Environmental Scanning

ENVIRONMENTAL
SCANNING
Environmental scanning is a process of gathering information about
the events and their relationship with the internal and external
environment of the organization. The primary aim of environmental
scanning is to find out the future prospects of business organization.
As a significant resource to the management, the Environmental
Scanning Committee enables the management to make decisions from
fundamental analysis of historical events to estimate future events.
The committee also helps in creating action plans to address these
upcoming events, analyzing action plans and arranging appropriate
resources for those plans, and putting management in contact with
fellow employees with the knowledge set to provide quality data for
decision making.
DEFINITION OF ENVIRONMENTAL
SCANNING
• The process of collecting, evaluating, and
delivering information for a strategic purpose is
defined as environmental scanning. The process of
environmental scanning requires both accurate and
personalized data on the business environment in
which the organization is operating or considering
entering.
CHARACTERISTICS OF
ENVIRONMENTAL SCANNING
• The characteristics of environmental scanning are as follows:
1.Continuous Process- The analysis of the environment is a continuous process
rather than being sporadic. The rapidly changing environment has to be
captured continuously to be on track.
2.Exploratory Process- Scanning is an exploratory process that keeps monitoring
the environment to bring out the possibilities and unknown dimensions of the
future. It stresses the fact that “What could happen” and not ”What will
happen”.
3.Dynamic Process- Environmental scanning is not static. It is a dynamic process
and depends on changing situations.
4.Holistic View- Environmental Scanning focuses on the complete view of the
environment rather than viewing it partially.
COMPONENTS OF ENVIRONMENTAL
SCANNING
1.Internal Environmental Components- The components that lie within the
organization are internal components and changes in these affect the general
performance of the organization. Human resources, capital resources and
technological resources are some of the internal environmental components.
2.External Environmental Components: The components that fall outside the
business organization are called external environmental components. Although
the components lie outside the organization, they still affect the organizational
activities. The external components can be divided into microenvironmental
components, and macro environmental components.
• Microenvironmental components include competitors, consumers, markets,
suppliers, organizations, etc. Macro environmental components include
political, legal, economical, cultural, demographic, and technological factors.
PROCESS OF ENVIRONMENTAL
SCANNING
1.Scanning- The process of analyzing the environment to spot the factors that
may impact the business is known as Environmental Scanning. It alerts the
enterprise to take suitable strategic decisions before it reaches a critical
situation.
2.Monitoring- The data is gathered from various sources and is utilized to monitor
and find out the trends and patterns in the environment. The main sources of
collecting data are spying, publication talks with customers, suppliers, dealers
and employees.
3.Forecasting- The process of estimating future events based on previously
analyzed data is known as environmental forecasting.
4.Assessment- T In this stage, the environmental factors are assessed to identify
whether they provide an opportunity for the business or pose a threat.
IMPORTANCE OF ENVIRONMENTAL
SCANNING
• Goal Accomplishment: The objectives of an organization cannot be fulfilled unless it
adapts itself to environmental changes. One has to adjust the strategies to fit in the
changing demands of the environment.
• Threats and Weakness Identification: For an organization to grow, it must minimize
its threats and identify its weaknesses. This is made possible with the help of
environmental scanning with which better strategies can be developed.tz
• Future Forecast: Environmental changes are often unpredictable. An organization
cannot anticipate all the future events but based on the analysis, it can make better
strategic decisions in the future. Hence, environmental analysis helps to forecast
the prospects of the business.
• Market Knowledge: Every organization must be aware of the ongoing changes in the
market. If it fails to incorporate strategic changes due to changing demands, it will
not be able to achieve its objectives.
• Focus on the Customer: Environmental scanning and analysis make an organization
sensitive to the changing needs and expectations of the customer.
• Opportunities Identification: With the analysis of the current environment, an
organization will be able to identify the possible opportunities and take necessary
steps.
LIMITATIONS OF ENVIRONMENTAL
SCANNING
• Overloading of information may sometimes result in indecision. Hence it is not
completely reliable.
• It does not forecast the future or eliminate uncertainties. Organizations may
face unexpected events. However environmental scanning should aim at
minimizing such threats to the business.
• It often makes an organization cautious and thereby delays decision making. It
is better to have a strategic approach to analyze the environment and take
decisions or actions on time.
• When the organizations rely completely on the analyzed information without
data verification and accuracy, it may lead to deviation in the desired outcomes.
Environmental Threat and Opportunity Profile
Analysis (ETOP)
• ETOP is considered as a useful device that facilitates an

