Environmental Scanning

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Businesses are mainly affected by social, economic, legal, technological and international factors. Environmental analysis is a study of these various influencing factors. Environmental scanning refers to collecting and utilizing the information about prominent trends, patterns, occasions and relationships that can adversely impact the business to determine future opportunities or threats.


Definition

According to William.F.Glueck, “Environmental Scanning consists of identifying and analyzing environmental influences individually and collectively to determine their potential effects on an organization and the consequent problems and threats.”


Characteristics of Environmental Scanning

  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.  


Techniques of Environmental Scanning

  1. SWOT Analysis- SWOT analysis is an acronym for Strengths, Weaknesses, opportunities and threats analysis of the environment. Strengths and weaknesses are considered as internal factors whereas opportunities and threats are external factors. These factors determine the course of action to ensure the growth of the business.

  2. PEST Analysis- PEST stands for Political, economic, social and technological analysis of the environment. It deals with the external macro-environment.

  3. ETOP- ETOP stands for the Environmental Threat Opportunity profile. It helps an organization to analyze the impact of the environment based on threats and opportunities.

  4. QUEST- QUEST stands for the Quick Environmental Scanning technique. This technique is designed to analyze the environment quickly and inexpensively so that businesses can focus on critical issues that have to be addressed in a short span.


Process of Environmental Analysis

  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, publications 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- The stage in which 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 the 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 the weaknesses. This is made possible with the help of environmental scanning with which better strategies can be developed.

  • 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 towards 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 delayed 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.

FAQ (Frequently Asked Questions)

1. What are the factors of Environmental Scanning?

Ans: There are four factors of environmental scanning. They are: 

  • Events: These are some of the incidences that take place in different sectors and environments of the organization. This determines the functioning of the business.

  • Trends: Trends can determine the frequency of events that take place in an organization. With the observation of trends, an organization can implement the required change in a particular area. 

  • Issues: The concerns that arise with events and trends in an organization is known as an issue. 

  • Expectations: A few groups associated with the organization have some demands known as expectations based on the trends and issues. These expectations arise reflecting the concerns over an issue.

2. What are Environmental Scanning Techniques?

Ans: Some Environmental scanning techniques include surveys, interviews, SWOT analysis, market research, etc. These help in the identification of the opportunities and threats that can affect the growth and performance of the organization.