Mullins (2005) contends that organisations comprise 'people, objectives, structures' and 'management'.
External: These are the factors which on which an organisation may not be able to exert much of its control. These include, the legal and political scene prevailing within the state/ country of its operations, number and types of competitors, suppliers in the market, terms and conditions from financial institutions, alternative products available in the market, newer technological innovations etc. Worthington (2006) places greater importance on political developments occurring at different levels - local, national and international.
Organisations resort to strategic planning to take care of these factors and. Organisations learn a lot from there environment and prevailing circumstances. But the strategic intent alone cannot be planned all in advance. It has to be a continuous evolutionary process depending upon the experiences. Henry Ford said, "Failure is the opportunity to begin again more intelligently"1
Environment Analysis: It involves studying and analyzing the surroundings to identify the competitors, the threats and opportunities. Maslow's hierarchy of needs argued that the driving force for human actions is the urge for satisfaction of one or the other need. These needs go on changing depending upon a number of factors. In fact the needs of consumer/ customer and those of the organization are inter-linked because organization too is an active component, so needs of the organization too keep changing. Similarly changing needs of the customer must drive an urge for change in the organization for it to succeed in the long run. Environment changes with;
The form of government i.e. whether democratic, parliamentary or not. The market forces depend a lot on the form of government.
Frequency of elections and leaning of the political party coming to power.
Existing trade facilitations/ barriers amongst the partner countries. For example EU is composed of 27 member states, which help businesses to prosper within the region. In addition regional trade associations like NAFTA, SAFTA etc also lessen the trade barriers and prove to be helpful in preparing strategies for the organisation.
Government's economic policies, taxation rates, rates of interests, currency convertibility, competition policy, employment policy, environment protection policies etc.
PESTEL analysis provides an important tool to take a comprehensive look at the external environment affecting an organisation. PESTEL determines the factors like Political, Economic, Social, Technological, Environmental, and Legal. Organisations are supposed to devise their strategies on the basis of this analysis. Environment analysis involves market analysis as well. In fact environment analysis tends to be unique to the strategists, because what may appear to be an opportunity to one organization may