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CHAPTER 4

Environmental Scanning
Identifying Forces Driving Change

By Anil Bilgihan for Dr. DeMicco


Student Learning Objectives

On completion of this chapter, you will be able to;


 Identify the environmental scanning process.
 Develop an appreciation to scan the business environment effectively.
 Describe the effective environmental scanning system.
 Identify the unique elements business domain.
 Identify and define the sources of information and give at least 1 hospitality
related example for each of them.
 Identify the timing information.
 Achieve a more practical understanding of forces that drive change in hospitality.
(Case Study)
 Comprehend the feedback and evaluation systems.
Objectives

Upon completion of this chapter, you will:

1. Understand the skills necessary to scan the business environment effectively.


2. Develop and maintain an effective environmental scanning system.
Key Concepts of the Chapter

• Environmental scanning
• The business domain
• Setting up a structure for scanning
• Determining information needs
• Determining information mediums
• Timing information
• Identifying sources of information
• Choosing scanning activities
• Analyzing and synthesizing information
• Information sharing
• Information feedback and evaluation systems
Objectives

1. Develop the skills necessary to scan the business environment effectively.

 Please read pages 91 through 112 in the text book for further information.
Strategic Management Model
Domain Definition Long-term Objectives
Geographic Market Area Performance Measure
Segment Action Plan
Primary Competition Resources Needed
Target Market Evaluation Timetable
Responsibility
Accountability
Environmental Events Rational
Competitive Methods
Strengths and
Weakness Analysis
Remote P1 S1
Functional Analysis
Task
Financial Position
Industry P2 S2 Structural Analysis
Physical Assets Short-term Objectives
Firm Labor Force
P3 S3 Risk
Functional Competitiveness

Mission Statement
Nature of Business
Target Customer
Products/Services
Standard Desired Evaluation
Means to Accomplish Above
Scanning the Business Environment
Identifying the Forces Driving Change

• The goal of any environmental scanning process is to successfully identify the


key forces driving change within the contextual environment of the organization.

• To achieve that goal, managers must set up personal and organizational


scanning systems to be sure that the widest perceptional view of the
environment is achieved. This scanning system should;
 Identify each force, the variables, and their interdependencies with other variables.
 Suggest cause-and-effect relationships.
 Determine the history and timing associated with the development of the forces.
 Assist the manager estimating the impact of forces driving change on the firm.

 Please read pages 91 through 94 in the text book for further information.
Identifying Events in the Environment

Industry Structure

All firms in the sector


have invested in the CM

Ideal Scanning Window


Leading firms adopt and
invest in the new CM

Innovator/Entrepreneur
creates a new CM

Fads Innovations Major Trend Fact of Life

Innovation / CM Life Cycle


Establishing an Environmental Scanning
System
• Establish domain definition
• Organizational structure issues
• Determine information needs – quantitative and qualitative
• Determine information mediums
• Assess timing of information
• Identify sources
• Choose scanning activities – regular and irregular
• Determine analysis and synthesis processes
• Determine information sharing
• Establish information feedback and evaluation systems
Domain Definition

• The task of domain definition is the first step in


establishing an effective environmental scanning
system.
• The domain of an organization refers to the context
in which it exists and functions.

 Please read page 94 in the text book for further information.


Criteria of the Domain Definition

•Geographic market area


•Segment defined by competitive methods made up of the mix of product and
service attributes
•Primary competition
•Major descriptors of target market

•Existing competitors, potential competitors, substitutes, suppliers and buyers

•Relationships with suppliers, competitors


•Relationships among different environmental categories
•Primary and secondary relationships (hierarchical)
Organizational Structure Issues

• Who participates in the process, what resources


are allocated to this endeavor, and how the
information is processed and used.
• Scanning the environment must fit into that
structure because resources
must be allocated to this
important management activity.

 Please read page 95 in the text book for further information.


Determining Information Needs

• Determining the information needs of the firm can


begin only after the process of defining the domain
the firm must complete in is completed.

