identify strategic position
Identify key opportunities and threats
Approaches to Environmental Scanning
Systematic Approach- Environment is monitored in a regular systematic way
Ad-hoc approach - It is not a continuous process. Only specific environmental
components are analysed.
Processed Form approach - Information is obtained from secondary sources and
processed as per the requirements of the business.
Scan and Assess the Trend - involves detailed analysis and micro study of the
environment
Techniques of Environmental Scanning
- Porter’s 5 Forces Model
- SWOT Analysis
- PESTLE Analysis
- Porter’s Value chain analysis
