Environment Scanning: Meaning, Nature and Scope

Define the Environmental Scanning

The process of collecting, analyzing, and distributing information for tactical and strategic purposes

According to Brown and Weiner (1985) Environmental Scanning is a kind of radar to scan the world systematically and signal the new, the unexpected, the major and

minor.
According to Aguilar (1967):
In his study of the information gathering practices , defines scanning as the systematic collection of external information in order to 1-lessen the randomness if information flowing into the organization. 2-Provide early warning for managers of changing external Conditions

What is Environmental Scanning?

Whether you are planning a trip, or an excursion to buy groceries, or the direction of a corporation, you need to consider the larger external environment. For example, you want to go grocery shopping in the next town. You'd like to get this done as quickly as possible. So, you turn on the radio to listen to the traffic report. Oops. There's been an accident on the highway you usually take to get to the store. What do you do? You plan to take an alternate route that will keep you out of the traffic jam. You've done a limited form of environmental scan. In terms of organizations and strategic planning, an environmental scan involves considering the factors that will influence the direction and goals of your organization. And, it includes consideration of both present and future factors that might affect the organization, since, of course, we're planning for the future, not just the present.

What is Environmental Scanning?

For example, an environmental scan might project that in the next ten years, the number of people (potential customers) between the ages of 18-24 will increase from 30% to 40%. That's important information if we want to decide what kinds of new products we might consider introducing into the marketplace. Should we work on developing products targeted at a dwindling seniors population? Or should we develop products to take advantage of the shift to a youth dominated market. The environmental scan forces us to look at these factors.

While some suggest the environmental scan should address only factors external to the organization (e.g. markets, legislation and government actions, demographics, marketing trends, etc), we suggest that you also do an INTERNAL ENVIRONMENTAL SCAN. An internal environmental scan involves looking at the present capabilities of the organization (infrastructure, hardware, personnel, abilities, structure, etc) and that information can be compared to what the organization WILL need in the future to achieve its strategic goals

Objective of Environmental Scanning

Identified the following objectives of an environmental Scanning system: Detecting scientific, technical, economic, social and political trends and events important to the business. Defining the potential threats, opportunity, or change for the business implied by those tends and events. Promoting a future orientation in the thinking of management and staff. Alerting management and staff to trends that are converging, diverging, speeding up, slow down, or interacting.

Modes Of Scanning:
Systematic scanning
Information related to markets and customers, changes in legislation, regulations having a direct impact on the organization's activities, government policy etc. are collected continuously by taking relevant factors into account

Ad-hoc scanning
Conducting special surveys and studies to deal with environmental issues from time to time.

Processed-form scanning
sing information in a processed form available from different sources inside and outside the organization

Types of environmental scans

Ad Hoc
General Characteristics

Periodic
Tied to planning cycle (e.g., every 3 years) In-depth Forecasts 5 to 10 years

Continuous
Also called Continuous Learning Structured, in-depth data collection and analyses by dedicated staff Data gathered is more comprehensive Dedication of time by researchers allows incorporation of data from more sources Provides planners with more comprehensive information Informs planners of critical changes sooner Plans can be adjusted or adopted more proactively

Usually performed in response to crisis Not as in-depth Forecasts are more short-term

Pros

Allows for quicker turn-around of scan results Lower commitment of resources over time

Predictable frequency allows for appropriate budget planning Frequency provides timely information gathering for planning Planning is proactive

Cons

Data can be more superficial Results may address immediate issues, but are less generalizable If only conducted in response to crises, indicates lack of organized institutional planning efforts Planning response is reactive

Reaction to unforeseen changes in environment (e.g., onset of recession) may Requires ongoing institutional require Ad Hoc scan to commitment of resources (funding, supplement information. personnel, and time) Planning response is then more reactive

What to include in your scan

More things to consider including:

Economic
Socio-cultural

Macroenvironment: STEEP
Demographics
population size and distribution age distribution education levels income levels race and ethnicity

Industry/career demand and decline Unemployment Inflation

Environmental/Ecological
New industry opportunities

Socio-Cultural (continued)

Political
Political climate/stability State budget deficit or surplus Changes in legislation

Technological

Attitudes about higher education Cultural shifts New products and services training opportunities New manufacturing processes Infrastructure changes

 Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships within an organizations internal and external environment.

It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment. While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another.

Internal analysis of the environment

Internal analysis of the environment is the first step of environment scanning. Organizations should observe the internal organizational environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with shareholders, access to natural resources, brand awareness, organizational structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal environment helps in identifying strengths and weaknesses of an organization.

External Analysis of the Environment

As business becomes more competitive, and there are rapid changes in the external environment, information from external environment adds crucial elements to the effectiveness of long-term plans. As environment is dynamic, it becomes essential to identify competitors moves and actions. Organizations have also to update the core competencies and internal environment as per external environment.

Environmental factors are infinite, hence, organization should be agile and vigil to accept and adjust to the environmental changes. For instance - Monitoring might indicate that an original forecast of the prices of the raw materials that are involved in the product are no more credible, which could imply the requirement for more focused scanning, forecasting and analysis to create a more trustworthy prediction about the input costs. In a similar manner, there can be changes in factors such as competitors activities, technology, market tastes and preferences.

External Environment
External Environment is not controllable
Demographics Social Change

Ever-Changing Marketplace
Economic Conditions

Product Distribution Promotion Price Competition

Target Market
Political & Legal Factors

Environmental Scanning

Technology

An environmental scan of todays marketplace

 Environmental scanning is one of four activities comprising External analysis. As illustrated in Figure 1, external analysis is the broader activity of understanding the changing external environment that may impact the organization. In describing external analysis, Fahey and Narayanan (1986) suggest that organizations scan the environment to identify changing trends and patterns, monitor specific trends and patterns, forecast the future direction of these changes and patterns, and assess their organizational impact. Internal analysis of the organization's vision, mission, strengths, and weaknesses, external analysis assists decision makers in formulating strategic directions and strategic plans. The goal of environmental scanning is to alert decision makers to potentially significant external changes before they crystallize so that decision makers have sufficient lead time to react to the change. Consequently, the scope of environmental scanning is broad.

What is environmental scanning?