34

Lesson4

 ENVI
RONMENTALSCANNI
NG

Lear
ningOut
comes:

Attheendoft helesson,st
udentsareexpectedto:
1.Determineandexplaininter
nalandexternalenvi
ronment
2.Identi
fythei
mpor t
anceofbusi nessscanning
3.Listenvi
ronmentalscanningtechni
ques
4.Identi
fySWOTAnal ysis,i
tsuses,benef
its,l
imit
ati
onsandsteps
5.MakeownSWOTandPESTLEAnal ysis

I
NTRODUCTI
ON

Environment alscanning isawayofaccumul ati

nginfor
mat i
onabout
sit
uationst hataffectst heinter
nalandext er
nalenvir
onmentoft he
business.Internalenv i
ronmentf ocusont hediff
erentuni
tsanddepartmentsinthe
organizati
onwhi l
e,theext ernalenvir
onmentf ocusesont hebiggerpartthatcoul
d
affecttheorganizationdirectl
yorindirectl
y.Anenterpr
ise’
sexter
nalenvi
ronmenthas
two subdi vi
sions:t he mi cro externalenv i
ronment ,and the macr o ext
ernal
env i
ronment.

The micro externalenv i

ronmentconsi sts ofot herent i
ties close t
ot he
businessenter
prisewhichallowi ttoeffect
ivel
y,ef
fi
cientl
yandeconomi call
yprovi
de
productsfori t
s mar ket.These ent it
ies arethe enterprise i
tself
,its suppli
ers,
mar ket
ingchannels,
cust omers,compet i
tor
sandpubl i
cs.
The basic purpose of env i
ronment alscanning is help management or t he
entr
epreneurdeterminespossibledirecti
onoftheorganization.

I
MPORTANCEOFBUSI
NESSSCANNI
NG

1.Through envi
ronmentalscanni ng one willbe ableto deter
mine rel
evant
i
nformati
ont hattheor ganizat
ionneed f oritsplan… val
uabl
ei nf
ormation
i
ncludesthestr
engths,
weak nesses,oppor
tunit
ies,
andthr
eatsofacompany .
 

2.Envir
onment alscanning helps us leads t o pr
operuti
li
zati
on ofbusi
ness
resourcesmayi tbecapitalresources,humanr esour
cesorot herf
act
orsof
production.Thisav
oidswastagesofr esourcesandall
owforthemostoperat
ive
andr easonableuseoftheseresources.

3.Properenvi
ronmentalscanni
ngandanaly
siswil
lhel
ptheent
repr
eneurpl
ant
he
necessar
ybusinessstr
ategyforl
ongandshor
tter
ms.

4.Last
ly
,env
ironment
alscanni
ngal
l
owst
hef
ir
mtomak
ethebestdeci
si
on t
hat

GEEC112–TheEnt
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will
helpt
hesuccessandgrowthofthebusiness.
Rel
ev antdynamicsofenv i
ronmentalscanning ar
eev ent
s,tr
ends,i
ssues,and
expectati
ons. Ev ents ar e mani festati
ons whi ch t akes pl ace i n
div
erse envir
onment
al 
sector
s ofa busi ness.Somet i
mes these ev
ent
sf ol
low a
patt
ernandt endtomov ei
naspecifi
cdirecti
on.

ENVI
RONMENTALSCANNI
NGTECHNI
QUES

1.SWOTANALYSI
S

A SWOTanal y
sisisat oolthatwillhelpyouidenti
fybusinessstrengt
hs(S),
weaknesses(W),opport
uni
ties(O)andthreats(
T).Throughthi
st echni
queonewill
beabletobuildonst r
engths(S),mini
mizeweakness( W),sei
zeoppor t
unit
ies(
O)
andcounter
actthreat
s(T).

TogetthemostoutofaSWOT analysi
s,oneneedt
oconducti
twi
tha
speci
fi
corpar
ti
cul
arbusi
nessobj
ect
ivei
nmi
nd.

USESOFSWOTANALYSI
S

ASWOTanal ysislooksatinter
nalandext
ernalf
act
orsthatcanaffectyour
busi
ness.I
nter
nalf
actorsar eyourstr
engt
hsandweaknesses.Ext
ernalf
actor
sar e
thet
hreat
sandopportuni
ties.

