What is Environmental Analysis? And Why is it Important?

Environmental analysis is a critical aspect of analyzing the internal and external factors that influence your business. It is important to take into account all forms of environmental impact and keep these in mind when making decisions.

In this article, I will be discussing what is environmental analysis, importance of environmental analysis with some advantages and disadvantages.

What is Environmental Analysis of organization?

An environmental analysis is an exercise in understanding the internal and external forces, situations and trends that have a direct influence on your organization’s performance. The goal of environmental analysis is to identify and mitigate any potential environmental impacts before taking any action.

Environmental analysis can help decision-makers understand how their proposed actions will affect the environment and identify potential alternative options. It can also help identify areas where public and private sector cooperation may be necessary to achieve desired environmental outcomes.

Why Environmental Analysis is Important?

Environmental analysis is important for a variety of reasons.

  • Environmental analysis identifies the impact that changes in key environmental variables will have on a business. This type of analysis allows you to see how changes might affect the value of your company or its competitive position.
  • Environmental analysis evaluate and track potential threats to your business and identify ways to minimize that threat through risk mitigation.
  • Environmental analysis helps to discover opportunities in a changing environment by identifying changes can be made in your organization that will increase the profitability of your resource base, enhance customer service, or improve quality.
  • Environmental analysis helps create some effective strategies and marketing plans for a business or industry to increase its competitive advantage.

One way to conduct an environmental analysis is run some scenarios study based on inputs provided by management, including business plans and forecasts, economic data on competitors and customers, market research , and a variety of other factors.

What are the Advantages of Environmental Analysis?

Environmental analysis can provide many advantages to businesses and organizations. In this section, we will explore some of the key benefits of environmental analysis:

  • Environmental Analysis helps to determine future issues and risks that may affect the business.
  • Environmental analysis can help to identify potential threats to the sustainability and productivity of a business.
  • From environmental analysis, you can improve your business operations effectively and minimize the risks.
  • Environmental analysis can help to identify potential threats to the sustainability and productivity of a business.
  • It helps to find solutions for improving your production processes and reducing waste. If organization conduct an environmental analysis review, then all waste produced by your business can be thoroughly evaluated and potential solutions to improve these problems can be suggested.

The goal of environmental analysis is to uncover the hidden forces that may influence or impact your organization.

What are the Disadvantages of Environmental Analysis

While environmental analysis can be beneficial to an organization, it also has some potential disadvantages.

  • One disadvantage of environmental analysis is that it can be time-consuming and expensive.
  • Additionally, environmental analysis can be subjective, which can lead to disagreements among stakeholders.
  • Another notable disadvantage of environmental analysis is that it can be complex and difficult to apply.
  • Finally, environmental analysis can sometimes result in inaccurate judgments about the risks and benefits of certain actions.

However, it does not mean that an organization should never conduct an environmental analysis, because although it has some disadvantages, but the benefits of environmental analysis are much greater.

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