Information Information ManagementManagement

LAP 2LAP 2

Environmental ScanningEnvironmental Scanning

Get the 411Get the 411

ObjectivesObjectives

Explain the purpose of environmental Explain the purpose of environmental scanning.scanning.

Demonstrate procedures for conducting an Demonstrate procedures for conducting an environmental scan.environmental scan.

Explain the purpose ofExplain the purpose ofenvironmental scanning.environmental scanning.

ObjectiveObjective

• SonnySonny’’s product:s product:

A fun, humorous SAT A fun, humorous SAT study guidestudy guide

Something to keep Something to keep studentsstudents’’ attention attention

• CDs are selling poorly.CDs are selling poorly.

• Students wanted to buy it Students wanted to buy it online!online!

• Sonny failed to scan the Sonny failed to scan the environment.environment.

Environmental Awareness

• The term The term “e“environmentnvironment””:: Often used to refer to the earth Often used to refer to the earth

and its resourcesand its resources Can also simply refer to Can also simply refer to

surroundingssurroundings

• What environment are you What environment are you currently in? currently in?

Classroom? Classroom? Library? Library? Bedroom?Bedroom?

• How does it affect your ability to How does it affect your ability to concentrate and perform your concentrate and perform your work successfully?work successfully?

• Businesses exist within Businesses exist within environments, too. environments, too.

How they respond is a critical How they respond is a critical factor for success. factor for success.

They must be “mindful of the They must be “mindful of the environment.environment.””

To do so, they use To do so, they use environmental scanning. environmental scanning.

Environmental ScanningEnvironmental Scanning

• Environmental scanning—three-step Environmental scanning—three-step process in which businesses: process in which businesses:

Gather information about their Gather information about their surroundingssurroundings

Analyze that informationAnalyze that information Determine the future impact of that Determine the future impact of that

informationinformation

Environmental ScanningEnvironmental Scanning

• What might happen if you werenWhat might happen if you weren’’t t aware of your surroundings?aware of your surroundings?

You could miss a potential threat, You could miss a potential threat, such as:such as: A potholeA pothole A pick-pocketA pick-pocket

You could miss a potential You could miss a potential opportunity, such as:opportunity, such as: A sign for soccer try-outsA sign for soccer try-outs An empty chair next to someone you An empty chair next to someone you

want to talk towant to talk to

Environmental ScanningEnvironmental Scanning

• Being aware of threats and Being aware of threats and opportunities—and knowing their opportunities—and knowing their potential impact—helps a business potential impact—helps a business with:with:

Strategic planningStrategic planning Management decision makingManagement decision making

Environmental ScanningEnvironmental Scanning

• A business cannot control its A business cannot control its external environment. external environment.

• But, it But, it can can control its internal control its internal environment to meet upcoming environment to meet upcoming threats and opportunities. threats and opportunities.

Environmental ScanningEnvironmental Scanning

• Internal environment:Internal environment: FinancesFinances PersonnelPersonnel Research and developmentResearch and development ProductionProduction MarketingMarketing

Environmental ScanningEnvironmental Scanning

• A businessA business’’s environment is always s environment is always in flux (changing). in flux (changing).

It is faced with a choice—adapt It is faced with a choice—adapt or fail. or fail.

To adapt successfully, it relies on To adapt successfully, it relies on environmental scanning.environmental scanning.

Categories of Information to ScanCategories of Information to Scan• DemographicsDemographics

The physical and social The physical and social characteristics of the populationcharacteristics of the population

Examples:Examples: AgeAge GenderGender IncomeIncome Employment statusEmployment status Family statusFamily status EducationEducation Geographic locationGeographic location Religious affiliationReligious affiliation Race/Ethnic originRace/Ethnic origin

Markets, like individuals, have Markets, like individuals, have demographic characteristics. demographic characteristics.

Businesses must pay close Businesses must pay close attention to them so that attention to them so that they can identify trends in they can identify trends in demographic data. demographic data.

Current trends in the U.S.:Current trends in the U.S.: Aging of the populationAging of the population Increased populations of Increased populations of

minority groupsminority groups

Categories of Information to ScanCategories of Information to Scan• Society and cultureSociety and culture

What do customers value? What do customers value? What are their attitudes toward What are their attitudes toward

the world around them? the world around them? Our society is transforming at a Our society is transforming at a

rapid rate. rapid rate. Successful businesses stay on Successful businesses stay on

top of changes so they can top of changes so they can remain sensitive to customer remain sensitive to customer needs and wants. needs and wants.

Categories of Information to ScanCategories of Information to Scan

Examples of social trends that Examples of social trends that affect business decision making:affect business decision making: Changing family roles:Changing family roles:

More working momsMore working moms More single parentsMore single parents More two-income householdsMore two-income households More diverse attitudes about More diverse attitudes about

what a family iswhat a family is More diverse attitudes about More diverse attitudes about

roles within familiesroles within families

Concern for fitness and health—Concern for fitness and health—has affected businesses in all has affected businesses in all industriesindustries

Need for convenienceNeed for convenience People are busier than ever.People are busier than ever. Customers are often willing to Customers are often willing to

pay more for products that save pay more for products that save them time or fit into their hectic them time or fit into their hectic schedules.schedules.

