Environment is the aggregate of all conditions, events and influences that surround and affect an organisation. Environmental analysis is the assessment of external uncontrollable variables that may impact a company’s business plan.

The entrepreneur prepares himself for his new venture. In this whatever he does is never enough! There are so many factors which help or mar the development of his activity. These factors can be called the ‘environment’. The environment is broadly classified into macro and micro environmental factors.

Companies and their suppliers, marketing intermediaries, customers, competitiors and public all operate in a macroenvironment of forces and trends. These directly / indirectly affect the way an organisation works, the decisions that it makes, the opportunities it can take advantage of and the threats it may face. To be successful the entrepreneur must develop an ability (and a life long habit) to keep in touch with these changing forces and trends, monitor them and understand them. Some global forces that may affect an organisation are :

a) Rapid development in international transportation, communication and financial transactions.

b) Rising economic power of smaller economies.

c) Trade blocs such as the European Union.

d) Growing concern for environmental protection.

e) Increasing number of cross – border corporate strategic alliances / mergers.

f) Acceptance of a global lifestyle.

Macro environmental factors can be further classified as demographical, economic, natural and technological. Within a quickly changing world the entrepreneur must monitor all of these forces. He must pay attention to the interrelationship between all these forces and predict how they may affect his venture. He must continuously be on the look out for events / trends that are likely to assist him, open up new avenues for his venture and provide greater demand for his products. Similarly, he must keep a watch out for forces that are likely to threaten or make difficult his growth.

For example, a demographic trend such as an increase in urban population is likely to lead to greater pollution and public sanitation problems. This may lead to a demand for restrictions / laws to take care of our environment and natural resources. A smart entrepreneur may realise that this is the right time to create a new product (based on a technological innovation) which actually saves money, uses eco – friendly materials, pollutes less, needs less water to produce, etc. Here we can see how all the macroenvironmental factors are linked to each other. One change creates a chain reaction in the other. Most cities in India have seen a concern for the natural environment and health of citizens, leading to a change in laws making helmets compulsory for two wheeler riders, and technological innovation in the processing of petroleum products and automobiles.

In addition to these macroenvironmental forces, an organisation will also be influenced directly by several micro - environmental forces. These include all the people and organisations involved in producing, distributing and promoting the entrepreneur’s products. Some of the organisations are the company the entrepreneur sets up, the various suppliers from whom he will buy materials, the distributors and retailers who will sell his products, the banks and insurance companies who will assist him, transporters, advertising agencies and the customers who will buy his products. The entrepreneur must study all these forces, monitor their developments and changes closely and learn to predict their future actions. It has been said that the entrepreneur who has a ‘nose’ for sensing changes in the environment quickly, and can adapt to it or take advantage of it, is the one who will be successful.

India was once considered to be an agricultural based economy. This impression is fast changing. Large-scale industry is modernising thereby replacing men and bringing in machines. It is said that the future of Indian industry is in ICE (Information Technology, Communication and Entertainment). It is interesting to witness the growth of companies in India engaged in IT. Students possessing the requisite degrees are offered lucrative jobs before they even graduate from their University. In the service sector we (in India) are doing great business in the form of outsourcing from advanced countries (BPO’s, Call Centres, Medical Transcriptions, etc.).