• Once established, the information will generally fall


into four categories;
◦ Quantitative
◦ Qualitative
◦ Personal
◦ Non-personal
Examples of Quantitative Information
Determining the Information Medium

• Most common medium is face-to-face personal


interaction.
• The written medium, both personal and impersonal,
continues to be an important one.
• The telecommunication revolution will no doubt
bring about rapid changes in the mediums used.
 Please read page 101 in the text book for further information.
New Communication in the Information
Age
Assessing Timing of Information

• The phase timing is everything has a great deal of


validity in the world of strategy.
• Bad timing can be avoided most often when firms
have effective scanning systems and the
organization has structured itself to improve the pro
cessing of information and its timing.
• The timing also reflects how managers study the
emerging forces that are developing.

 Please read pages 101 through 102 in the text book for further information.
Body of Knowledge in the Hospitality
Industry
Identifying Sources of Information

• The primary concern of the manager in selecting


the sources of information are validity and
reliability.
• Validity refers to fact that the information accuratel
y represents and describes the relationships that ar
e necessary to make important strategic decisions.
• Reliability refers to the need for accuracy and
consistency over time.

 Please read page 103 in the text book for further information.
Common Information Sources Available
to the Hospitality Manager
Choosing Scanning Activities

• Scanning is an activity that does not lend itself to


neatly defined processes or timetables.
• It cannot be done effectively without strong
cognitive, experimental, and perceptional skills.

 Please read pages 105 through 107 in the text book for further information.
Concept Map of Environmental Event

 Please read pages 110 through 113 in the text book for further information.
Matrix Analysis

• Today’s manager must be able to understand the


present relationships and regulators.

• To do this, the use of matrices to assess


relationships becomes extremely useful.

• Matrix analysis help to create greater


understanding of the present and emerging body of
knowledge.

 Please read pages 113 through 117 in the text book for further information.
Information-Sharing Feedback and
Evaluations Systems

Executive
Level

Functional External
Level Level

Operations
Level

 Please read pages 117 through 118 in the text book for further information.
A Continuous Process of Scanning is
Necessary
• A good scanning system will never be able to
remove all the uncertainty from a decision.

• Scanning should be done on a continuous basis


levels of executives who contribute substantively to
the strategic management process.

 Please read page 118 in the text book for further information.
Summary of the Chapter

• The chapter provides an overview of tools


necessary for proper environmental scanning.
• It begins with the importance of identifying forces
that drive change and how to establish a domain for
analysis purposes.
• It then provides insight into the steps in the
effective assessment of key forces and
opportunities.
• Shows the importance of sharing derived
conclusions throughout the organization.
Readings for the Chapter

• http://www.widenarrow.com/begrepp__bi-cykeln.ht
ml (interactive webpage)

• Literature in strategic management in


the hospitality industry,
Michael D. Olsen

• CEO Perspectives on Scanning the Global Hotel


Business Environment, Michael D. Olsen,
Bvsan Murthy and Richard Teare
Case Study

• Please read Case Study: ‘Technology as a Competi


tive Method: The Case of InterContinental Hotels’
(page 119-125).

• Please answer the discussion questions at the end


of the Case Study.
Case Study Answers
InterContinental Hotels

HRIM 603
Strategic Hospitality Management
Case Study #4
Technology as a Competitive Method: The Case of
InterContinental Hotels
F.Anil Bilgihan

1) Technology, broadly, is a tool or set of tools aimed at making some aspect of life better, easier, or more efficient. Science and technology have great
potential to improve lives in all communities around the world. Technology is evolving at such a rapid pace it's hard to tell what will happen in six
months. It's hard to predict what products will make it to the market and which will take the crown and end up as everybody's favorite toy, business
companion or home entertainment device. Every technology has changed our lives, some of them in manner more aggressive than other. It’s hard to
point out to a specific technology and makes it responsible for the major changes in a life of person, because every one of us may be influenced by
other things. Businesses are using technology to gain industry advantage in many ways. “The successful companies of the next decade will be the ones
that use digital tools to reinvent the way they work. These companies will make decisions quickly, act efficiently, and directly touch their customers in
positive ways.” Bill Gates.

