ENVIRONMENTAL APPRAISAL/SCANNING

The First Steps to Strategy Formulation

SIX MEGA TRENDS IN INDIA

Trend of attaining scale-Indian companies are no more small or tiny- In 2000 Indian Car Market was producing half a million vehicles, in 2010 a single company will be producing double the number Trend of spread of connectivity and awareness- in 2001 India had 5 million connections and now about 200 million, TV sets have increased 12 times

SIX MEGA TRENDS (CONTD)

Trend of growth of middle class- in 2001 estimated 61 million Indians were earning Rs 2 lacs a year, in 2005 100 million ad in 2010 estimated 173 million Trend of problems of growth- environmental degradation, rising energy demand and less supply, growing income disparities, India the third hihest emitter of CO2

SIX MEGA TRENDS (CONTD)

Trend of openness ( globalisation)- foreign trade component of our GDP is 55%,FIIs hold 25% of Indian stocks, huge forex reserves, unprecedented travel abroad, more Indian students abroad Trend of dominance of youth- nearly half of Inda is under 25 yeas of age

CHARACTERISTICS OF ENVIRONMENT
It is more complex- understandable in parts but not in totality It is dynamic- constantly changing It is multi-faceted- same event different perceptions, opportunities and threats often alternate It has a far reaching impact- trends beyond trends, uncertainty, non-linear

SWOT ANALYSIS
Set Objectives for the organisation or unit Identifying the strengths & weaknesses Identifying Opportunities& Threats How do we maximise our strengths? How do we minimise our weaknesses? How do we capitalise on the opportunities? How do we deal with the threats and if possible convert them into opportunities

SWOT ANAYSIS (CONTD)

Finally recommending strategies which will optimise the answers to the above questions Benefits of SWOT Analysis: simple, low cost, flexible, clarifies issues, develops goal oriented alternatives, starting point for strategic analysis Pitfalls of SWOT Analysis: simple may lead to simplistic views and to trivialisation of reality, compiling lists rather than thinking, biased view of the four elements of SWOT to justify previous decisions Chances of confusing strengths, weaknesses, opportunities and threats

TYPES OF ENVIRONMENT
General vs. Relevant Environment Unchanging Environment Changing (but can be predictedt) Environment Turbulent Environment- when parameters turn variable

ENVIRONMENT SECTORS
Economic Environment- country-specific, infrastructural issues India as a potential economic super power International Environment- globalisation, its content and direction, regional blocks, forums, trends of global trade, global finances, geopolitics, demographic trends, technological trends, global skills, knowledge & quality benchmarks

ENVIRONMENT SECTORS (CONTD)

Global IT trends Global legal systems WTO Labour mobility Comparison of China & India- Chinas GDP more than double that of India and its growth rate is 1-2 % higher, per capita income more than double that of India- yet India has sectors where it is ahead of Cina like IT Software, Pharmaceuticals etc.

ENVIRONMET SECTORS (CONTD)

Market Environment- customer factors and profiles, product factors, distribution channels( Japanese example) Customer Service levels and quality Competitive picture using the Porter Model Political Environment Regulatory Environment Socio-cultural Environment Supplier Environment

SOURCES OF ENVIRONMEN SCANNING

Documentary or secondary sources like different publications, print media, trade and industry association publications Mass Media like TV, radio, Internet Internal sources like Company files, documents, reports etc. External agencies like customers, distribution people, suppliers, trade associations etc. Formal Studies like researches consultancy analysis, business schools Spying & surveillance

TECHNIQUES OF SCANNING A Few Examples

Single variable extrapolation Structured and unstructured expert opinion Scenario building Game Theory Many methods of forecasting Fuzzy Logic Chaos Theory

CHAOS THEORY Why & When?

Long term planning is difficult Industries do no longer reach a stable equilibrium Dramatic changes can and do occur unexpectedly Only short term forecasts and predictions can be made Based on Mathematical Models called Chaotic Models used in biological, sociological, economic and weather forecasting

PITFALLS OF SCANNING
The Strategic Planner may mistake the tree for the woods Paralysis by analysis Scanning and day to day operations hould be kept segregated- scanning is a staff function It should not be kept isolated either as tht would make the planner not know the organisation