BENEFI
TSOFSWOTANALYSI
S

1.I
thelpsy ouidenti
fyandunderst
andkeyi ssuesaffecti
ngy ourbusiness,
buti
t
doesnotnecessaril
yoffersol
uti
ons.
2.Conducti
ng ofa SWOT anal ysisincursl i
tt
le orno cost-any one who
underst
andsy ourbusi
nesscanperform aSWOTanal ysi
s.
3.I
tconcent r
atesonthemosti mport
antfactorsaff
ectingyourbusiness.

LI
MITATI
ONSOFSWOTANALYSI
S

WhenconductingaSWOTanal ysi
s,keepinmi ndthatiti
sonlyonest
ageof
t
hebusi
nesspl
anningprocess.Forcomplexissues,youwil
lusual
lyneedt
oconduct
mor
ein-
depthr
esearchandanalysi
stomakedeci sions.

ASWOTanal
ysi
sisl
imi
tedbecausei
t:

 doesn'
tpri
ori
ti
zeissues
 doesn'
tprovi
desoluti
onsorof f
eralt
ernati
vedecisi
ons
 canproducetoomanyi deasbutnotallhel
py ouchoosewhichonei
sbest
 canproducealotofinfor
mation,butnotallofi
tisusef
ul.

TI
PSFORASUCCESSFULSWOTANALYSI
S

 KeepyourSWOTshor tandsimple.
 Wh endone,pr
ior
it
izetheresul
tsbyli
sti
ngt
hemostr
elev
antel
ement
sthataf
fect

GEEC112–TheEnt
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MindModul
e1
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yourbylisti
ngthem i norderofthemostsi gnif
icant
 Getmul ti
pleperspect i
vesony ourbusi ness.Askf orinputfrom y
ouremployees,
suppli
ers,cust
omer sandpar t
ners.Mor eheadsi sbett
erthanone.
 ApplyyourSWOTanal ysi
st oaspecifi
cissueonl y.
 Lookatwher ey ourbusi nessisnow andt hinkaboutwher eitmightbeinthe
fut
ure,aswel l
aswher eyouwoul dliketobe.
 Consideryourcompet i
torsandber eali
sti
cwheny oucompar e.
 Usegoal sandobj ecti
vesf r
om yourov er
all
 businessplan 
inyourSWOTanalysi
s.

St
epsi
nConduct
ingaSWOTanal
ysi
s

1.Identi
fyyourobj ecti
ve.Focusononeonl y.
2.Researchy ourbusi ness, i
ndustryandmar ket.Getarangeofper
spect
ivesby
tal
kingtoy ourstaff,businesspar tnersandclient
s.Al
soconductsome market
research 
andf i
ndoutabouty ourcompet it
ors.
3.Listyourbusiness'sst rengths
4.Listyourbusiness'sweaknesses
5.Listpotenti
aloppor tuniti
esf oryourbusiness
6.Listpotenti
althreatstoy ourbusiness
7.Establi
shpr i
oriti
esf r
om t heSWOT
8.Dev el
opast rategyt oaddr essissuesintheSWOT

Rev
iewy
our4pr
ior
it
izedl
ist
sbyaski
ng:

 Howcanweuseourstr
engthstotakeadvant
ageoftheopportunit
iesi
denti
fi
ed?
 Howcanweusethesestr
engthstoover
comet hethr
eat
sidentif
ied?
 Whatdoweneedt odotoov er
comet heidenti
fi
edweaknessesi nordert
ot ake
adv
ant
ageoft
heopport
unit
ies?
 Howwil
lwemini
mizeourweaknessest
oov
ercomet
hei
dent
if
iedt
hreat
s?

Oncey
ouhaveanswer
edthesequest
ionsandfi
nal
izedyourli
sts,y
oucannow
uset
heSWOTanal
ysi
stodev
elopst
rat
egi
esforachi
evi
ngyourbusi
nessgoal
s.

