What is the role of environmental analysis in strategic management?
Environmental analysis in strategic management plays a key role in companies by determining current and potential opportunities or threats outside society in its external environment. The external environment includes political, environmental, technological and sociological events or trends that can affect business directly or indirectly. Environmental analysis is generally performed as part of the analysis of strengths and weaknesses, opportunities and threats (SWOT) when a strategic plan develops. Managers who practice strategic management must perform quarterly, half -year or every year environmental analysis depending on the nature of the business industry. The ability to identify events or conditions in an external environment helps businesses to achieve competitive benefits and reduce the risk of not preparing when they face the upcoming threats.
The purpose of environmental analysis is to assist in developing a strategy by maintaining de cisions under the organization informed about the external space. This may include a change in political parties, growing regulations to reduce pollution, technological development and move demography. If a new technology is developed and used in a different sector, a strategic manager would see how this technology could also be used to improve processes in his business. The analysis allows businesses to get an overview of your environment to find opportunities or threats.
SWOT analysis is performed as part of the process of strategic planning of the company. Internal analysis summarizes the strengths and weaknesses of the company, while external environmental analysis focuses on opportunities and threats. The role of environmental analysis in strategic management is to find possible opportunities and threats and create a plan to use Opportunity or avoid threats. If a threat cannot be avoided, such as the shift of a demographic group that causes a decline in sales, it should be createda plan to minimize its effects. For example, business could develop a product that focuses on a new demographic majority.
How often this type of analysis should be performed on the nature of the industry. If the industry is rapidly developed or prone to changing legislation, the company should consider its analysis quarterly or semi -annual. The industry that bears constant changes or is not sensitive to changes in an external environment may only require an annual analysis. Entrepreneurship, which performs environmental analysis, is often aware of the opening of opportunities and can use them faster than its competitors. Increasing how often environmental analysis is performed can also help businesses to see potential risks earlier, allowing him to further create a strategic plan for the creation of a strategic plan has been prevented or reduced.