assessment of information related to the environment and also in
determining the relative significance of external environment
threats and opportunities to systematically evaluate
environmental scanning.
• By dividing the environment into different sections, the ETOP
analysis helps in analyzing its impact on the organization. The
analysis is based on threats and opportunities in the environment.
Quick Environmental Scanning Technique Analysas
(QUEST)
• QUEST is an environmental scanning technique that is designed to

assist with organizational strategies by keeping adheres to change and its
implications. Different steps involved in this technique are as follows:
• The process of environmental scanning starts with the observation of the
organization’s events and trends by strategists.
• After observation, important issues that may impact the organization are
considered using environment appraisal.
• A report is created by making a summary of these issues and their
impact.
• In the final step, planners who are responsible for deciding the feasibility
of the proposed strategy, review reports.
SWOT Analysis
• SWOT analysis stands for strengths, weaknesses, opportunities
and threats analysis of a business environment. Strengths and
weaknesses are an organization’s internal factor while threats
and opportunities are considered as external factors.
• So, the process of SWOT analysis includes the systematic
analysis of these factors to determine an effective marketing
strategy.
• It is a tool that is used by the organization for auditing purposes
to find its different key problems and issues.
• Different factors are considered while analyzing the internal
environment of an organization like the structure of the
organization, physical location, the operational capacity and
efficiency of the organization, market share, financial resources,
skills and expertise of employees, etc.
• Strengths: The strength of any organization is related to its core
competencies i.e. efficient resources or technology or skills or
advantages over its competitors. For example, the marketing
expertise of a firm can be its strength. Apart from this, an
organization’s strength can be:
• Strong customer relations
• Market leader in its product or services
• Sound market image and reputation
• Smooth cash-flows
• Weaknesses: A weakness or limitation of an organization is related
to the scarcity of its resources or skill-set of staff or capabilities that
creates an adverse effect on its performance. For example, limited
cash-flow and high cost are considered as a financial weakness of
the organization. Similarly, other weaknesses can be:
• Poor product quality
• Low productivity
• Unrecognized brand name or poor brand image
• Different factors that are considered while scanning the external
environment of the organization like Competitors, customers,
suppliers, technology, social and economic factors, political and legal
issues, market trends, etc.
• Opportunities: An opportunity of the organization’s environment is
considered as its most favorable situation. These are the circumstances
that are external to the business and can become an advantage to the
organization. For example, different opportunities for a firm can be:
• Social media marketing
• Mergers & acquisitions
• Tapping new markets
• Expansion in International market
• New product development
PEST ANALYSIS
• PEST technique for a firm’s environmental scanning includes analysis of
political, economic, social, and technical factors of the environment.
• Political/ Legal factors: Different factors like changes in tax policy,
availability of raw material, etc. creates a direct effect on a business. So
organizations are required to constantly monitor tax-related policy
changes as an increase in tax may increase the heavy financial burden on
them. Similarly, different laws like “Consumer protection act” also play
an important role in an organization’s operation activities as it is
important to abide by the act.
• More examples can be foreign trade policy, political changes, regulations
in competition, trade restrictions, etc. also considered as different
political/ legal factors that exist in the external business environment.
• Economic factors: Different economical Factors like the
unemployment rate, inflation, cost of labor, economic trends,
disposable income of consumers, monetary policies, etc. play an
important role in environmental scanning.
• For example, in the case of high unemployment, a company may
decrease the prices of its products or services and in opposite
situation i.e. when the unemployment rate is low then prices can
be high. This happens because if more customers are
unemployed then by lowering the prices, an organization can
attract them
• Social / Cultural factors: Attitude, trends, and behavioral aspects
of society also create an impact on the functioning of the
organization. Studying and understanding the lifestyle of
consumers is very much required to target the right audience
and to offer the right product or services based on their
preferences.
• For example, Issues and policies related to the environment like
pollution control are also being considered by organizations to
ensure that it operates in an environment-friendly atmosphere.
Taking care of the cultural aspect of different countries while
doing business at the international level, is also an important
factor.
• Technological Factors: Technological factors affect the way firms
produce products and services as well as market them. Like, “processes
based on new technologies” is one of the important factors of a
technological environment.
• To maximize profits, production should be handled most cost-
effectively and this, technology has an important contribution.
• For example, an increase in computer and internet-based technology is
playing a major role in the way organizations are distributing and
marketing their products and services.
• Also, different advancements in technologies like automation of the
manual process and use of machinery based on more advanced and
latest technologies, more investment in research & development by
organizations have increased their efficiency by increasing production
in less time, cost-reduction and better investment in the long run.

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ENVIRONMENTAL

• ETOP is considered as a useful device that facilitates an

• QUEST is an environmental scanning technique that is designed to

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