Essay: Discuss The Importance Of Environmental Analysis In Managing Business Organisations

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  • Published on: October 23, 2019
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  • Discuss The Importance Of Environmental Analysis In Managing Business Organisations
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Task 1

Discuss the importance of environmental analysis in managing business organisations.

An environmental analysis in plays an essential role in business management by providing possible opportunities or threats outside the company in its external environment. The purpose of an environmental analysis is to help to develop a plan by keeping decision-makers within an organization. The changes can be include exchanging of executive parties, increasing guidelines to decrease pollution, technological developments, and fluctuating demographics. An environment analysis helps the industries to improve the outline of their environment to find more opportunities or threats.

Differentiate external and internal environment.

The environmental analysis has to be implemented at an internal level, as well as an external level, to identify all opportunities and threats of the external and internal environment. Moreover this analysis is helpful to find the strengths and weaknesses of the any organization. External analysis of the environment is generally emphases on the customers. External environmental also refers to the aspects of the technological, commercial, economic, financial, political, regulatory, socio-cultural and physical environments of an organization.Whereas, the internal analysis focuses at the current situation of resources, strengths or weakness of an organization. Internal environment refers to the capabilities and limitations of the organisation and it has no limitations.

Give at least 3 variables in the external and internal environment. Discuss the potential effects of these variables to the business entity.

Employee Relations

Internal policies and procedures impact on business activities. For example, if the company is committed to promoting from within, company must ensure employees receive appropriate training and development to be ready for promotion when the time comes. They should monitor the number of employees qualified for retirement and ensure potential replacements or other staff members are trained to avoid a sudden withdrawal of business knowledge.


The amount of competition in industry affects the business or company’s ability to trainee qualified workers. Industry giants find that candidates seek them out. There is no need to spend money advertising each recruitment in such a case, because candidates will visit the company website of their own agreement. They have to face the competition in the market.


Many employees related factors also influence his or her compensation. These can be performance. It is always rewarded with pay increase and as a result it motivates the workers to do better in future. It is a internal factor.

Laws and Regulations

Laws and regulations impact the remuneration of employees in many areas, such as:

  • Work hours and compulsory time-off (paid and unpaid)
  • Minimum wage
  • Overtime
  • Compulsory bonuses
  • Employment at will

The business entity external environment is included everything that is outside the entity.

1. In what way the stakeholders can affect the future of the business?

Stakeholder, which relates to investors or owners in a firm or business. Stakeholders can be defined as individuals and groups who are affected by the activities of an organization. Internal stakeholders include managers and employees and are those that are situated within the company and affect the day-to-day running of the organization.

Task 2

Using the diagram as shown in the next page, discuss the importance of environmental analysis and its impact to the business entity by answering questions A, B and C.

Mr. Webby is the owner-manager of Pick and Carry, a big grocery store in Auckland City. He started the business in 2008 without any feasibility studies conducted to determine the viability of the business. In 2010, his business experienced a great loss/deficit amounting to NZ$50,000. The deficit was due to the fact that Pick and Carry could not compete with the strongly established grocery shops in Auckland City specifically New World and Countdown. Because of Pick and Carry’s deficit, Mr. Webby planned to shift the business into a department store, hoping that the new business can recover its huge deficit. However, Mr. Webby is worried because the GNPof the country will likely require the New Zealand council to increase its taxes and there is an increasing production cost due to inflation. If Mr. Webby solicits your opinion about his newly proposed business, how would you address his questions and concerns?:

How will the competitors, suppliers and customers affect the business?

Any business can face huge deficit if they don’t know about feasibility studies. In the competitive market there is more competitors in a particular business, the business activity would be improved with more competitors, the consumers would have more choice. Moreover, this will increase competition would also result in competitive cost which would further attract the consumers.

Analyse the influences of the following macro-environmental forces to the proposed business:

Legal/Regulatory: Sometimes Legal factors can limit and legal rules change with time in a business operates. For example, company may have to hire additional supervisory staff or purchase safety equipment after a new health and safety law is passed. Legal factors are determined by both local legislation and regional and national laws. In some cases, companies who are doing exporting in other counties they have to follow the international laws also.

Social/cultural: The humor and demographics of the people are come in the social area of macro environment factors. Social movements, such as a mobile is a favorite media devices among people, which can also influence the products a company producers and where it chooses to spend advertising dollars to promote their products in society.

Technological: Technological macro environment factors can influence how an organization does business. Any business can use a new type of equipment, computers that are nowadays use for the development of the company. Company owners must be able to correctly recognize the new developments which will help owners to see the development in their company performance.

Economic: economic factor is also influence the business or an investment money in the business. Various economic factors should be taken into financial conditions of the company. For a business, there are many key economic factors include influence the performance of business that are interest rate, government taxes and labour cost.

Who are the stakeholders of the business?

There are many stakeholders in this business such as competitor, customers, potential substitutes, potential entrants, and suppliers.

Task 3

Miss Parker is the long time general manager of MAC, the biggest food chain in Dunedin. The owner of MAC plans to open a new branch in Auckland City. Since the general manager knows that you have a Diploma in Business from IANZ, she seeks your advice on how to do the following strategic management steps:

a. Statement of the Business Mission

b. Environmental Analysis:

Is the process of fact finding and determining how to make improvements within the environment to attract more customers. The system analyst, with user approval, specifies “what” the system should do to make this MAC branch more popular among people. Mac are continuously improving our operations and enhancing our customers’ experience.

c. Identification of Strengths and Weaknesses:


  • Largest fast food market share in the world
  • Brand recognition valued at $40 billion
  • $2 billion advertising budget
  • Locally adapted food menus
  • Partnerships with best brands
  • More than 80% of restaurants are owned by independent franchisees
  • Children targeting


  • Negative marketing
  • Unhealthy food set of choices
  • Mac Job and high employee turnover
  • Low differentiation

Values of Organizational Leaders:

Value of leaders Development is stranded in talent management and he/she can have the ability to do career planning, Individual Development plans, career maps, succession planning, learning activities, and etc. they have the capability to know their strengths, social and develop their skills through experience.

Development of Alternative Strategies:

Five force framework: in this process they are adding new dishes to give tough competition to other food markets.

Industry cycle: the changes they are making to attract more customers.

PESTEL: – This is identify the changes need to make in organization.

Task 4

You are a manufacturer of beauty products in New Zealand. Your business market power is heavily dependent on the exportation of these products. If the global economy is not in a good condition and the countries where you export your products are experiencing inflation, serious poverty and unemployment, what are the possible effects of the global economy to your business in New Zealand Make a flowchart to present the effects of the macro-environment to the business entity?

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