BUSINESS POLICY

AND
STRATEGY

Dr. Eti Jain

Assistant Professor
UNIT 2

Environmental Analysis
• Need, Characteristics and Categorization of Environmental Factors
● Approaches to Environmental Scanning Process- Structural Analysis of Competitive
Environment
● ETOP-A Diagnosis Tool

Analysis of Internal Resources

● Strengths and Weaknesses
● Resource Audit
● Strategic Advantage Analysis
● Value Chain Approach to Internal Analysis
● Methods of Analysis and Diagnosing Corporate Capabilities -Functional Area profile
and Resource Deployment Matrix
● Strategic Advantage Profile
● SWOT, McKinsey’s 7S framework
• Environmental Scanning is related to examining and interpreting different
economic, social, technological, political trends, and events that affect an
organization or industry or the whole market.
• Different factors or components of both internal and external business
environment can affect an organization or business in both positive (opportunity)
or negative (threat) way. That’s why these are required to be constantly monitored
in which Environmental Scanning plays a vital role. These components are:
 Purpose of Environmental Scanning
The basic purpose of environmental scanning is data collection related to competitors, employment trends,
technological advancement, industry trends, political, economic conditions, etc.
• Environment awareness: Environmental Scanning includes the study of the business environment of any
business which helps in gaining knowledge of changing the business environment. To remain competitive in
the market, business owners must have awareness about the current environment in which they operate their
business. This facilitates predicting the prospects of business in such an environment, and also they can plan
their business strategy well in advance.
• Information for decision-making: One of the important aims of the business environment study through
Environmental Scanning is to provide necessary information which is required for conducting right and better
decisions. With the help of the study, businesses can know their stakeholders and competitors much better. So,
it’s easier to make decisions related to different aspects like sales & purchase, costing, perks, etc.
• Facilitates policy-making: Good business polices demand a thorough knowledge of different business
environment i.e. economical, social, legal, political, etc. By providing such knowledge, environmental
scanning contributes to drafting better business policies.
• Planning related to technology: Businesses work in today’s rapidly changing technical environment. It’s
necessary for them to cope-up with the technological advancements of their industry by knowing the
technological environment. It helps in making effective technical planning for businesses.
• Business survival through forecasting: At the time of recession or losses, organizations bear limited sales
while unlimited production may be there. In that scenario, business survival much depends on the fact that all
such situations have been predicted well in advance through Environmental Scanning.
 Factors that influence Environmental Scanning

An environmental scanning is affected by different factors which are given

below:
• Organizational factors: Different characteristics of the organization such
as its size, complexity, nature of its business, market and products/services,
age, etc. affect its environment.
• Environmental factors: Different factors related to the nature of the
environment like its complexity, flexibility, diversity, etc. also affects the
process of environmental scanning.
• Factors related to strategist: Different strategists have an important role in
the strategy formulation of an organization. The characteristics of these
strategists i.e. qualification, experience, motivation, ability to cope-up with
stress, interpersonal skills, etc. make an impact on the organizational
environment.
Types of Environmental Scanning
A) Centralized Scanning:
Centralized scanning refers to analyzing only some specific environmental
components. In this case, only the elements that are likely to have a
significant impact on the company are examined.
Centralized scanning, for example, is the study of only economic conditions.
In addition to being economical since specific components are only scanned,
this method helps to save time as well. However, the study of only specific
components does not make it a comprehensive method.
B) Comprehensive Scanning:
The term comprehensive environmental scanning refers to the detailed
analysis of all the components of the environment.
This analysis examines all the internal and external factors which may
influence the business. Therefore, it is comprehensive in nature. Because
many components are analyzed, it is expensive and time consuming.
Approaches to Environmental Scanning
A) Systematic Approach:

• As part of a systematic approach, environmental scanning is undertaken using a

systematic method. Market and customer information, government policies,
economics, and social factors are continuously collected.
• In other words, the environment is monitored on a regular basis. Using timely and
relevant information helps management make better decisions.
• This approach demands a systematic collection of information for scanning an
environment. Different types of information related to market, competitors,
customers, regulations, etc. may have a direct impact on the organization’s
business. So these are required to be closely monitored regularly to determine
relevant facts and figures.
• This type of approach is best suitable for strategic management activities and
operational tasks.
B) Ad-hoc Approach:

• The Ad-hoc approach consists of only surveying and studying specific

environmental components. It is useful for gathering information for
specific projects, evaluating strategic alternatives, or developing new
strategies. The process does not continue continuously. To be effective,
environmental scanning needs to be carried out on continuous basis.

• In this approach, organizations conduct special surveys on an ad-hoc

basis related to certain environmental issues. These studies or surveys
may be considered while initiating new projects or to update current
strategies.
C) Processed Form Approach:

• The Processed Form Approach incorporates information

collected from internal and external sources, which is
processed and used in accordance with the business’
requirements.
• This approach consists of the use of processed form
information which is collected from different internal and
external environment i.e. government agencies, educational
institutes, etc. So, in this approach, information is obtained
from secondary resources.
1) Understanding the forces that shape the environment and its nature

The first step in environmental scanning is to identify the factors that have
influenced the business’ growth and development. There are various
components to these environments, including political, economic, socio-
cultural, technological, legal, physical, and global ones. After this, the
nature of the environmental components is examined. An environment can
be simple or complex, stable or volatile.
Some firms operate in a simple environment, while others work in a
complex environment. Environmental scanning becomes more important
when there is a high level of uncertainty in the environment
2) Information sources should be determined

The sources of collecting information from the environment should be

identified after studying the forces and nature of the environment. The
following sources can be utilized for gathering information on the business
environment.
• Secondary sources: Newspapers, books, research articles, industrial and trade
publications, government publications, and competitors’ annual reports
• Mass media: TV, radio, and the Internet
• Internal sources: Management information systems, data networks, and
employee reports
• External agencies: Consumers, intermediaries and suppliers
• Formal studies: Research conducted by employees, research agencies, and
educational institutions
• Spying and surveillance of the competitors.
3) Determine the techniques for scanning the environment
It is important to determine the technique of environmental scanning after
determining the sources of information. Scanning techniques depend on the
type of environment to be scanned. Executive opinion, expert opinion,
Delphi, historical analogies, and other techniques are commonly used for
scanning.

4) Trend Assessment and Scanning

To identify early signals of potential changes in the environment, a detailed
and micro study of the environment is the final step in the environmental
scanning process. It also detects changes already in progress and shows the
trend of the environment. In order to assess the trend, opportunities and
threats should be taken into consideration
STRUCTURAL ANALYSIS OF COMPETITIVE
ENVIRONMENT
Understanding Porters 5 Forces Model
Why ETOP is needed?
How to prepare an ETOP?
For Example: Motor Bike Company
Key Points to Remember
Resource Audit
Types of Resource Audit
•.
 APPROACH TO
INTERNAL ANALYSIS
Using this tool:
METHODS OF ANALYSIS AND
DIAGNOSING CORPORATE
CAPABILITIES
FUNCTIONAL AREA PROFILE AND

RESOURCE DEPLOYMENT MATRIX

Meaning of Strategy
Different levels of Strategy
Meaning of Functional Strategies
Functional Strategies Objectives
Types of Functional Strategies
Strategy Deployment
Strategy Deployment Process
Strategy Deployment Matrix
Strategic Advantage Profile
SWOT Analysis
McKinsey’s 7s Model
Strategic Advantage Factors: Marketing and
Distribution
Strategic Advantage Factors: HR & Engineering
Strategic Advantage Profile
Strategic Advantage Profile
SWOT ANALYSIS
SWOT MATRIX
McKinsey 7s Model
Importance of the Tool
Steps to Apply
Example:
THANK YOU