ENVIRONMENTAL SCANNING

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What is environmental scanning? DefinitionThe process of collecting, analyzing, and distributing information for tactical and strategic purposes

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Purpose of an environmental scan:

To provide strategic intelligence by evaluating potentially significant environmental changes

Conveys both current environmental status and how it is changing trendsAlerts planners to trends that are converging, diverging, interacting, accelerating, or deceleratingIdeal end-goal: allows for adaptive planning before these trends occur or fully develop

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•Often refers only to the environment that is external to the organization

•Good strategic planning requires information on internal organizational factors, so whenever possible include these also(unless obtained in separate processes)

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How it fits in the planning cycle:

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Types of environmental scans

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Ad Hoc Periodic Continuous

General

Character-istics

Usually performed in response to crisisNot as in-depth Forecasts are more short-term

Tied to planning cycle (e.g., every 3 years)In-depth Forecasts 5 to 10 years

Also called Continuous LearningStructured, in-depth data collection and analyses by dedicated staffData gathered is more comprehensive

Ad Hoc Periodic Continuous

Pros

Allows for quicker turn-around of scan resultsLower commitment of resources over time

Predictable frequency allows for appropriate budget planning

Frequency provides timely information gathering for planning

Planning is proactive…

Dedication of time by researchers allows incorporation of data from more sources

Provides planners with more comprehensive information

Informs planners of critical changes sooner

Plans can be adjusted or adopted more proactively

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Ad Hoc Periodic Continuous

Cons

Data can be more superficial

Results may address immediate issues, but are less generalizable

If only conducted in response to crises, indicates lack of organized institutional planning efforts

Planning response is reactive

Reaction to unforeseen changes in environment (e.g., onset of recession) may require Ad Hoc scan to supplement information.

Planning response is then more reactive

Requires ongoing institutional commitment of resources (funding, personnel, and time)

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SOURCES OF INFORMATION

• Documentary or secondary sources- Magazines, newspaper, journals, books, trade &industry Assn. publication, Govt. Publication, Annual report of competitor company

• Mass media• Internal sources - employees, files, MIS, documents

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SOURCES OF INFORMATION

• EXTERNAL AGENCIES - Customers, marketing intermediaries, suppliers, Govt. Agencies

• FORMAL STUDIES - Consultants, Educational Institutions, in-house

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COMPETITIVE ENVIRONMENT SCANNING

• Market stability is threatened by short product life cycles, short product design cycles, new technologies, frequent entry by unexpected outsiders, repositioning by incumbents and tactical redefinition market boundaries as divers industries merge.

• The environment escalates toward higher & higher levels of uncertainty, dynamism, heterogeneity of players & hostility”

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COMPETITIVE ENVIRONMENT SCANNING

•ENVIRONMENTAL THREAT- Challenges posed by an unfortunate trend - lead to erosion of company’s position

•ENVIRONMENTAL OPPORTUNITY - an attractive arena - that company enjoys a competitive advantage

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INDUSTRIAL ENVIRONMENT

Firm

Relevantenvironment

Microenvironment

MacroEnvironment

InternalEnvironment

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COMPONENTS OF MEGA ENVIRONMENT

Regulatory EconomicPolitical

Technological Social

Mega Environment

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CHARACTERISTICS OF VARIOUS ENVIRONMENT

TECHNOLOGICAL• Transportation capability• Mastery over energy• Ability to alter character

of material• Mechanization of

physical activities• telecommunication

network

SOCIAL• Population, demographic

data• Spread of literacy• Income distribution• Social Values• Ethical standards• Concern for health

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CHARACTERISTICS OF VARIOUS ENVIRONMENT

ECONOMIC• GDP, Growth rate• Money supply• BOP• Policies and regulations

POLITICAL• Regulatory• Legal provisions• Stability of Government

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Suppliers

MarketingIntermediaries

Market Types

Market demand Competition

MICRO ENVIRONMENT

Financial Institutions

Regulatory Provisions

Industrial relation climate

Availability of skilled

manpower

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•Indication where the opportunities exist•Grasp of the major sources of threats to the industry•Indication of the critical requirement for success in the industry•SUPPLIERS - shortage, location, cost, quality•MARKETING INTERMEDIARIES - distribution channels, transporters, advertising & marketing research firms - absence or presence

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•MARKET TYPES - consumer markets, industrial markets, institutional markets, international markets, resellers markets - stable or volatile

•MARKET DEMAND

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• FINANCIAL CLIMATE - Availability of funds, Incentives, exemptions

• REGULATORY ENVIRONMENT - Free trade zones, sales tax, tax rebates - central/state Govt.

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SWOT•STRENGTH - Inherent capacity which an organization an use to gain strategic advantage over it competitors•WEAKNESS - Inherent limitations or constraint which creates a strategic disadvantage•OPPORTUNITY - a favorable condition in the organization’s environment which enables it to consolidate and strengthen its position•THREAT - an unfavorable condition in organization’s environment which creates a risk or causes damage to the organization

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OPPORTUNITY MATRIX

High Very Moderately Attractive Attractive

Attractiveness Moderately Least

Low Attractive Attractive

High LowProbability of occurrence

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THREAT MATRIX

High Major Moderate Threat Threat

Seriousness Moderate Minor

Low Threat Threat

High Low Probability of occurrence

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