SWOTanal
ysi
sshoul
da
f
urt
herpl
anni
ngand

Thi
nk&
GEEC112–TheEnt
repr
eneur
ial
MindModul
e1
 37

1.Now doaSWOTanal y
sisf orabusi nessI deathaty ouwant ,thendev elopa
mat r
ixtoidenti
fystrengths,opportunit
ies,weaknesses, andt hreats.
2.Thinkcar eful
lyaboutt hest rengthsandweaknesseswi thint hebusi ness.
Thesemay beper sonalchar acter
isti
cs,financi
ali ssues,thel ocati
onoft he
business,costofpr omotingpr oductsorsel li
ngy ourproduct s.Wr i
tet hem
down.
3.Think of t he externalenv i
ronment f or this busi ness. What ar et he
opportuni
tiesandt hreatsiny ourbusi nessenv i
ronment ?Tr yt olookf orkey
i
nformant swhocanhel py ougener atemor einformat i
onabouty ourbusiness
i
dea.
4.Thenwr i
tedownt headv antagesanddi sadvantages,aswel lashow y ou
i
ntendt oov er
comet hem.

Uset
hef
orm ont
henextpagef
ory
ouranswer
.

SWOTANALYSI
S

Busi
nessI
dea:
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
__

St
rengt
hs Weaknesses

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repr
eneur
ial
MindModul
e1
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Oppor
tuni
ti
es Thr
eat
s

Adv
ant
ages

GEEC112–TheEnt
repr
eneur
ial
MindModul
e1
 39

Di
sadv
ant
ages

2.PESTLEanal ysis(formerl
yknownasPESTanal ysi
s)thisisaf ramewor kthat
i
s use t o analyz e and monit
ormacr o-
env i
ronmentalf actorst hataffects
organizati
on’spr oducti
vi
ty.Thi
stoolisusefulwhenst art
inganew busi ness
orenter i
ngaf orei
gnmar ket.I
tisoftenusedwi thotheranal yt
icalbusiness
tool
ssuch ast he SWOT analysi
s and 
Porter’
sFi veFor ces to givea clear
understandingofasi t
uati
onandrel
atedint
ernal andexternalfactors.

GEEC112–TheEnt
repr
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MindModul
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Polit
icalFactor
s:
These aref actor
sthatf ocus on how gov ernmenti ntervenes in cer
tai
n
i
ndust r
y.Thesei ncludesgover
nmentpol i
cy,poli
ti
calstabil
i
tyorinstabil
i
ty,corr
upti
on,
forei
gnt r
adepol icy,t
axpoli
cy,l
aborlaw,env i
ronmentallawandt raderestri
cti
ons.I
n
additi
on,thegov ernmentmayal sohaveani ntenseimpactonanat ion’
seducat i
onal
system,infrast
ructureandhealthregulat
ions.Thesear eallfactorsthatneedt obe
takenintoaccountwhenassessi ngtheattracti
venessofapot entialmarket.

EconomicFactors:
Economi cfactorsincl
ude el ements ofeconomy ’s perf
ormance such as
economicgrowth,exchangerates,infl
ati
onrates,i
nter
estrates,disposableincome
ofconsumersandunempl oymentr ates. 
Thesefact
orsmayhav eadi rectorindi
rect
i
mpactonacompany ,asiti
nfl
uencesconsumer spurchasi
ngpower ,aff
ectsprices
ofcommoditiesandcouldchangedemand/ supplyt
rendofcertai
nlocal i
ty.

Soci alFactors:
Thisf actorf ocuseson gener alsoci
alenv i
ronmentwhi ch representst he
demogr aphicchar acteri
stics,norms,cust omsandv aluesoft hepopul ationwi t
hin
whi cht heorgani zat
ionoper ates.Thisalsoincl
udespopul ati
ont rendssuchast he
popul ati
ongr owt hrate,car eerat t
it
udes,agedi st
ri
butionsafetyemphasi s,income
distributi
onheal thconsci ousness,l i
festy
leandculturalbarri
ers.Thesef act
orsar e
relevantwhent argeti
nggr oupcust omer s.Fur
thermore,ital
sosay ssomet hingabout
thel ocalworkforceandi tswi l
l
ingnesst oworkundercer t
ainconditi
ons.

