Process and Limitations of Environmental Analysis

Process of Business Environment Analysis

The process of Business environment analysis involves many steps, which are as follows:

  1. Collection of necessary information.
  2. Scanning and searching of information.
  3. Getting information by spying.
  4. Forecasting the conditions.
  5. Observing the environment.
  6. Assessing

  1. Collection of necessary Information

Collection of necessary information is the first stage in the process of business environment analysis. It involves the observation of various factors prevailing in a particular area also. If an environment is to be analyzed, written as well as the verbal information from various sources with regard to the elements of environment for that particular business is to be collected first.

  1. Scanning and Searching of Information

Scanning and searching is an important technique of business environment analysis. Once the necessary information has been collected, it should be put to scanning. Besides, the search for other relevant information also continues. This technique gives results as to the hypothesis already established. This helps the analyst to know as to what are the conditions prevailing for a particular business at a time.

  1. Getting Information by Spying

Spying is also one of the techniques of business environment analysis. When the activities of a particular business are to be analyzed and such information cannot be collected by traditional methods, the technique of spying is resorted to. This happens especially when business rivalry exists. Mostly, this technique is used to collect competitive information.

  1. Forecasting the Conditions

Scanning provides a picture about the past and the present. However, strategic decision-making requires a future orientation. Forecasting is the scientific guesswork based upon some serious study. So it helps to know how a business in particular and conditions in society in general are going to take shape.

  1. Observing the Environment

One can analyze a business environment by merely observing it. The observation reveals various conditions prevailing at a particular point of time. This is helpful in understanding the existing environment in its entirety so that suitable decisions can be taken.

  1. Assessing

Assessment is made to determine implications for the organization’s current and potential strategies. Assessment involves identifying and evaluating how and why current and projected environmental changes affect or will affect strategic management of the organization.

Limitation of Business Environment Analysis

Following are main limitation of business environment analysis

  1. Unexpected and Unanticipated Events

We can not tell unexpected and unanticipated events in business environment analysis. Sometime, business has to face unexpected happenings. So, there will no benefit of business environment in these cases.

  1. No sufficient Guarantee

Business environment analyst does not give any guarantee whether all events will happen as per estimation in business environment.

  1. Uncritical Faith

Sometime data may be incorrect. So, decisions on basis of these analysis may be risky for business.

  1. Too much information

Sometime too much information relating to business environment analysis will create the doubt in businessmen.

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