For the survival and growth of a business, the analysis of its environment (both internal and external) is essential. How the business responds to changes in the environment will dictate its performance. Let us take a look at the strategic response of a business to its environment.
Strategic Response to the Environment
The business environment consists of the business organization itself and a lot of other internal and external factors. These factors are completely integrated with the organization.
And the business environment is very dynamic and multi-faceted as well. As a result, it is very difficult to predict the changes that happen in the business environment.
How companies respond to a particular situation will determine their fate in the long run. Ideally, companies should capitalize on the opportunities and eliminate or minimize the threats and risks. Let us look at the three approaches a company may take to respond to its business environment.
Browse more Topics under Business Environment
- Meaning and Characteristics of Business Environment
- Importance of Business Environment
- Relationship between an Organization and its Environment
- Environmental Impact and Analysis
- Environmental Scanning
- Macro Environment – Demographic Environment
- Elements of Micro Environment
- Macro Environment – Economic Environment
- SWOT analysis
- Macro Environment – Political-Legal and Social Environment
- PESTLE Analysis
- Macro Environment – Technological Environment
- Macro Environment – Global Environment
1] Least Resistance
This is a passive approach that some businesses maintain. The aim here is the survival of the business. So they simply react to the changes and cope with their new situations in order to survive, not thrive.
So these businesses do not predict or analyze their environment. They only react to the changes in their external environment to maintain their goals. There is no ambition to turn opportunities into benefits and grow the business. This is the path of least resistance.
2] Proceeding with Caution
At a slightly higher level, organizations do more than simply react. They take the efforts to study and analyze their environment. They take an active interest in finding smart ways to adapt to the ever-changing external environment.
So these companies will analyze the impact of the expected changes in their business goals and targets. They will then accordingly plan a strategic response wherein they will take both corrective and adaptive steps.
This is a far more sophisticated strategy than that of least resistance where we wait for the changes to occur. The said strategic response will allow the firm to move ahead with stability and strength.
So it is more than mere survival, this strategy also promotes the growth of the firm. It aims to mitigate the threats and seize the opportunities.
3] Dynamic Response
These organizations operate at a higher level. They are leading organizations in their industries or in the market. So for such firms, the external factors are somewhat manageable or controllable, i.e. they have some minimal control even over their external environment.
Such companies have very powerful and dynamic analysis and feedback framework. They can see the major changes coming from a mile. So they do not wait for the changes to occur, they find ways to control and alter the environment to a favourable environment (for their purpose).
Also, such companies are acutely aware of their strengths. They use these strengths to convert even threats into opportunities. Instead, they exploit the weaknesses of the environment and turn threatening situations to their advantage. This is the most dynamic and strongest strategic response.
Solved Example on Strategic Response to the Environment
Q: What strategic response will a strong company like Vodafone (market leader) most likely choose?
- Dynamic Response
- Proceeding with Caution
- Least Resistance
- None of the above
Ans: The correct option is A. A company like Vodafone operates at the highest level. They have a lot of market strength and influence in the market. So they will attempt to control their external environment and choose a dynamic response.