Technol ogicalFact ors:

Thesef actorst alkoni nnov ati
onsi nt echnology,technologyincenti
ves,the
l
ev el of i nnovation, automat ion, research and dev elopment ( R&D) activ
ity,
technologicalchangeandt heamountoft echnologicalawar enessoft hepeopl e.
Thesef actorsmayi nfl
uencedeci sionsoftheent er
prisetoent erornotentercert
ain
businessendeav or.Bybei ngawar eandt echnol ogical
lywi se,youmaybeabl et o
avoidyourcompanyf rom disbur
si ngal otofmoneyondev elopingatechnologythat

GEEC112–TheEnt
repr
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MindModul
e1
 41

woul
dbecomeobsol
etev
erysoon.

Envir
onment alFact ors:
Env i
ronment alf act
orsf ocusr aw mat eri
alsscar ci
ty,poll
ution targetsand
carbonf ootprinttargetssetbygov ernments.
 These factorsincl
udeecol ogi
caland
envir
onment alaspect ssuchasweat her,cl
i
mat e,envir
onment aloffsetsandcl imate
change whichmayespeci all
yaffectindustr
iessuchast ourism,farming,agr i
cult
ure
andi nsurance.Bei ngawar eoft hepossi bl
eef fectsofcl i
matechangei saf fect
ing
howcompani esoper ateandthepr oductstheyof fer
.Thisisalsor easonswhymany
compani esar ebecomi ngmor einvolvedonv ari
ouspr acti
cesoncor poratesoci al
responsibil
it
y( CSR)andsust ainabil
it
y.

LegalFact ors:
Althoughthesefactorsmayhav esomeconnect i
onwi t
ht hepolit
icalfactor s,
theyincludemor especif
icl awssuchasempl oymentlaws,consumerpr otection
l
aws, copy ri
ghtandpatentlaws, andheal
thandsafetylaws.
 I
tisv eryimportantt hat
anent r
epr eneurshoul
dknowaboutt hisi
nor dert
otradesuccessf ul
lyandet hically.
I
naddi t
ion, bei
ngawareonv ari
ouslawswill
helpyouavoidproblemsl at
eron.

Thi
nk&Act

Thi
nkofabusinessi
deaandi
dent
if
ypossi
blef
act
orst
hatcoul
daf
fecti
tusi
ng
PESTLEAnal
ysi
s

PESTLEANALYSI
S

Busi
nessI
dea:
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
___
__

P E S T L E

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MindModul
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 42

3.PORTER’ SFIVEFORCESi sasi mpley etpowerfultooli

nunderstandi
ngthe
potent
ialprof
it
abi
li
tyandcompet i
ti
venessoft hebusiness.Mi
chaelPorter
,a
Harvar
d Business schoolprof
essordev el
ops t hi
s modelin 1979,which
becamet hemostpopularandhi
ghlyregardbusinesstool
.

Por
ter’
si dent
ifi
ed fi
vef orces t
hatmake up t
he compet
it
ive busi
ness
env
ironment,t
hisincl
udes:

 Competi
tiv
eRi valry
.Thisfocusont henumberr i
val
ryamongt heexisti
ng
competi
tor
s;how di ver
seisthecompetit
ion;paceofcompeti
tors’growth;
Howhighorhowl owareri
sksint
heindust
ry,andhoweasyordi
fficul
tisi
tto
l
eaveorexitt
hisindustr
y.

Takenote:t hebiggercompet i
tionamongf i
rms,thel essprofi
tableitwil
lbe
forabusi nessenterpriseandt helessri
v al
ry,thebet t
erforthef ir
m.When
competit
ioni ssointense,companiesatt
ractbuy er
sbygi vi
ngaggr essi
vepri
ce
cuts and expensi ve mar ket
ing campai gns,on t he other hand when
competit
ion in minimaland no one el se isof feri
ng same pr oduct
,then
customerswi ll
li
kelycomet oyouandt herewillbetremendouspr ofit
scoming
i
n.

 ThreatofSubsti
tut
ion.Thi
sf act
ormeasur
es the t
hreatpresented by
substi
tut
epr
oduct
s.Thisf
ocusonthenumber
,ty
pesandkind ofdirectand

GEEC112–TheEnt
repr
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ial
MindModul
e1
 43

i
ndi
rectsubst
it
utest
hatcoul
dpossi
blybear
epl
acementt
othepr
oduct
.