2) InterContinental Hotels used the technology as one of their competitive methods to gain industry advantage. For instance AT&T announced that it
has deployed an Internet Protocol Virtual Private Network (IP VPN) for InterContinental Hotels Group and its managed Candlewood Suites Hotel
portfolio, the first of its kind in the hospitality industry. The AT&T solution leverages the VPN and Multi-Protocol Label Switching (MPLS) technology to
provide a multi-faceted and highly reliable – but low cost – network. MPLS prioritizes data traffic between the hotel and the property management
application residing at AT&T’s IDC, ensuring application performance and uninterrupted communications. It is a very unique technology for hospitality
industry. Their success is behind their corporate decisions of how to invest in technology. Their company strategy was based on the leadership of its
CEO, Brian Langton, who believed in the need to integrate key marketing, reservations and operating systems into one strong technology based system
that would lead the industry as Holiday Inn had during the 1960s. He prophesied the future of technology, which was e-commerce, and integrated
necessary technologic developments to his company. The company applied the strategic plan. And with the help of that competitive method, company
gained considerable advantage over others in the industry.
Case Study Answers

Their success is behind their corporate decisions of how to invest in technology. Their company strategy
was based on the leadership of its CEO, Brian Langton, who believed in the need to integrate key
marketing, reservations and operating systems into one strong technology based system that would lead
the industry as Holiday Inn had during the 1960s. He prophesied the future of technology, which was e-
commerce, and integrated necessary technologic developments to his company. The company applied the
strategic plan. And with the help of that competitive method, company gained considerable advantage
over others in the industry.

3) Distinguishing among competitors and gaining more market share by using technology as competitive
methods have challenges. It is very important to scan the environment in this situation also. The key to
gain more market share by using technology is to have the right choice at the right time. Everyday
technology is developing so fast and these developments can be adapted to hospitality industry as well.
For example when VOIP is developed, it is very important to use this technology in your hotel first. You
need to look the environment and then adopt the technology where it fits in your industry. However,
those upgrades seem to be endless as the development of technology is not likely to stop. On the other
hand, hospitality organizations allocate a budget for technology every year. That budget is often narrow;
most of the hospitality organizations do not have enough economical power to buy all of the available
technologies. The point here is to decide which technology to integrate with, by scanning the environment
and foreseeing which technology will be demanded most by the customers. Strategic alignment is the key.
It should support the companies’ mission.
4) As we discussed in the third question, strategic alignment plays the key role. Companies should select the right technology at the right time
and this technology should be parallel to company strategy. For example, McDonalds used free Wi-Fi at their restaurants but it failed, because it
didn’t fit into company strategy which was ‘fast’. Table turnovers increased. Later they put time limit for Wi-Fi, and then it became successful.
Amount of the budget allocated to be spent in technological development is another important issue.

5) The investments that IHG has done in technology were very successful. The first reason was, they realized the need in e-commerce and
invested enough money for the upgrade. The second reason was that they realized this need at the right time and put it into process right away.
And the third reason was their understanding that the developments they have done were not a technology game but an issue of customer
service fulfillment. In 2000, selection of Web-enabled PMS was a unique strategy.

6) Although main goal of IHG was customer satisfaction, those two hotels stand as prototypes. They were used as our “experimental guestroom”
in University of Delaware to show what can be done with the latest technology. So, it can be said that there are differences between the
corporation and those two hotels. That does not mean other brands of the corporation lacks technology, but it would be useful to keep in mind
that those two hotels are not one of those Hampton Inns or Embassy Suites which are also brands of the corporation.

7) Any information related to other companies technological status would be helpful in determining the overall demand for the technology
investments IHG has made over the years. This keeps IHG in competition with other companies. Moreover, customer feedbacks and data mining
methods can be used as well.

8) Academic researches, the media (technology magazines, internet), technology conferences like HITEC, and the researches that big companies
made and, surveys can be useful in tracking developments in technology for the travel industry.
Figures for Case Study

Figure 1
Figures for Case Study

Figure 2
IT Planning Process
Figures for Case Study

Figure 3
Figures for Case Study

Figure 4
Chapter Questions

• Which is NOT a function of the scanning system?

◦ Identify each force, the variables, and their


interdependencies with other variables
◦ Suggest cause and effect relationships
◦ Determine resource allocation
◦ Determine the history and timing of the development of
the forces
◦ Assist in estimating the impact of forces driving change
Chapter Questions (cont’d)

• The concept of industry structure refers to

◦ the degree of complexity in the market place.


