Environmental Scanning & Monitoring Techniques

Asst.Prof.Sovan Mangaraj
Innovation The B-School
sovan@ibschool.org.in

ENVIRONMENTAL SCANNING & MONITORING

Environmental scanning is a concept from business management by which businesses gather information from the environment, to better achieve a sustainable competitive advantage. For sustained competitive advantage the company must also respond to the information gathered from environmental scanning by altering its strategies when the need arises.

SWOT
(Strength-Weakness-Opportunity-Threat)

Identification of threats and Opportunities in the environment (External) and strengths and Weaknesses of the firm (Internal) is the cornerstone of business policy formulation; it is these factors which determine the course of action to ensure the survival and growth of the firm.

SWOT Analysis

SWOT ANALYSIS
The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT originated from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure.

SWOT: Studying Internal & External Environment

The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories: Internal factors The strengths and weaknesses internal to the organization. External factors The opportunities and threats presented by the external environment.

Examples of SWOTs
Strengths and Weaknesses
Efficient & Skillful Human Resource Sound Financial Capability Creativity / ability to develop new products Possession of Modern Technology Strong Distribution Network Unskilled Human Resource Inadequate Financial Health Less Focus on R & D Obsolete Technology Poor Distribution Network

 Opportunities
Takeovers Market Trends Economic condition Mergers Joint ventures Strategic alliances

Threats
Expectations of stakeholders Technology Public expectations Competitors and competitive actions Poor Public Relations Development Criticism (Editorial) Global Markets Environmental conditions

Uses of SWOT Analysis

Corporate planning Deciding which business to venture into.
Set objectives Defining what the organisation is intending to do. Environmental scanning Internal appraisals of the organization's SWOT, this needs to include an assessment of the present situation as well as a portfolio of products/services and an analysis of the product/service life cycle.

 Analysis of existing strategies, this should determine relevance from the results of an internal/external appraisal. This may include gap analysis (compare its actual performance with its potential performance which will look at environmental factors)

Strategic Issues defined key factors in the development of a corporate plan which needs to be addressed by the organisation
Develop new/revised strategies revised analysis of strategic issues may mean the objectives need to change

Remember
Use SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports.

PEST Analysis
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. A PEST analysis fits into an overall environmental scan as shown in the following diagram:
Environmental Scan
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External Analysis
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Internal Analysis

Macro Environment
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Micro Environment

P.E.S.T.

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:
Political stability Tax policy Employment laws Environmental regulations Trade restrictions and tariffs

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

SOCIAL FACTORS
Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors include: Health consciousness Population growth rate Age distribution Cultures and Values

TECHNOLOGICAL FACTORS
Technological factors can lower barriers to entry, affect efficient production levels, and influence outsourcing decisions. Some technological factors include:
R&D activity Automation Rate of technological change

Thank You