As you can see above, the Environment sits in the background of all the various segments of the Strategic Planning dimension. However it also falls under Dynamic Management. The Environment is a collection of factors, both internal and external, that are relevent to the Strategic Planning and Dynamic Management of the organization.
Internal factors are those that exist within the organization and may include subjects like labor relations, leadership, work culture, availability of resources, state of technology, values, etc. Each of these things will affect the organization’s ability to make and achieve Objectives In addition they will influence the development and choice of the appropriate Course of Action. Environment is absolutely unique to each individual organization. An internal Environmental scan of one organization will yield very different results, then that of a competitive organization, even if they are in the same industry.
External factors are those external to the organization and may include subjects like competitors, regulation, the economy, society, etc. These will also influence the setting of Objectives by and organization and the development of a Course of Action. The external Environment of an organization tends to have a lot of similarities to other closely related organizations. For example two shoes stores in the same small town will have a similar external Environment.
Also keep in mind that each Objective and Course of Action will present a unique Environment to consider. To take Jack and Jill for example. Would the Environment be different if they were to have the lemonade stand at Jack’s house instead of Jills? Of course they would. If they live on different streets, then the number of cars that go down the street might be higher or lower then Jill’s house. Jack’s house may have a picnic table already there, which would eliminate the need to set up a table and chairs. The water at Jack’s house might come from a well which they found makes a better tasting lemonade.
Using the previous examples let’s bring up a few highly relevant Environmental factors that influenced the Objectives and Course of Action.
Example 1 OBJ: Bill will start and operate a wine bar in Toledo, Ohio. He will specialize in providing the largest selection of California varieties, which are underrepresented in the area. He will make at least $80,000 a year in profit from his wine bar.
Relevant Environmental Factors: Only a couple wine bars in Toledo, Ohio. Both of these wine bars focus on European and Australian varieties. $80,000 a year is what Bill was making in his previous position.
Course of Action A: Bill will start and manage an independent wine bar under a brand he develops.
Relevant Environmental Factors: Bill does not have the money to pay the franchise costs. Bill strongly desires to make the brand his own.
Example 2 OBJ: Kevin will build a decorative two story shed in the backyard of his house. It will have at least 100 square feet of space upstairs for storage which will reduce the clutter in the house.
Relevant Environmental Factors: Kevin’s wife wants the shed to be decorative. The stuff Kevin has in his house will cover at least 75 square feet of space.
Course of Action B: Kevin will hire the services of a carpenter to work on the shed.
Relevant Environmental Factors: Kevin is working full time and as a result does not have a lot of free time. Kevin is not skilled in carpentry.
Example 3 OBJ: Abigail will organize a fundraising dinner for the Doe family. The dinner will be prepared by a local restaurateur and there will be fun and games for everyone. The fundraiser will raise at least $10,000 for the Doe family.
Relevant Environmental Factors: Not many people have expressed an interest in organizing an event for the family. An owner of a local restaurant is very active in the community and is close with the family.
Course of Action A: Abigail will gather a small group which will undertake all preparations.
Relevant Environmental Factors: Abigail does not have the time to undertake all preparations for a major fundraiser. Abigail is a skilled leader and organizer.
Example 4 OBJ: Susan will manage a project to improve productivity by at least 5% in the company. The project will focus on introducing soft improvements which require minimal resources to implement.
Relevant Environmental Factors: Resources are tight in the company currently, as sales are down and the economy is in the midst of a recession.
Course of Action A: The project will introduce new incentives to reward higher productivity.
Relevant Environmental Factors: Employees have responded well to incentive programs in the past.
Example 5 OBJ: The average student test scores will improve by a total of 10%, from 76% to 86%, over the next three years.
Relevant Environmental Factors: The new district superintendent is calling for improvements across the board when it comes to test scores.
Course of Action B: The course will be redesigned so that more time is spent on traditionally weak areas.
Relevant Environmental Factors: Several students have complained that too much time is spent on irrelevant subject areas. Students that struggle all seem to struggle in the same specific areas.
Example 6 OBJ: ACME will be the lowest cost provider of computer services in Dayton.
Relevant Environmental Factors: Many companies in the area have complained about the high cost of computer services. ACME has previously identified several ways to drastically reduce the cost of services.
Course of Action B: ACME will focus on maintenance agreements and other long term relationships to keep prices low.
Relevant Environmental Factors: ACME is aware that 80% of it’s business comes from it’s top ten customers. 60% of costs come from servicing the other 20%. Companies are eager to enter agreements where costs can be predictable and stable.
Example 7 OBJ: The Jaguars will win at least 8 games this year.
Relevant Environmental Factors: It is estimated that to make the local playoffs, a team will need to win 8 games.
Course of Action B: The Jaguars will focus on improving their preseason training.
Relevant Environmental Factors: Competitive teams have traditionally had more extensive preseason training programs. Additional funding has been alocated to the sports program.
Example 8 OBJ: Scott will ensure that the team continues to produce 50 widgets per week and keep the quality scores above 95%.
Relevant Environmental Factors: Upper management has come to expect this level of production from the team.
Course of Action A: Scott will retain the previous methods and processes practiced by the team.
Relevant Environmental Factors: The previous methods and processes are working very well. The team is resistant to change since this is working just fine.
The examples above represent the most important Environmental factors that were taken into account when making these decisions. Likely there were many more factors that influenced the Strategic Planning process. Some might have been more subtle while others are blatantly obvious. However it is imperative that a practioner of the Luffy network conduct an Environmental scan alongside the development of Objectives, making modifications to those Objectives as needed. Environmental scanning should be continued while developing various possible Courses of Action, as each Course may present a very different Environment to work within.
As we move further into Dynamic Management we will see how well we planned our organization within it’s operating Environment. Often you will find that certain unknown Environmental factors were completely overlooked while others did not have the expected effect.
The next section deals with the Current Situation. The Current Situation is a snapshot of how an organization is doing, with regards to meeting it’s objectives, at a particular point in time.