Page 49 - E2 Integrated Workbook STUDENT 2018

The global business environment

Environments

1.1 The nature of the global business environment

Strategy is concerned with the ability of the organisation to fit with, or
cope with, its environment. Since an organisation does not operate in
a vacuum it is important that it continually scans its external
environment in order that it can develop appropriate responses to take
advantage of opportunities, or to minimise threats. An understanding of
the external environment is, therefore, a critical element in the
development of strategy and can help in determining how to achieve a
sustainable competitive advantage.

1.2 Different environments

An organisation can react to its environmental situation (or opportunities and threats)
in several ways.

 It may do nothing if it is convinced that the problem is insignificant or short-
term.

 It may decide to monitor the environment carefully but not to respond just yet.

 It may increase its flexibility through contingency planning and product-market
development.

 It may decide that the situation is important and urgent and want to plan major
strategic change.

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