Use of Environmental Analysis in Strategic Management

The changing environment

The environment is changing drastically all around the world, and these changes are substantial both in terms of their speed and their impact on every aspect of the commercial system. Recent examples of these shifts include the liberalization of many Third World countries' financial systems, as well as the integration of the global economy into the multilateral framework of the WTO and regional agreements like the European Union, the SAARC, and the ASIAN.

The technological revolution has affected a wide range of fields, including genetic engineering, resource and materials research, and data technology. Markets (product diversity, increase in transaction volume, globalization, etc.) are accelerating. Similar to how societal concepts (such as the current rise in consumerism, ecological awareness, sexism, etc.) have spread widely (Shukla 1996)

The following environmental factors are the following business realities, according to the majority of experts:

• Changing demographics; more females and minorities in the workforce;
• Further geographically dispersed workforce;
• Heightened sense of ethics and society;
• Environment, ecology, and health care have become serious agenda items;
• Globalism and increasing international alliances and connections;
• Networking and alliances between business, government, and educations;
• Added complexity in doing business in a global marketplace; and
• Information technology has become embedded in everything we do.

The formation of such patterns is altered in Nepal as well. Recent shifts toward a more liberal and unrestrained economy have put commercial firms under a lot of simultaneous pressure. Firms are under increased pressure now to deal with the growing competition, create a more customer-focused strategy, globalize through partnerships and collaborations, improve management competency, upgrade existing technology, and so on. It is becoming increasingly crucial for Nepalese commercial organizations to create effective corporate strategies for addressing these urgent environmental trends as a result of these ubiquitous developments.

Concept of strategic management

Today, corporate enterprises increasingly depend on strategic management to maintain and enhance their performance. The internal operations of corporate entities were frequently prioritized by traditional management. Modern management broadens this strategy to take into account advancements and developments on the outside. Thus, the development of strategic management has progressed from simple extensions of planning activities to increasingly intricate and analytical depictions of organizational environmental interaction.

W.F.Glueck(1980) defines strategic management as: “That set of decision and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives”.

D.B Jemison (1981) describe strategic management as: “The process by which general managers of complex organization develop and utilize a strategy to co-align their organization's competencies with the opportunities and constraints in their environments.”

B. Prasad (1983) views strategic management as: “A process that identifies present and future critical issues for the organization and develops ways to resolve them within the organization’s resources and external constraints.”

According to a synthesis of the three definitions, strategic management is a holistic method and procedure for connecting a company's resources, making it dynamic and environment-responsive. A company uses strategic management as a tool to accomplish its goals.

Strategy, organization, and environment

Strategic management process involves several steps:

• Goal formulation,
• SWOT analysis,
• Identification of strategic alternatives,
• Strategy formulation,
• Strategy implementation,
• Measurement and evaluation, and
• Reformulation of strategy.

The best possible fit between the opportunities and threats in the external environment and the organizational strengths and weaknesses is what is known as a business firm's strategy. A definition of the organization's aims and objectives as well as its plans for achieving them serves as an expression of this alignment. This connection between strategy, environment, and organization is depicted in the figure.

The environmental analysis gives the business firm information to pinpoint the main opportunities and hazards in its environment, as shown in the figure. Managers are better able to find viable options from which to select an effective strategy by taking into account the primary opportunities and dangers facing an organization. Additionally, if the company firm's competitors are less proactive in this area, it may provide them a competitive edge within the industry.

The managers can get answers to the following questions by analyzing the environmental forces: where are we now and where are we headed if we stay on course? What are our advantages and disadvantages? What are the human and financial resources we have? Where do we stand in relation to our goals? Have we discovered any information in this analysis or the study of uncontrollable forces that calls for the deletion or modification of goals? Must new objectives be added? Answering these concerns therefore necessitates a careful examination, monitoring, and evaluation of the firm's operations and commercial strategies in light of the environmental reality.

Use of environmental analysis in strategic management

A force that is only likely to have a small impact poses few challenges to an organization. Such a force just requires a small investment of managerial effort and focus. A managerial time and effort investment is necessary to seize an opportunity when a force is expected to have a significant positive influence. Numerous environmental influences must be faced and addressed by higher institutions. The management process becomes more complicated as a result of this.

Managers cannot be certain that actions made today will be suitable in the future due to complex and changing environmental influences. They have particularly difficult occupations because of this unpredictability. The fundamental actions that managers often take to comprehend and control these environmental forces are as follows:

• List the forces that have the greatest impact on their administrations, along with their relative strength.
• Analyze how these forces' evolving tactics may affect the opportunities and risks they pose to their organizations.
• Create a plan that outlines how they intend to take advantage of these possibilities and fend off these risks.
• Determine the type of resources they will require.

Managers can improve their organization's capacity to manage the environment in three key ways:

• Minimizing the effects of external factors:
  • By lessening the potential impact of such pressures, managers can improve their environmental performance. Therefore, it is the responsibility of all managers to find strategies to lessen the potential impact of forces. Top managers come up with plans that will enable a firm to seize opportunities and fend against challenges. Middle managers should use their resources more wisely to keep expenses low.
• Creating an organizational structure and control system:
  • Pledging attention to the organizational structure and control system is another strategy to respond to a complicated and evolving environment. The internal organization and controls that managers must establish will enable them to react correctly to the various factors at play in the external environment. Their goal is to make the organization and its surroundings compatible so that the organization's structure and control system can effectively adapt to external factors.
• Boundary-spanning roles:
  • Managers' performance depends heavily on their capacity to access the data, foresee the future, and select the best courses of action. By engaging in boundary bridging exercises, they can learn to perceive, comprehend, and appreciate the surroundings of their organization. It is a technique for communicating with people and organizations outside the organization in order to gather useful information.

References

• books.google.com/books?isbn=8174463178
• books.google.com/books?isbn=812594267X
• Pant, P. R. (2009). Business Environment in Nepal (SIXTH ed.). Kathmandu, Nepal: Buddha Academic Publishers and Distributers.