ENVIRONMENTAL

SCANNING
 DEFINITION

Environmental scanningis a process of gathering, analyzing, and

dispensing information for tactical or strategic purposes.

Carefulmonitoringof an organization'sinternaland
external environmentsfor detectingearlysignsof
opportunities and threatsthat mayinfluenceitscurrent
andfutureplans. In comparison,surveillanceis confined to a
specificobjective or a narrowsector.

It is monitoring and interpreting sweep of social, political, economic,

ecological, and technological events to spot budding trends that
could eventually impact industry
 PURPOSE OF ENVIRONMENTAL
SCANNING

Effective utilisation of resources

Constant monitoring of resources
Strategy formulation
Identification of threats and opportunities
Useful for the managers
Prediction of future
FACTORS TO BE CONSIDERED FOR
ENVIRONMENTAL SCANNING
APPROACHES TO ENVIRONMENTAL
SCANNING
SYSTEMATIC APPROACH
information for environmental scanning collected systematically
Information pertaining to business and industry could be collected
continuously to monitor changes
Continuous updating necessary not only for strategic management
but also for operational activities
In this approach information is collected relating to mkt
customers,changes in legislation govt. policy have a direct impact on
organisation.
ADHOC APPROACH
Organisations conduct special surveys and studies to undertake
special projects, evaluate existing strategies or devise new
strategies
Changes and unforeseen developments may also be investigated
PROCESSED FORM APPROACH
Information used is supplied by govt agencies or private instituitions
Secondary data available from external and internal sources may
also be used
 FACTORS AFFECTING ENVIRONMENTAL
APPRAISAL
Factors relating to nature Factors relating to the
of environment Strategies
Complexity This is master level stretgy:-
Flexibility corporate level strategy to achieve
Hostility corporate objective.
Diversity Sub level strategy:-for specific
purpose and to help master stretgy.
Factors relating to the Functional level strategy:-how the
organisation stretgy is translated into functions
Nature of the business like marketing,finance, production
Age of the organisation and R AND D.
Size of the organisation
Nature of the markets Factors relating to
Nature of the products strategists:
Age , education and experience
Motivational level
Ability to withstand pressure and
strain
Interpersonal relations
 STRUCTURING THE ENVIRONMENTAL
APPRAISAL
Two most important techniques of
environmental appraisal are:
ETOP(environmental threats and
opportunities) Analysis
SWOT(strengths, weaknesses,
opportunities and threats) analysis
 ETOP
Steps involved in the preparation of
ETOP:
Dividing the environment into different sectors
Analysing the impact of each sector on the
organisation
Subdividing each environmental factor into sub
factors for a comprehensive ETOP
Analysing the impact of each subfactor on the
organisation in the form of a statement
Preparing a summary to show the major factors for
the sake of simplicity
 Importance of ETOP
Provides a clear picture to the
strategists of the sectors and the
different factors in those sectors
Helps the organisation in knowing where
it stands with respect to its environment
Helps the organisation in formulating
appropriate strategy to take advantage
of the opportunities and threats in its
business
 SWOT Analysis
SWOT stands for Strengths, Weaknesses,
Opportunities and Threats

Identification of the threats and opportunities in

the external environment and strengths and
weaknesses in the internal environment of the
firms are the cornerstone of business policy
formulation.
It is the SWOT analysis which determines the
course of action to ensure the growth / survival
of the firm.
 Strengths

Strengthsinternal to the unit; are a units resources and

capabilities that can be used as a basis for developing a
competitive advantage; strength should be realistic and not
modest.
The list of strengths should be able to answer:
What are the units advantages?
What does the unit do well?
What relevant resources do you have access to?
What do other people see as your strengths?
What would you want to boast about to someone who knows nothing
about this organization and its work?

Examples: good reputation among customers, resources, assets,

people, : experience, knowledge, data, capabilities
Think in terms of: capabilities; competitive advantages; resources,
assets, people
(experience, knowledge); marketing; quality; location; accreditations
qualifications, certifications; processes/systems
 Weaknesses

Weaknessesinternal force that could serve as a barrier to maintain or

achieve a competitive advantage; a limitation, fault or defect of the
unit;
It should be truthful so that they may be overcome as quickly as
possible

The list of weaknesses should be able to answer:

What can be improved?
What is done poorly?
What should be avoided?
What are you doing as an organization that you feel could be done more
effectively/efficiently?
What is this organization NOT doing that you feel it should be doing?
If you could change one thing that would help this department function more
effectively, what would you change?

Examples: gaps in capabilities, financial, deadlines, morale

lack of competitive
 Opportunities

Opportunitiesany favorable situation

present now or in the future in the external
environment.

Examples: unfulfilled customer need, arrival of new

technologies, loosening of regulations, global
influences, economic boom, demographic shift

Where are the good opportunities facing you?

What are the interesting trends you are aware of?
Think of: market developments; competitor;
vulnerabilities; industry/ lifestyle trends;;
geographical; partnerships
 Threats

External force that could inhibit the maintenance or attainment

of a
competitive advantage; any unfavorable situation in the external
environment that is potentially damaging now or in the future.

Examples: shifts in consumer tastes, new regulations, political or

legislative effects, environmental effects, new technology, loss of key
staff, economic downturn, demographic shifts, competitor intent; market
demands; sustaining internal capability; insurmountable weaknesses;
financial backing

The list of threats should be able to answer:

What obstacles do you face?
What is your competition doing?
Are the required specifications for your job/services changing?
Is changing technology threatening your position?
Do you have financial problems?
Could any of your weaknesses seriously threaten your unit?
 Pest Analysis
It is very important that an organization
considers its environment before
beginning the marketing process. In fact,
environmental analysis should be
continuous and feed all aspects of
planning. The macro-environment
consists of e.g. Political (and legal) forces,
Economic forces, Sociocultural forces, and
Technological forces. These are known
asPESTfactors.
PEST
 POLITICAL FACTORS
The political arena has a huge influence upon
the regulation of businesses, and the spending
power of consumers and other businesses. One
must consider issues such as:
1.How stable is the political environment?
2.Will government policy influence laws that regulate
or tax your business?
3.What is the government's position on marketing
ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and
religion?
6. Is the government involved in trading agreements
such as EU, NAFTA, ASEAN, or others?
 ECONOMIC FACTORS
Marketers need to consider the state
of a trading economy in the short and
long-terms. This is especially true
when planning for international
marketing. One need to look at:
1. Interest rates.
2. The level of inflation Employment level
per capita.
3. Long-term prospects for the economy
Gross Domestic Product (GDP) per capita,
and so on.
 SOCIO-CULTURAL FACTORS
The social and cultural influences on business
vary from country to country. It is very important
that such factors are considered. Factors include:
1.What is the dominant religion?
2.What are attitudes to foreign products and services?
3.Does language impact upon the diffusion of products
onto markets?
4.How much time do consumers have for leisure?
5.What are the roles of men and women within society?
6.How long are the population living? Are the older
generations wealthy?
7.Do the population have a strong/weak opinion on
green issues?
 TECHNOLOGICAL FACTORS
Technology is vital for competitive advantage,
and is a major driver of globalization. Consider
the following points:
1. Does technology allow for products and services to
be made more cheaply and to a better standard of
quality?
2.Do the technologies offer consumers and businesses
more innovative products and services such as Internet
banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g.
books via the Internet, flight tickets, auctions, etc?
4.Does technology offer companies a new way to
communicate with consumers e.g. banners, Customer
Relationship Management (CRM), etc?