Environmental analysis: Environment of an organization consists of it surrounding anything that affects its operation favorably or unfavorably. Organizations environment includes those factors (internal and external) that affect the operations of the business directly or indirectly. It described as the process which examines all the components, internal or external, that has an influence on the performance of the organization. Environmental analysis is scrutinizing of the external forces which have the bearing on the functioning of the Business. The internal components indicate the strengths and weakness of the business entity whereas the external components represent the opportunities and threats outside the organization.
An organization relies on strengths to capture opportunities and recognize weaknesses to avoid becoming a victim of environmental threats. Environmental analysis helps in the detection of threats at an early stage, that assist the organization in developing strategies for its survival. Add to that, it identifies opportunities, such as prospective customers, new product, segment, and technology, to occupy a maximum share of the market than its competitors. The benefit of the analysis is also limited by the reliability and timeliness of data used in the analysis.