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Strategic Management - Environmental Analysis and Diagnosis

Taxonomy of a Firm’s Environment - Environmental Analysis

   Posted On :  26.06.2018 12:02 am
Taxonomy of a Firm’s Environment - Environmental Analysis

The total environment can be classified into two broad categories

Taxonomy of a Firm’s Environment
 
The total environment can be classified into two broad categories

1. Internal environment

2. External environment

The internal environment includes the goals and value system, the hierarchical authority structure, the technological equipment and processes, the social groups and teams, the management groups, organi-zational climate and culture,etc.

The external environment can be classified into two segments.

1. Macro environment or Mega environment, or

2. Micro environment or task environment.



Macro Environment

 
Also referred to as general or remote environment, Mega’ environment, skirts the ‘micro’, or the relevant environments.The major constituents of mega environment are PEST or STEP (P refers to Politico-legal environment, E-Economic environment, S-Socio-cultural environment and T-Technological environment) or PESTEL (Political, environmental, socio-cultural, technological, economic and legal). These environments can further be classified into international, regional, national etc. Thus, depending upon the situation, an analyst may refer to the global economic environment, the regional political environment or the national social environment.

Micro Environment

 
Microenvironment includes employees, shareholders, creditors, suppliers, customers and financial institutions, regulatory organizations, channels of distribution, and special interest groups like consumer associations, and community organizations. This environment has a substantial impact on an organization’s current business. Consequently, developments in microenvironment become the dominant preoccupation of the management for strategic decisions. To avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry.Creative technological adoptions can improve manufacturing and marketing techniques.
 
A company like L& T which has diversified product mix like machinery for cement, switchgear, material handling equipment, machinery for dairy plants, computer peripherals etc., may have many ‘micro’ environments. Only necessary information should be gathered by L & T from the relevant environment.

Tags : Strategic Management - Environmental Analysis and Diagnosis
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