Environmental scanning plays a key role in strategy formulation by analyzing the strengths and weaknesses and opportunities and threats in the environment. Environmental scanning is defined as monitoring, evaluating, and disseminating of information from external and internal environments to managers in organizations so that long term health of the organization will be ensured and strategic shocks can be avoided.
What is Environmental Scanning?
Environmental Scanning means an examination and study of the environment of a business unit in order to identify its survival and prosperity chances. It means observing the business environment both external and internal and understanding its implications for business opportunities. It also involves knowing beforehand the risks and uncertainties as well as threats to the business unit.
As business environment is dynamic in nature, it is always changing, environmental scanning has to be quick and regular. It should not be one time act to scan the environment. It is the constant telescoping of external environment and micro scoping of internal environment.
Environmental Scanning provides a broader prospective to corporate planners in formulating plans and strategies. In short, the process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business is known as environmental scanning.
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| Environmental Scanning: Your Business Survival Guide |
Need for Environmental Scanning
Environmental Scanning is essential because of following reasons
- Prime Influence – Environment is a prime influence on the effectiveness of business strategies. If strategic planning is done without considering environment, it is likely to be defective. Besides, the success of the implementation of the strategy depends on the environmental factors.
- A tool to anticipate Changes – Environmental scanning is a very useful tool not only to understand business surroundings, but also as a good instrument to anticipate the changes and be prepared to face the challenges of such changes.
- Time for adjustment – A business unit cannot change the business activities overnight. It needs time to adjust with the changing environment. If it has to face the changed environment suddenly, it may be possible to make immediate changes according to the demand of the changed environment. Environmental scanning gives time to the company to get adjust to the changed environment.
- Early Warning system - Environmental Scanning gives advance warning or danger signals of the adverse changes in environment. It helps the company to design defense mechanism to avoid future adverse effects of environment on the business activities e.g., with the changing marketing environment, many companies are adopting on-line marketing to survive in this competitive environment.
Techniques or Approaches of Environmental Scanning
Environmental Scanning can be effectively done following different techniques or approaches as follows
1) Seeking and getting opinion – Opinions of experts or knowledge people can be got by talking to them. Depending upon the nature of industry, and type of markets, these experts would differ, but they would be the people who are good at reading the current trends as well as future trends e.g., a businessman who wishes to establish a holiday resort may talk to an expert in Tourism or expert person in the hotel business in order to know the prospects of the resort.
Opinions can be sought even from non-experts or laymen who are involved in the relevant business. This can be done through surveys or informal chats or meetings with the concerned people. The opinions of experts and non-experts should be integrated to have a clear picture of environment and future trends.
2) Extrapolating – To extrapolate means to calculate or estimate unknown factors or future trends by inference or logic after knowing the facts or present trends. It involves estimating or forecasting an unknown, present trends. It helps a businessman to read future with the help of the present. It is not guesswork. It is a calculation that peeps into the future or in the unknown with the help of proper reading of the present.
3) Estimate – An estimate is a technique of designing the worst-case scenario and the best-case scenario. It estimates the best opportunities and the worst threats that are likely to emerge from the analysis of the environment. It thereafter weights the possibilities and probabilities of the opportunities and threats and preparing a balanced, realistic environment.
4) Mapping – It is an analytical tool that tries to read the process of transformation of factors in environment. The whole of the environment does not change suddenly, certain factors change, while others remain the same over a period of time. Mapping is a technique that tries to track the environmental factors to find out how many of them, and which of them are changing. It tries also to find out the direction and the speed of the change. It locates and plots the changes, their routes and their magnitude or extent.
5) Modelling - There are many types of modelling that can be used to scan the environment. E.g., Regression analysis or probability tables are also used in more complex types of modelling.
6) Industrial espionage – It is used for 2 purposes
- to gather vital information from government department
- to collect clues from the competitors
A spy can be a government employee or an employee of a competitor, a competitor’s supplier or customer. E.g., Japanese visitors to American factories, plants and facilities gather information. Research students working in laboratories may take up vacation jobs with companies as a part of spying assignments.
