Business Environment Analysis Quiz

Study Notes

External Environment Overview

The external environment consists of three main components: physical or natural environment, general or societal environment, and industry or task environment.

External Environment Analysis Process

Environmental Scanning: Involves critical surveillance of external events impacting a company.
- Set up a scanning system, collect and analyze data, identify recurring issues, and prepare reports.
Environmental Monitoring: Tracks trends and sequences identified during scanning.
- Focuses on emerging issues, evaluates their time frames, and decides on necessary actions.
Competitive Intelligence: A systematic method to collect and analyze competitor information.
- Identifies sources, validates data, projects competitor moves, and defines actions.

Layers and Objectives of External Environment Analysis

Physical Environment:
- Considers resources, climate, and wildlife.
- Goal: Assess sustainability issues regarding the impact of natural resources on business.
Societal Environment:
- Includes sociocultural, technological, economic, environmental, and political factors.
- Goal: Identify strategic forces influencing growth, future, and direction of a company.
Industry Environment:
- Focuses on customers, suppliers, employees, creditors, government, and competitors.
- Goal: Understand competition levels and driving forces affecting market positioning.

Physical Environment Concerns

Focus on factors beyond company control such as:
- Availability of raw materials.
- Unpredictable weather conditions.
- Increasing greenhouse gas emissions.

Conducting a Physical Environment Analysis

Identify current physical environment forces impacting the company.
Collect reliable quantitative data to support evaluation.
Assess the impact level of identified forces (very strong, strong, moderate, negligible).
Determine occurrence frequency of these forces.
Evaluate the company's vulnerability to climate-related effects.
Categorize climate change effects into six risk categories:
- Regulatory
- Supply chain
- Product and technology
- Litigation
- Reputational
- Physical

Societal Environment Characteristics

Composed of political/legal, economic, sociocultural, and technological factors that influence industry growth.
Strategic analysis aims to explore influential factors on a company's future.

Key Political, Economic, Sociocultural, and Technological Factors

Political/Legal:
- Tax laws, government programs, foreign trade relations.
Economic:
- Interest rates, GDP trends, inflation rates, unemployment levels, money supply.
Sociocultural:
- Education levels, population growth rate, lifestyle changes, age distribution.
Technological:
- Internet availability, spending on research and development, telecommunication infrastructure, computerized systems.

Description

Test your knowledge on the external business environment, including the physical, societal, and industry factors that influence a company's operations. This quiz covers the analysis process and the importance of environmental scanning for business success.