The strategic environmental analysis enables companies to understand their business environment better. It is an ongoing process for identifying all the external and internal factors that may influence organizational performance. It helps organizations to align their strategies with the changing environment.
The environmental analysis includes:
1. Internal analysis
The internal analysis identifies the resources needed to perform an activity.
2. External analysis
The external analysis identifies the external conditions that affect the organization. The critical aspects of external analysis include market and competitor analysis.
• Market analysis
Market analysis identifies the market trends, competition, customer needs, and other important information about the market's current situation.
• Competitor analysis
Competitor analysis identifies the competitors and their strengths and weaknesses.
Commonly used models for the business environment analysis include Porter's five forces model, SWOT analysis and PEST / PESTEL analysis. We will discuss these in separate posts.
- Businesses are affected by various internal and external factors.
- Managers need to understand these factors for developing strategy.
- The environmental analysis identifies all the external and internal elements affecting the organization's performance.
- This helps managers understand how they can improve their business environment through strategic planning.