Table of Content: 

1. INTRODUCTION 
2. STRAGIC ANALYSIS 
3. STRATEGY AND BUSINESS ENVIRONMENT
4. PESTLE– A tool to Analyse Macro Environment
5. INDUSTRY ENVIRONMENT ANALYSIS
6. Product Life Cycle

INTRODUCTION 

There are different kinds of business activities that take place in an organisational setting, and a cursory look into their world reflects a wide variety of organisations ranging from small local businesses to international or multinational corporations’ level. Generally, organisations are distinguished based on their size, type of 
products, markets, geographical coverage, legal status, and like because of vast organisational diversity.

Whatever their size or other distinguishing feature they do not operate in a vacuum. They continuously act and react to what happens outside their periphery. The factors that are outside the business operations are typically referred to as organisational / business environment. In other words, and in the specific context of business, environment may be defined as a set of all external factors that weigh in the minds of the managers. Drawing an analogy with the term ‘atmosphere’ one could envision layers of such influences. See Figure-

The process of strategic formulation begins with a strategic analysis. Its objective is to compile information about internal and external environments in order to assess possibilities while formulating strategic objectives and contemplating strategic activities. In this chapter various aspects of external environment are covered with the perspective of strategic analysis. We will also attempt to understand how to identify, and tackle strategies to adapt within complex and turbulent external environment.

STRAGIC ANALYSIS 

Strategy formulation is not a task in which managers can get by with intuition, opinions, instincts, and creative thinking. Judgments about what strategies to pursue need to flow directly from analysis of a firm’s external environment and its internal resources and capabilities. Environmental scanning is a natural and continuous activity for every business and some do it on an informal basis, while others have a formal structure to collect meaningful information. It is just as important to learn about changes in tax regulations through television news as it is through a well-established reading material from experts. The capacity to collect important information in informal settings usually separates great entrepreneurs and managers. Using just informal techniques, on the other hand, exposes the organisation to missed opportunities and unanticipated hazards. A systematic approach to environmental assessment is essential for managing risk and uncertainty.others have a formal structure to collect meaningful information. It is just as important to learn about changes in tax regulations through television news as it is through a well-established reading material from experts. The capacity to collect important information in informal settings usually separates great entrepreneurs and managers. Using just informal techniques, on the other hand, exposes the organisation to missed opportunities and unanticipated hazards. A systematic approach to environmental assessment is essential for managing risk and uncertainty.

The majority of the rapidly expanding organisations use strategic planning throughout various stages of their operations. The strategic analysis is a component of business planning that has a methodical approach, makes the right resource investments, and may assist business in achieving its objective. It forces to think about the rivals and aids in the evaluation of business plans to stay ahead of the competition. The two important situational considerations are:

(1) industry and competitive conditions, and 
(2) an organisation’s own capabilities, resources, internal strengths, weaknesses, and market position.

STRATEGY AND BUSINESS ENVIRONMENT

To accomplish the goals and objectives of a business, business strategist createsstrategies and formulate policies considering both internal and external factors. A 
framework for adjusting to the demands of an unpredictable environment and an uncertain future is provided by strategic management. 

The business environment is highly dynamic and continuously evolving. Strategists provide an interface between the organizational abilities and the opportunities and 
challenges it must deal within the larger environment. 

Strategic management is involved with choosing a long-term direction in relation to these resources and opportunities. There is a close and continuous interaction 
between a business and its environment. This interaction helps in strengthening the business firm and using its resources more effectively. It helps the business in the following ways:

• Determine opportunities and threats
• Give direction for growth
• Continuous Learning
• Image Building
• Meeting Competition

PESTLE– A tool to Analyse Macro Environment

The term PESTLE is often used to describe a framework for analysis of macro environmental factors. PESTEL analysis is frequently used to assess the business environment in which a firm operates. Political, economic, social, and technological (PEST) analysis was the name given to the framework in the past; however, later, the framework has been expanded to include environmental and legal factors as well. PESTLE analysis involves identifying the political, economic, socio-cultural, technological, legal and environmental influences on an organization and providing a way of scanning the environmental influences that have affected or are likely to affect an organization or its policy.

‘PESTLE analysis is an increasingly used and recognized analytical tool, and it is an acronym for:

The PESTLE analysis is simple to understand and quick to implement. The advantage of this tool is that it encourages management into proactive and structured thinking in its decision making.

INDUSTRY ENVIRONMENT ANALYSIS

A combination of ideas and methodologies may be utilised to create a clear picture of key industry traits, competition intensity, industry change drivers, rival firms' market positions and tactics, competitive success, and profit forecasts. Industry analysis enable strategic understanding about the entire state of any industry and make decisions about whether the industry is a lucrative or not. 

The analysis entails seeing the firm in the context of a bigger framework. The purpose of industrial analysis is to get insight into a wide range of elements within 
and outside the business. Analysing these elements enhances knowledge of surrounding and serves as the foundation for aligning strategy with changing industry circumstances and realities. 

Product Life Cycle

An important concept in strategic choice is that of product life cycle (PLC). It is a useful concept for guiding strategic choice. Essentially, PLC is an S-shaped curve 
which exhibits the relationship of sales with respect of time for a product that passes through the four successive stages of introduction, growth, maturity and decline. If businesses are substituted for product, the concept of PLC could work just as well. 

The first stage of PLC is the introduction stage with slow sales growth, in which competition is almost negligible, prices are relatively high, and markets are limited. 
The growth in sales is at a lower rate because of lack of awareness on the part of customers.

The second phase of PLC is growth stage with rapid market acceptance. In the growth stage, the demand expands rapidly, prices fall, competition increases, and 
market expands. The customer has knowledge about the product and shows interest in purchasing it. 

The main advantage of PLC approach is that it can be used to diagnose a portfolio of products (or businesses) in order to establish the stage at which each of them exists. Particular attention is to be paid on the businesses that are in the declining stage. Depending on the diagnosis, appropriate strategic choice can be made. For instance, expansion may be a feasible alternative for businesses in the introductory and growth stages. Mature businesses may be used as sources of cash for investment in other businesses which need resources. A combination of strategies like selective harvesting, retrenchment, etc. may be adopted for declining businesses. In this way, a balanced portfolio of businesses may be built up by exercising a strategic choice based on the PLC concept.