Internal and External Environment and Environment Scanning

EXTERNAL ENVIRONMENT

All the relevant forces outside the firm’s boundaries are “External Environment”. Managers need to have information about the external environment to predict future.

External Environment can be classified in two broad categories:

1. Macro Environment

2. Competitive Environment

The forces that comprise the Macro Environment are as under:

a. Law & regulation / Politics

Governments can affect business opportunities in terms of the specific tax laws, economic policies, the import export laws, etc.

b. Economy

Economic conditions change over time. The analysis of the economic conditions of a country is not an isolated process; managers need to look into the economies of other countries, budget deficits, economic growth, stock exchange, etc.

c. Technology

Technological advancement puts a stiff pressure on the firms competing in the globalize business environment. Due to the advancement in MIS the firms have readily available date, just a click away. Telecommunication have greatly reduces the meeting/conference times from days into hours.

d. Demographics

Comprise the facts regarding the characteristics of the people. They may be divided into different Workgroups, Societies & Countries & further categorized into age, gender, family size, education & occupation.

e. Social Issues & Natural Environment

Help managers to envisage how people thing & behave. We see the impacts in terms of:

– Workforce (Child care, flexible work hours, parental leave etc.)

– Corporate social actions (Social welfare schemes, spending on anti smoking complains by tobacco companies, etc.)

– Product & market (How to position the product? & how the market will react towards the product)

“ENVIRONMENT SCANNING”