What are the key points to be understood in environmental analysis?

Answer 1

1. Businesses may face problems due to restrictive business environment which may be because of rigid government laws (e.g. no polluting industry can ever be located within a 50 Km radius of the Taj Mahal) , state of competition etc.

2. The present and future viability of an enterprise is impacted by the environment. For e.g. no TV manufacturer can be expected to survive by making only the traditional cathode-ray tube television sets when consumer preference has clearly shifted to plasma and LCD television sets.

3. The cost of capital and the cost of borrowing - the two key financial drivers of any enterprise are impacted by the external environment. For e.g. the ability of a business to fund its expansion plan by raising money from the stock markets depends on the prevalent public mood towards investment in stock markets.

4. The availability of all key inputs like skilled labour, trained managers, raw materials, electricity, transportation, fuel etc., is a factor of the business environment.

5. Increasing public awareness of the negative aspects of certain industries like hand woven carpets (use of child labour), pesticides (damage to environment in the form of chemical residues in groundwater), plastic bags (choking of sewer lines) have resulted in the slow decline of some industries.

6. Finally, the environment offers the opportunities for growth and profits. For e.g. when the insurance and the aviation industrieswerethrown open to the private sector, the new entrant could easily build on the expectations of the public.

Answer 2

1. Identifying and analyzing key environmental trends and factors that may impact an organization's operations.
2. Assessing the potential risks and opportunities posed by the external environment.
3. Understanding the regulatory, social, economic, and technological factors that may influence an organization's sustainability and competitiveness.
4. Developing strategies to respond to environmental changes and leverage opportunities for innovation and growth.