analyzing, and dispensing information for tactical or strategic purposes. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering. Environmental Scanning is the monitoring, evaluating and disseminating of information from the external and internal environments to key people within the corporation. A corporation uses this tool to avoid strategic surprise and to ensure its long-term health.
DEFINITION The process by which strategists monitor the economic, governmental/legal, market/competitive, supplier/technological, geographic and social settings to determine opportunities and threats to their firms
Environmental diagnosis consists of managerial decisions made by analysing the significance of data (opportunities and threats) of the environmental analysis
KINDS OF ENVIRONMENTAL SCANNING Ad-hoc scanning - Short term, infrequent examinations usually initiated by a crisis Conduction of special surveys & studies to deal with specific environmental issues. Systematic : Information related to markets & customers , changes in legislation ®ulations that have a direct impact on organizations activities that could be collected continuously to monitor changes. Regular scanning - Studies done on a regular schedule (e.g. once a year) Continuous scanning (also called continuous learning) - continuous structured data collection and processing on a broad range of environmental factors
Environmental scanning refers not just to the micro environment, but it can also include macro environment, industry, competitor analysis, marketing research,consumer analysis, new product development,product innovations or the company's internal environment. Environmental scanning External analysis Internal analysis Macro environment Micro environment PEST analysis Five force analysis INTERNAL ENVIRONMENT Important internal factors are 1) Value System The value system of founders and those at the helm of affairs has important bearing on the choice of business, the mission and objectives of the organization, business policies and practices. 2) Mission and Objectives The business domain of the company , priorities , direction of development, business philosophy, business policy etc. are guided by the mission and objectives of the company INTERNAL ENVIRONMENT 3)Management Structure and Nature The organizational structure, the composition of the Board of Directors, extent of professionalization of management etc. are important factors influencing business decisions. 4) Internal Power Relationship Factors like the amount of support the top management enjoys from lower levels and workers, share holders and Board of Directors have important influence on the decisions and their implementation.The relationship between the members of Board of Directors is also a critical factor. OTHER FACTORS 1. Physical Assets and Facilities 2. R&D and Technological Capabilities 3. Marketing Resources 4. Financial Factors
MICRO ENVIRONMENT Also known as task environment and operating environment Include The suppliers Marketing intermediaries Competitors Customers Publics
MACRO ENVIRONMENT A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:
Political Economic Social Technological
The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macro environmental factors.
Political Factors :-Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include:
tax policy employment laws environmental regulations trade restrictions and tariffs political stability
Economic Factors :-Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macro economy: economic growth interest rates exchange rates inflation rate Economic conditions Economic policies Economic systems , the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets, etc.
Social Factors:
Social factors include the demographic and cultural aspects of the external macroenvironment. These factors affect customer needs and the size of potential markets. Some social factors include: health consciousness population growth rate age distribution emphasis on safety buying and consumption habits of people, tastes and preferences, language beliefs and values, customs and traditions, Education
Technological Factors :-
Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include:
R&D activity Automation technology incentives rate of technological change
INTERNATIONAL ENVIRONMENT Particularly important for the industries directly depending on imports or exports and import-competing industries Recession, economic boom, liberalization,eg Oil price hikes increased the cost of production and the prices of certain products such as fertilizers , synthetic fibres. So usually, the demand for natural fibres and manures increased. Also demand for automobiles that economise energy consumption got increased.
FIVE FORCE ANALYSIS Threat Of New Entrants Threat Of Substitutes Bargaining Power Of Buyers Bargaining Power Of Suppliers Rivalry Among Existing Firms NEED & IMPORTANCE Macro environmental and industry scanning are useful as they reveal current conditions of market. To predict the future characteristics of the organizational environment To understand what is happening both inside and outside the organization Focus on knowledge and information. To identify strength weakness, opportunities and threats. SWOT analysis is necessary for the survival and growth of every business enterprise.
NEED & IMPORTANCE Optimum use of resources Survival and growth To plan long-term business strategy Environmental scanning aids decision-making Identifies changes and make adjustments Formation of strategies of production ,sales,marketing,demandsof environment Accurate forecastes SWOT ANALYSIS