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Importance of Analysing the Business Environment

Paper Type: Free Assignment Study Level: University / Undergraduate
Wordcount: 902 words Published: 12th Nov 2020

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An agile business is capable of maintaining its competitive advantage, while being flexible and reacting rapidly to the market requirements. Two important stages in creating an agile business is the analysis of the environment to identify the strengths of the organization and the risks that can affect operations and strategy development through which business plan how the mission will be reached, in order to be agile, handle or overcome competition.

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An essential concern for creating an agile business must be the analysis of the environment (Hill and Hill, 2011). According to Aguinis (2009, p. 56) it involves identifying the external and internal factors that can help the organization to achieve its mission or the issues that will affect negatively the organization. The analysis of the external environment includes understanding the opportunities and risks (Aguinis, 2009). So, according to Slack, Chambers and Johnston (2004) industries that are undersupplied, unused labour groups and technological growth can create the perfect environment for establishing a competitive business. However, ’’economic recession to the innovative products of the competitors’’ can stop the organization from becoming successful (Aguinis, 2009, p. 56) . That’s why, Hill and Hill (2011) state that in each external analysis of the business environment, the politics, economy, technology, customers, suppliers and competitors, must be considered. Furthermore, in the internal analysis, the businesses must take into consideration the organizational internal strengths, such as assets and labours’ key abilities; and weaknesses, as old organizational structure, the difference between personal and professional level interests (Reed and Blunsdon, 1998). Hence, businesses can become agile if they will focus on the internal and external business environmental changes, and its structures and processes will be modified in response to them.

The analysis of the environment must be followed by the development of a strategy that meets the requirements of the marketplace and will facilitate the organization to achieve and maintain a competitive advantage (Heizer, Render and Munson, 2017). According to (Heizer, Render and Munson, 2017) the strategy is organization’s plan to achieve its mission by using its strengths and avoiding the weaknesses. Businesses attain their mission through 3 strategic concepts: ‘’cost leadership, differentiation and response’’ and each of them offers the possibility of becoming more agile and achieving an advantage over competitors (Heizer, Render and Munson, 2017, p74).  Identifying and satisfying customers and market’s needs is essential to strategy development (Hill and Hill, 2011). In result, the 5 performance objectives: quality, speed, dependability, flexibility and cost should be part of the strategy development process (Aguinis, 2009). As Slack, Chambers and Johnston (2004, p.56) states, agility is truly a ‘’combination of all the 5 performance objectives’’. The quality objective is about offering error-free goods and services which will satisfy the customers and increase the probability of having loyal customers (Slack, Chambers and Johnston, 2004). Speed objective seeks to diminish the time in which the customer will receive the good or service and dependability involves doing everything in time, like it was promised (Slack, Chambers and Johnston, 2004). Flexibility is the ability of the organization to change fast to meet the requirements of the customers; additionally, the price objective aims to keep the prices low and increase the quantity of sold services or products, hence boosting profitability. Therefore, Sharifi and Zhang (1999, p.30) summarise the importance of these concepts for creating an agile business, stating that the ‘’agility index is a mixture of agile capabilities’’: competency, responsiveness, quickness, flexibility in managing the operations.

Overall, the analysis and understanding of the business environment and how it can affect the business, as well as a well-developed strategy that concentrates on the requirements of the market and customers’ needs are some of the factors that support the creation of an agile business.  These concerns enable the organizations to become more agile, to make strategic changes at a faster rate than their competitors and achieve a competitive advantage.

  • Aguinis, H. (2009) Performance Management. 2nd edn. (International), London: Pearson/Prentice Hall.
  • Heizer, J., Render, B. and Munson, C. (2017) Principles of Operations Management: Sustainability and Supply Chain Management. 10th edn. England: Pearson.
  • Hill, A. and Hill, T. (2011) Essential operations management. Basingstoke: Palgrave Macmillan.
  • Reed, K., Blunsdon, B. (1998) ‘Organizational flexibility in Australia’, International  Journal  of  Human  Resource  Management,  9 (3), pp. 457–477.
  • Sharifi, H., Zhang, Z. (1999) ‘A methodology for achieving agility in manufacturing organisations: an introduction’, International Journal of Production Economics, 62 (1–2), pp.7–22.
  • Slack, N., Chambers, S. and Johnston, R. (2004) Operations Management. 4th edn. Harlow: Prentice Hall.


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