Importance of Environmental Analysis

Environmental analysis offers the following benefits:

(i)  Environmental analysis makes managers aware of the linkage between an organization and its environment and keeps them alert and informed.

(ii) Environmental analysis helps the company to identify the threats and opportunities before it. It serves as an early warning signal allowing the company to develop appropriate responses.

(iii) Through environmental analysis an organization can gain understanding of how the industry’s environment is being transformed.

(iv) The environment changes so fast that an organization’s equilibrium with its environmental may be disturbed quickly. With the help of environmental analysis the organization can know the know the causes of disequilibrium. Suitable changes can then be made to create the new equilibrium.

(v) Environmental analysis helps the planners to narrow the range of available alternatives and eliminate options that are clearly inconsistent with forecast opportunities or threats. The analysis permits elimination of unsuitable alternatives and thereby concentrate on more important options.

(vi) Environmental analysis is essential for the formulation of right strategies and for modification of existing strategies as and when necessary.