Question

What is Environmental Analysis and how do its results determine the process of the company's strategic planning. What are some environmental factors that might substantially influence strategy and tactics?

Answer 1

The environmental analysis is the complete study of external environmental forces that can influence the company's strategic planning. This analysis is commonly called as PESTLE Analysis i.e. Political, Environmental, social, technological, economic and legal factors. They aid in analyzing and identifying opportunities and threats that could affect the business planning of the company. The following are some of the environmental factors that can substantially influence the strategy and tactics of the company.

Political factors: These are the policies and regulations made by the local government to conduct the business. Few of them are import and export tariffs that could benefit or make trouble to conduct international business by the companies.

Economic factors: The economic factors like GDP of the company can impact the business in terms of opportunities and threats, Different taxations also affect the conduction of business.

Social factors: The lifestyle of the consumers, gender bias influence, ethnicity, and origin of the target customers also can influence the business in providing opportunities and threats.

Technological factors: The dynamic change in technology also influences business strategies and tactics. For example, nowadays most people are preferring to shop online, which is making companies to do lot of digital marketing than traditional marketing.

Legal factors: They deal with consumer protection, environmental protection, human rights, employee-related laws. The companies have to adhere to follow these laws to avoid legal litigations and loss of license to conduct the business

Environmental factors: The companies have to be socially responsible in conducting their business and also have to implement tactics to reduce their harmful influence on the environment.