Environmental

Analysis
Environment

The circumstances, objects,

or conditions by which one is
surrounded

The factors and influences

that affect the growth, health,
progress, functioning, etc., of
someone or something
 Understanding Business Environment

There are several internal and external factors that can

influence a company's business decisions. Different
combinations of these factors, like price, social changes and
regulatory changes, can influence the overall environment
where a business operates.
Why Business do
Environmental Analysis?

An environmental analysis is a
strategic technique used to:
• Identify all internal and external factors
that could affect a company’s success.
• Internal components reveal the
strengths and shortcomings of a
company,
• External components represent the
opportunities and risks. This exists
outside of the company.
 Why Businesses do Environmental
Analysis?

Make
informed
Anticipate decisions
change
Create
effective
Identify strategies
threats
Find
opportunities
 Types of Environments
Internal External

• Internal environment is • External environment is

a component of a component of
the business the business
environment, which is environment, which is
composed of various composed of various
elements present inside elements present
the organization, that outside the
can affect or can be organization, that can
affected with, the affect the choices,
choices, activities and activities and decisions
decisions of the of the organization.
organization.
Factors affecting internal
environment Value System

Physical
Resources and Vision, Mission
Technological and Objectives
capabilities

Internal
environment

Human Organizational
Resources Structure

Corporate
Culture
Factors affecting internal environment

Value system consists of all those components that are a part of regulatory frameworks, such as
culture, climate, work processes, management practices and norms of the organization. The
employees should perform the activities within the purview of this framework.

The company’s vision describes its future position, mission defines the company’s business and the
reason for its existence and objectives implies the ultimate aim of the company and the ways to
reach those ends.

The structure of the organization determines the way in which activities are directed in the organization so as
to reach the ultimate goal. These activities include the delegation of the task, coordination, the composition
of the board of directors, level of professionalization, and supervision. It can be matrix structure, functional
structure, divisional structure, bureaucratic structure, etc.
Factors affecting internal environment

Corporate culture or otherwise called an organizational culture refers to the values,

beliefs and behaviour of the organization that ascertains the way in which employees
and management communicate and manage the external affairs.

Human resource is the most valuable asset of the organization, as the success or
failure of an organization highly depends on the human resources of the organization.

Physical resources refers to the tangible assets of the organization that play an
important role in ascertaining the competitive capability of the company. Further,
technological capabilities imply the technical know-how of the organization.
 EXAMPLE:

Factors affecting the internal environment of Tesla

Value System:
Tesla’s value system revolves around innovation, sustainability, and a customer-centric approach. The
company aims to accelerate the world's transition to sustainable energy, emphasizing the importance of
reducing the carbon footprint through renewable energy and advanced technology solution
EXAMPLE (CONTD):

Vision: Tesla’s vision is “to create the

most compelling car company of the
21st century by driving the world’s
transition to electric vehicles.”

Mission: “To accelerate the world’s

transition to sustainable energy
 Organizational Chart

EXAMPLE
(CONTD):
 EXAMPLE (CONTD):
6. Physical Resources and
4. Corporate Culture 5. Human Resources
Technological Capabilities
• Tesla’s corporate culture is • Tesla attracts and retains • Gigafactories
innovative, fast-paced, and talent through a dynamic • Service Centers &
risk-tolerant, which and challenging work Supercharger Network
reflects Elon Musk’s environment. It focuses on • Autopilot Technology
leadership style. Key hiring top talent from
• Research and
cultural elements include: various engineering,
Development (R&D
• Innovation manufacturing, and
• Agility technological fields. The
HR strategies include:
• Mission-Driven
• Providing competitive
salaries
• Offering professional
development programs
• Opportunities for
career growth.
 Factors affecting
external
Environment

Political Economical

Social Technological
PEST is Usually also known as PESTLE analysis, where
it include Environmental and Legal analysis as well. It
is an analysis based on external factors.
 Process of Environmental Analysis

1. Identifying Environmental Factors

• First of all, the factors which influence the business entity are to be identified, to improve
its position in the market. The identification is performed at various levels, i.e. company
level, market level, national level and global level.
2. Scanning and Selecting Relevant and key factors
• Scanning implies the process of critically examining the factors that highly influence the
business, as all the factors identified in the previous step effects the entity with the same
intensity.
3. Defining variables for Analysis
• In this step, a careful analysis of all the environmental factors is made to determine their
effect on different business levels and on the business as a whole..
 Process of Environmental
Process Analysis
of Environmental Analysis

4. Using different Methods, Techniques, and Tools

• Some of the methods are Scenario Building, Benchmarking, and Network Methods. Some of the techniques are
Brainstorming, survey, Historical enquiry. Some of the analytical tools are Mean, Median, Mode, Frequency.

5. Forecasting Environmental Factors

• After identification, examination and analysis, lastly the impact of the variables is to be forecasted.

6. Designing Profiles
• Internal areas are recorded in Strategic Advantages Profile (SAP), and External areas are recorded in
Environmental Threat and Opportunity Profile (ETOP). These two Profiles are designed & combined in to one.

7. Strategic Position and Reporting Writing

• After analysis of business environment a strategist knows the actual situation and can make some future
forecasting based on the Environmental Analysis.
 Scenario Building

Benchmarking
Tools for
Environmental
Analysis
PESTLE Analysis

SWOT Analysis
 Scenario Building

It is a strategic planning tool used to anticipate and prepare for future developments
by creating a range of plausible scenarios. It helps organizations navigate
uncertainties by imagining different futures based on current trends and variables.

Process: It involves identifying key drivers of change (e.g., technological

advancements, economic shifts, regulatory changes) and combining them in
various ways to create different scenarios.

Purpose: The goal is not to predict the future but to explore possible
outcomes, enabling companies to build flexible strategies and prepare for
various contingencies.

Example: A car manufacturer might create scenarios based on shifts in

government policies regarding electric vehicles, changes in consumer
behavior, or technological innovations.
 • Benchmarking is the practice
of comparing a company’s
performance, processes, or
products against those of

Benchmarking
industry leaders or best
practices. It serves as a
reference point for
organizations to identify
performance gaps and areas
for improvement.
Types of
 PEST ANALYSIS

Political Factors: Government policies, regulations, and political stability influence business operations.
Changes in tax laws or trade restrictions can impact profitability and market access.

Economic Factors: Interest rates, inflation, and economic growth determine consumer spending and
investment. A recession may reduce demand for products, while a boom could increase business
opportunities.

Social Factors: Cultural trends, demographics, and consumer attitudes shape market demand.
Businesses must adapt to changing lifestyles and preferences to remain relevant.

Technological Factors: Advancements in technology can lead to innovation and efficiency but also
present challenges. Businesses need to stay updated with the latest technologies to remain competitive.