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Define the Environmental ScanningThe process of collecting, analyzing, and distributing information for tactical
and strategic purposes
According to Brown and Weiner (1985)
Environmental Scanning is a kind of radar to scan the world
systematically and signal the new, the unexpected, the major andminor.
According to Aguilar (1967):
In his study of the information gathering practices , defines scanning as the
systematic collection of external information in order to
1-lessen the randomness if information flowing into the organization.
2-Provide early warning for managers of changing external
Conditions
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What is Environmental Scanning?
Whether you are planning a trip, or an excursion to buy groceries, or the direction of acorporation, you need to consider the larger external environment.
For example, you want to go grocery shopping in the next town. You'd like to get this
done as quickly as possible. So, you turn on the radio to listen to the traffic report. Oops.
There's been an accident on the highway you usually take to get to the store. What do
you do? You plan to take an alternate route that will keep you out of the traffic jam.
You've done a limited form of environmental scan.
In terms of organizations and strategic planning, an environmental scan involves
considering the factors that will influence the direction and goals of your organization.
And, it includes consideration of both present and future factors that might affect theorganization, since, of course, we're planning for the future, not just the present.
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What is Environmental Scanning?
For example, an environmental scan might project that in the next ten years, thenumber of people (potential customers) between the ages of 18-24 will increasefrom 30% to 40%. That's important information if we want to decide what kindsof new products we might consider introducing into the marketplace. Should wework on developing products targeted at a dwindling seniors population? Orshould we develop products to take advantage of the shift to a youth dominatedmarket. The environmental scan forces us to look at these factors.
While some suggest the environmental scan should address only factors externalto the organization (e.g. markets, legislation and government actions,demographics, marketing trends, etc), we suggest that you also do anINTERNAL ENVIRONMENTAL SCAN.
An internal environmental scan involves looking at the present capabilities ofthe organization (infrastructure, hardware, personnel, abilities, structure, etc)and that information can be compared to what the organization WILL need inthe future to achieve its strategic goals
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Objective of Environmental Scanning
Identified the following objectives of an environmental Scanning system:
Detecting scientific, technical, economic, social and political trends and
events important to the business.
Defining the potential threats, opportunity, or change for the business
implied by those tends and events.
Promoting a future orientation in the thinking of management and staff.
Alerting management and staff to trends that are converging, diverging,speeding up, slow down, or interacting.
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Modes Of Scanning:
Systematic scanning Information related to markets and customers, changes in legislation,regulations having a direct impact on the organization's activities,government policy etc. are collected continuously by taking relevant factorsinto account
Ad-hoc scanning Conducting special surveys and studies to deal with environmental issues from timeto time.
Processed-form scanning
sing information in a processed form available from different sources insideand outside the organization
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Types of environmental scansAd Hoc Periodic Continuous
General
Character-
istics
Usually performed in response to
crisis
Not 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 Learning
Structured, in-depth data collection and
analyses by dedicated staff
Data gathered is more comprehensive
Pros
Allows for quicker turn-around of
scan results
Lower commitment of resources
over time
Predictable frequency allows
for appropriate budgetplanning
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
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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Macroenvironment: STEEP Socio-cultural
Demographics
population size and distribution
age distribution
education levels
income levels
race and ethnicity
Socio-Cultural (continued) Attitudes about higher education
Cultural shifts
Technological New products and services training
opportunities New manufacturing processes
Infrastructure changes
Economic Industry/career demand and decline
Unemployment
Inflation
Environmental/Ecological New industry opportunities
Political Political climate/stability
State budget deficit or surplus
Changes in legislation
What to include in your scanMore things to consider including:
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Environmental scanning refers to possession and utilization of
information about occasions, patterns, trends, and relationships within
an organizations internal and external environment.
It helps the managers to decide the future path of the organization.Scanning must identify the threats and opportunities existing in the
environment. While strategy formulation, an organization must take
advantage of the opportunities and minimize the threats. A threat for one
organization may be an opportunity for another.
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Internal analysis of the environment
Internal analysis of the environment is the first step of environment
scanning. Organizations should observe the internal organizational
environment. This includes employee interaction with other employees,
employee interaction with management, manager interaction with other
managers, and management interaction with shareholders, access to natural
resources, brand awareness, organizational structure, main staff, operational
potential, etc.
Also, discussions, interviews, and surveys can be used to assess the internal
environment. Analysis of internal environment helps in identifying
strengths and weaknesses of an organization.
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External Analysis of the Environment As business becomes more competitive, and there are rapid changes in the
external environment, information from external environment adds crucialelements to the effectiveness of long-term plans.
As environment is dynamic, it becomes essential to identify competitorsmoves and actions. Organizations have also to update the corecompetencies and internal environment as per external environment.
Environmental factors are infinite, hence, organization should be agile andvigil to accept and adjust to the environmental changes.
For instance - Monitoring might indicate that an original forecast of theprices of the raw materials that are involved in the product are no morecredible, which could imply the requirement for more focused scanning,forecasting and analysis to create a more trustworthy prediction about theinput costs. In a similar manner, there can be changes in factors such ascompetitors activities, technology, market tastes and preferences.
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External Environment
Demographics
SocialChange
EconomicConditions
Political &Legal Factors
Technology
Competition
EnvironmentalScanning
Target Market
ProductDistributionPromotion
Price
External Environmentis not controllable
Ever-ChangingMarketplace
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An environmental scan of todays marketplace
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Environmental scanning is one of four activities comprising
External analysis.
As illustrated in Figure 1, external analysis is the broader activity ofunderstanding the changing external environment that may impact the
organization.
In describing external analysis, Fahey and Narayanan (1986) suggest that
organizationsscan the environment to identify changing trends and patterns,
monitorspecific trends and patterns, forecast the future direction of thesechanges and patterns, and assess their organizational impact.
Internal analysis of the organization's vision, mission, strengths, and
weaknesses, external analysis assists decision makers in formulating
strategic directions and strategic plans. The goal of environmental scanning is to alert decision makers to potentially
significant external changes before they crystallize so that decision makers
have sufficient lead time to react to the change. Consequently, the scope of
environmental scanning is broad.
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What is environmental scanning?