Environmental Appraisal

Submitted ToProf. S.K. SrivastavaPresentation on Environmental AppraisalSubmitted BySadhika KatiyarRupesh Kumar MishraGaurav KatiyarAshish Chandra NamamTilak DiwediSaurabh Singh RajpootPranay Ranjan

What is environmentEnvironment means the surroundings, external objects, influences or circumstances under which someone or something exists.The environment of any organization is the aggregate of all conditions, events and influences that surround and affect itCharacteristics of environment Environment is complex: The environment consist of number of factors, events, conditions and influences arising from different sources. All these do not exist in isolation but interact with each other to create an entirely new set of influences.

Environment is dynamic: The environment is consistently changing in nature. Due to many and varied influence operating, there is dynamism in the environment causing it to continuously change its shape and character.

Environment is multi faceted: What shape and character an environment assumes depends on perception of observer. A particular change in environment or a new development may be viewed differently by different observers.

Environment has a far reaching impact on organizations. The growth and profitability of an organization depends critically on environment in which it exists. Any environmental change has an impact on organization in several different ways. 4Types of Business Environment Business Environment

Internal Environment External Environment

INTERNAL ENVIRONMENTStructureOperation procedureFinanceHuman resourceMarketing approachR & D etc.EXTERNAL ENVIRONMENT External Environment

Micro MacroMicro EnvironmentShareholdersEmployeesSuppliersBanksCustomersDistribution channelsMacro EnvironmentSocio culturalTechnological capitalist Economic socialistPoliticalInternational etc.

Role of government in Business EnvironmentRegulatory Role government makes the rules and regulation regarding the licensing , manufacturing , labor welfare policies etc. When government withdraws some strictness on regulatory function , it is called Liberalization.Participative Role government be the part of various operational fields likes banks , railway , PSU etc.. when government allows to private sector to be part of some specific operational areas , it is called privatization.

Protective Role government makes some specific rules in forms of various taxes and restrictions to protect the domestic industry. when government withdraws some restrictions to attract the FDI , FII and providing best product , it is called Globalization. Environmental sectorsEconomic environmentInternational EnvironmentMarket EnvironmentPolitical EnvironmentRegulatory EnvironmentSocio Cultural EnvironmentSupplier EnvironmentTechnological EnvironmentEconomic Environment The economic environment consists of macro level factors related to means of production and distribution of wealth that have on business of organization.

Some important factors areEconomic stage at which a country existsEconomic structure adoptedEconomic policiesEconomic planningInfrastructural factors

International Environment The international environment consists of all those factors that operate at transnational, cross cultural and across border level, having impact on business of organization.

Globalization, its process, content and directionGlobal economic forces, block and forumGlobal trade and commerce, its process and trendGlobal financial system, sources of financingGeopolitical situation, equation, alliances and strategic interests of nations

Market Environment The market environment consist of factors related to group and other organization that compete with and have an impact on an organizations market.

Some factors are as below :Customer or client factorsProduct factors such as demand , image Marketing intermediary factorsCompetitor-related factorsPolitical Environment The political environment consist of factors related to management of public affairs and impact on business organization.

The political system and its features like nature of political systemThe political structure, its goals and stabilityPolitical processes like operation of party system, elections Political philosophy, govt role in business etcRegulatory environment The regulatory environment consists of factors related to planning, promotion and regulation of economic activities. The constitutional framework , directive principlesPolicies related to licensing, monopolies and foreign investmentPolicies related to distribution and pricing and controlPolicies related to import and exportsSocio Cultural environment The socio cultural environment consists of factor related to human relationship within society, the development, forms and function of such relationship and learned and shared behavior of groups of human being having a bearing in business of organization

Some of important factors and influences operating in social environmentDemographic characteristics like population, densitySocio cultural attitudes and values such as expectation of society from business, social customFamily structure and changes in itRole and position of men, women, children and aged in family and society

Supplier environment The supplier environment consists of factors related to cost, reliability and availability of factors of production or services that have impact on business of an organizationSome important factors areCost availability and continuity of supply of raw materialCost availability of financeCost , reliability and availability of energy used in production Cost ,availability and dependability of human resource

Technological Environment The technological environment consist of those factors related to knowledge applied and material and machines used in production of goods and services that have impact on business of an organizationSome important factors areSources of technology like company source , external sources and foreign sourcesTechnological development, stages of development change and rate of change of technologyCommunication and infrastructural technology in management

Environmental scanning Environmental scanning can be defined as process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business for purpose of taking strategic decisions

Factors to be considered for scanningThe external environment in which an organization exists consists of a bewildering variety of factors. These are as below:Events are important and specific occurrences taking place in different environmental sectorsTrends are general tendencies or the courses action along which events take place.Issues are current concerns that arise in response to events and trends.Expectations are demands made by interested groups in light of their concern for issues.Approaches to environmental scanningKubr has suggested three approaches which could be adopted for sorting out information for environmental scanning These three approaches are

Systematic approachesAd hoc approachProcessed-form approachSystematic Approach Under this approach, information for environmental scanning is collected systematically. Information related to markets and customers, changes in legislation and regulations that have a direct impact on organizations activities etc. It could be collected continuously to monitor changes and take the relevant factors into account. Continuously updating such information is necessary not only for strategic management but also for operational activitiesAdhoc Approach Using this approach an organization may conduct special service and studies to deal with specific environmental issues from time to time. Such studies may be conducted for instance when an organization has to undertake special project, evaluate existing strategies or devise new strategies.Processed-Form Approach For adopting this approach the organization uses information in processed form, available from different sources both inside and outside the organization. When an organization uses information supplied by Govt. agencies or private institutions, it uses secondary source of data and the information is available in processed form.SWOT ANALYSISSTRENGTHWEAKNESSOPPOURTUNITYTHREATINTERNAL ENVIRONMENTStrength: It is an inherent capacity which an organization can use to gain strategic advantage. Eg good reputation among customers, resources, assets, people, experience.Weakness: It is an inherent limitation or constraint which creates strategic disadvantages.Eg gaps in capabilities, financial deadlines, low morale etcEXTERNAL ENVIRONMENTOpportunity: It is a favorable condition in organizations environment which enables it to consolidate and strengthen its position.Eg economic boom, favorable demographic shifts, arrival of new technologies etcThreat: It is an unfavorable condition in organizations environment which creates a risk for, or causes damage to organization.Eg economic downturn, demographic shift etcBenefits of SWOT analysisSimple to useLow costFlexible and can be adapted to varying situationsLeads to clarification of issueDevelopment of goal alternativesUseful as a starting point for strategic analysis