Takenote:t
hemor edir
ectandsuperi
orsubst
it
utesthepr
oducthastheharderit
i
st ocompete.Thef ewersubst
it
utes,l
esserqual
it
yandmor ev ar
iedfeatur
es
fr
om oneanother
,theeasi
eri
twil
lbe.

 Barri
erstoEntr
y.Thi sf actorfocusesony ourposi
ti
oninthemar ketthatcan
beaf fect
edbypeopl e’ sabi l
it
yt oentery ourmarket
.Factorsthatt endto
i
ncreaseordecr easebar ri
erst otheent r
yofcompet it
orsaregov ernment
poli
cies;cost of di stri
bution,mar ket
ing and sell
ing products;capital
requi
rementsandav ailableresources.

Takenote:themor estr
ess-freet oenterintheindustr
y,thehigherchancesof
havi
ngmor ecompet it
orsy ouwi l
lhave.Thest if
fertoentert heindust
ry,t he
l
esscompet itors.
 BuyerBargainingPower .Thisf actormeasureshowmuchi nf
luencedobuy ers
possess.Todet er
minesuchy ouhav et odeterminethequant i
tyofbuy er s,
whethertheyar econcentratedordi spersed,t
hev olumet hey purchase,thei r
buyi
ngexper i
encesandt her elevanceoft heproducttothem.

Takenote:Ifthesi
tuat
ionsarefavor
abl
etot hebuyers,t
hismeansthatt
hey
haveagr eaterist
heirnegoti
ati
ngpower ,however,ifthesi
tuat
ionsisless
fav
orabl
e,thelesst
henegotiat
ingpowertheyhave.

 Suppli
erBar gai
ning Power .Thisf actorassesses how much ef fectdo
suppli
ershavetotheenterpri
se.Todet er
mi nesuchyouhavetodeter
mi nethe
numberofsuppl i
ersinthei ndust
ry,identif
yhow concentr
atedordispersed
theyare,knowwhethertherearealt
ernativ
esuppl i
ersandhowhighorlowar e
costofchangingsuppl
ierfrom onetoanot her.

Takenot e:i
fthesit
uati
onsaremoref
avorabl
etosuppl
ier
s,suppli
ershav
et he
higherbargai
ningpower,howev
er,
ift
endstobetheotherhandthensuppli
ers
tendtohav el
essinfl
uence.

GEEC112–TheEnt
repr
eneur
ial
MindModul
e1
 44

MichaelPort
er’
s
Fi
veFor cesModel
(1979)

Li
ft
edfrom:
Mi
ndtool
s.com

GEEC112–TheEnt
repr
eneur
ial
MindModul
e1
 45

 MODULESUMMARY

InModule1, youwerei ntroducedwit

hthedif
ferentconceptsandbackgr ound
ofEntr
epreneurshi
p.Alongsidewi ththeseconcept
s,y ouwer ealsopresentedwith
thedi
ff
erentsocial
responsibil
it
iesofanentrepr
eneuranddifferentet
hicalst
andards
i
ndoingbusiness.

Ther
ewer efour(4)lessonsi
nModul
e1.Lesson1di
rect
edy
ourat
tent
iont
o
t
henat
ureofent
repreneur
ship.

I
nlesson2,
itengagedy
out
ounder
standwhoanent
repr
eneuri
s.

Lesson3focusedonthi
nki
ngout
sideoft
heboxf
ormor
eexpl
orat
ionofi
deas
andbusi
nessopportuni
ti
es.

Last
ly,
lesson4dedi
cat
edont
heenv
ironment
alscanni
ng.

Congr
atulat
ions!Youhav ejuststudi
edModul
e1.Now,y ouar ereadyto
eval
uat
e how much y ou hav
e benefi
ted f
rom y
ourreadi
ng by answer
ing t
he
summativ
etest.GoodLuck!

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eneur
ial
MindModul
e1
 46

GEEC112–TheEnt
repr
eneur
ial
MindModul
e1