Environmental Appraisal

Concept of Environment Environment literally 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 it.! Since the environment influences an organization in multitudinous ways, it is of crucial importance to understand it. External and Internal Environment The external environment includes all the factors outside the organization which provide opportunities or pose threats to the organization. The internal environment refers to all the factors with an organization which impart strengths or cause weaknesses of a strategic nature. The environment in which an organization exists can, therefore, be described in terms of the opportunities and threats operating in the external environment apart from the strengths and weaknesses existing in the internal environment. The four environmental influences could be described as follows; 1. An opportunity is a favourable condition in the organisatinos environment which enables it to consolidate and strengthen its position. An example of an opportunity is a growing demand for the products or services that a company provides. 2. A threat is an unfavourable condition in the organisations environment which creates a risk for, or cause damage to, the organisatino. An example of a threat is the emergence of strong new competitors who are likely to offer stiff competition to the existing companies in an industry. 3. A strength is an inherent capacity which an organization can use to gain strategic advantage. An example of a strength is superior research and development skills which can be used for new product development so that the company can gain a strategic advantage. 4. A weakness is an inherent limitation or constraint which creates strategic disadvantages, An example of a weakness is overdependence on a single product line, which is potentially risky for a company in times, of crisis. An understanding of the external environment, in terms of opportunities and threats, and the internal environment, in terms of strengths and weaknesses, is crucial for the existence,

growth, and profitability of any organization. A Systematic Approach To Understanding The Environment Is The SWOT Analysis. Market Environment The market environment consists of the factors related to the groups and other organisations that compete with and have an impact on an organizations markets and business. Some of the important factors and infouences operating in the market environment are as follows: 1. Customer or client factors such as, the needs, preferences, perceptions, attitudes, values, bargaining power, buying behaviour and satisfaction of customers. 2. Product factors, such as , the demand, images, features, utility, function, design, life cycle, price, promotion, distribution, differentiation, and the availability of substitutes of products or services. 3. Marketing intermediary factors, such as, levels and quality of customer service, middlemen, distribution channels, logistics, costs, delivery systems, and financial intermediaries. 4. Competitor-related factors, such, as the different types of competitors, entry and exit of major competitors, nature of competition, and the relative strategic position of major competitors.

Technological Environment The technological environment consists of those factors that are related to the knowledge applied and the materials and machines used in the production of goods and services which have an impact on the business of an organization. Some of the important factors and influences operating in the technological environment are as follows: 1. Sources of technology, like company sources, external sources, and foreign sources; cost of technology acquisition, collaboration in and transfer of technology 2. Technological development, stages of development, change and rate of change of technology, and research and development 3. Impact of technology on human beigns, the man-machine system, and the environmental effects of technology. 4. Communication and infrastructural technology in management.