◦ the degree of uncertainty in the market place.
◦ another way to define the industry domain.
◦ the degree of concentration of suppliers.
◦ the degree of dispersion of customers.
Chapter Questions (cont’d)

• In understanding industry structure, the manager must be able to assess


the degree of interdependencies that exist in the domain. This statement
refers to

◦ the firm's ability to lead competitors in creating new products and services.
◦ the investment in strategic alliances with other firms.
◦ the degree to which the firm is dependent upon its board of directors.
◦ the manager's ability to determine the cause and effect relationships in the business
domain.
◦ the manager's ability to utilize such management tools as yield management.
Chapter Questions (cont’d)

• The term body of knowledge refers to

◦ the sum total of the firm's knowledge regarding its


competitive method.
◦ the ability of the firm to gain competitive advantage
because it possesses more knowledge.
◦ the sum total of all literature that has been written on
a particular topic.
◦ the consultants' reports on industry structure.
◦ none of the above
Chapter Questions (cont’d)

• Which is not a criterion for evaluating the quality of


information sources?

◦ The influence it has on strategic thinking


◦ The number of sources
◦ Timing
◦ Validity
◦ Reliability
Chapter Questions (cont’d)

• Which company led the hotel industry in utilizing tec


hnology in the1980s?

◦ Holiday Inn Worldwide


◦ Marriott
◦ Hilton
◦ Starwood
Chapter Questions (cont’d)

• When discussing the structure of an environmental


scanning system, one must consider the following i
ssue(s):

◦ who should participate in the process.


◦ what resources should be allocated.
◦ how the information is being processed and used.
◦ all of the above
◦ none of the above
Chapter Questions (cont’d)

• What skill is not required for the director of competit


ive intelligence or development analysis?

◦ Analytical skills
◦ Marketing skills
◦ Communication skills
◦ Self-management capability
Chapter Questions (cont’d)

• Which is not considered a category of information?

◦ Quantitative
◦ Qualitative
◦ Personal and personal
◦ Signals and signs
Chapter Questions (cont’d)

• Which field is not mentioned in the sampling of


disciplines and fields of study contributing to the
body of knowledge in the hospitality industry?

◦ Nutrition
◦ Sociology
◦ Safety and security
◦ Accounting
Chapter Questions (cont’d)

• Which mode of scanning activities would most man


agers fit into now?

◦ Proactive
◦ Routine
◦ Reactive
◦ Null
Chapter Questions (cont’d)

• Content analysis is a tool to help managers interpret the


large amount of information about the environment. In using
content analysis, which skills are not required for applying
the content analysis process?

◦ Comprehension skills
◦ Analytical skills
◦ Synthesizing skills
◦ Application skills
◦ Extrapolation skills
Chapter Questions (cont’d)

• Environmental scanning activities should be carried


out:

◦ annually.
◦ bi-annually.
◦ quarterly.
◦ continuously.
Chapter Questions (cont’d)

• Concept mapping is another tool to help interpret the large a


mount of data that a manager must review in analyzing the
environment. It is a useful tool to help managers:

◦ determine the frequency and volume of ideas that have emerged


from the content analysis process.
◦ assess the relationship among various themes identified in the
content analysis process.
◦ rank the most important themes.
◦ identify relationships among various themes.
◦ all of the above
Chapter Questions (cont’d)

• Matrices are excellent ways of understanding the


relationship of:

◦ the task environment with the remote environment.


◦ the task environment with the resources of the firm.
◦ the firm environment with the multinational environment.
◦ the task environment with the resources of the firm; the
firm environment with the multinational environment.
◦ all of the above
Chapter Questions (cont’d)

• Scanning is best accomplished by

◦ a team of individuals working independently on policy oriented


matters.
◦ a team of individuals working together on strategic issues.
◦ information shared equally among all the firm's employees.
◦ information sharing based on the total body of knowledge on the
subject.
◦ a team of individuals working together on strategic issues;
information sharing based on the total body of knowledge on the
subject.
Student Learning Objectives

On completion of this chapter, you will be able to;


 Identify the environmental scanning process.
 Develop an appreciation to scan the business environment effectively.
 Describe the effective environmental scanning system.
 Identify the unique elements business domain.
 Identify and define the sources of information and give at least 1 hospitality
related example for each of them.
 Identify the timing information.
 Achieve a more practical understanding of forces that drive change in hospitality.
(Case Study)
 Comprehend the feedback and evaluation systems.