Examples:Examples: Frozen dinnersFrozen dinners Drive-thrusDrive-thrus 24-hour gyms24-hour gyms

Going “greenGoing “green””—customers are —customers are concerned about the environment concerned about the environment but also about their walletsbut also about their wallets

• Society and cultureSociety and culture

Categories of Information to ScanCategories of Information to Scan• The economyThe economy

Greatly affects businesses and Greatly affects businesses and the decisions they must make to the decisions they must make to satisfy customers and remain satisfy customers and remain profitableprofitable

Economic factors included in an Economic factors included in an environmental scan:environmental scan: Stage of the business cycle Stage of the business cycle

(prosperity, recession, (prosperity, recession, recovery, etc.)recovery, etc.)

InflationInflation Interest ratesInterest rates Unemployment ratesUnemployment rates Investor confidenceInvestor confidence Tax ratesTax rates Currency exchange ratesCurrency exchange rates Foreign economic conditionsForeign economic conditions

Categories of Information to ScanCategories of Information to Scan• CompetitionCompetition

Brand competitionBrand competition Competition between two similar Competition between two similar

productsproducts Example—Nike basketball shoes Example—Nike basketball shoes

vs. Adidas basketball shoesvs. Adidas basketball shoes Competition for substitute Competition for substitute

productsproducts Competition between twoCompetition between two

different products thatdifferent products thatsatisfy the same needsatisfy the same need

Example—movie Example—movie theaters vs. theaters vs. bowling alleysbowling alleys

General competition—competition General competition—competition among all businesses for scarce among all businesses for scarce customer dollarscustomer dollars

Categories of Information to ScanCategories of Information to Scan• GovernmentGovernment

Political factors to scan:Political factors to scan: Changing laws and regulations, Changing laws and regulations,

such as:such as: Minimum-wage lawsMinimum-wage laws Environmental-protection lawsEnvironmental-protection laws Worker-safety lawsWorker-safety laws

Monetary and fiscal policiesMonetary and fiscal policies Import/export restrictions and Import/export restrictions and

regulationsregulations Government relations with Government relations with

specific industries (Example: specific industries (Example: subsidies for agricultural subsidies for agricultural businesses)businesses)

Marketing-specific legislation Marketing-specific legislation State and local lawsState and local laws Political climates and stability in Political climates and stability in

foreign marketsforeign markets

Categories of Information to ScanCategories of Information to Scan• TechnologyTechnology

Perhaps the most rapidly Perhaps the most rapidly changing category of changing category of information information

Falling behind on Falling behind on technology has been the technology has been the downfall of many downfall of many businesses. businesses.

High-tech businesses arenHigh-tech businesses aren’’t t the only ones that need to the only ones that need to monitor technology. monitor technology.

Reminders About Information Categories

• All of these factors are dynamic, changing all the time.

• All of these factors are interrelated, affecting each other.

• Each business has a unique relationship with its environment— certain factors and trends affect some businesses and industries more than others.

Demonstrate procedures Demonstrate procedures for conducting an for conducting an

environmental scan.environmental scan.

ObjectiveObjective

How to Conduct an Environmental Scan

• Step one: Identify participants Step one: Identify participants and responsibilities.and responsibilities.

Who will participate in Who will participate in environmental scanning?environmental scanning?

What specific tasks will they What specific tasks will they be responsible for? be responsible for?

On a certain level, all On a certain level, all employees should participate. employees should participate.

Everyone should be aware of Everyone should be aware of the environment and how it the environment and how it affects:affects: The businessThe business Her/His particular jobHer/His particular job

In some cases, In some cases, responsibilities may be responsibilities may be more formal:more formal: Conducting market research Conducting market research

or arranging for an outside or arranging for an outside firm to do sofirm to do so

Creating or maintaining a Creating or maintaining a database to organize relevant database to organize relevant environmental informationenvironmental information

Heading up efforts to make Heading up efforts to make contact with customers and contact with customers and gather information from themgather information from them

How to Conduct an Environmental Scan

• Step two: Carry out scanning Step two: Carry out scanning activities. activities.

Activities will vary from Activities will vary from business to business. business to business.

Some tools you can use to Some tools you can use to gather information:gather information: SurveysSurveys QuestionnairesQuestionnaires Focus groupsFocus groups Informal conversationsInformal conversations Newspapers, magazines, Newspapers, magazines,

trade journalstrade journals Television news and Television news and

programmingprogramming Market research studiesMarket research studies

Focus only on whatFocus only on what’’s relevants relevant—avoid information overload. —avoid information overload.

How to Conduct an Environmental Scan

• Step three: Identify and analyze Step three: Identify and analyze important issues and trends. important issues and trends.

Information gathered is only Information gathered is only useful if business knows how it useful if business knows how it affects strategic planning and affects strategic planning and decision making. decision making.

Look at information and Look at information and identify specific trends:identify specific trends: May be identified for you May be identified for you

(Census Bureau)(Census Bureau) May have to draw May have to draw

conclusions yourselfconclusions yourself

Ask critical questions, such as:Ask critical questions, such as: How does this trend affect How does this trend affect

demand for our goods or demand for our goods or services?services?

How does this trend affect How does this trend affect our businessour business’’s ability to s ability to compete?compete?

How critical is this trend to How critical is this trend to long-term organizational long-term organizational success?success?

Determine whether or not the Determine whether or not the trend is an important one for trend is an important one for your business.your business.

How to Conduct an Environmental Scan

• Step four: Report results or Step four: Report results or select issues and trends to select issues and trends to act on. act on. Not all trends can be Not all trends can be

addressed immediately or addressed immediately or all at once. all at once.

A business must prioritize A business must prioritize trends in its strategic trends in its strategic planning. planning.

How to Conduct an Environmental Scan

• Step five: Scan on a continuous basis. Step five: Scan on a continuous basis. ItIt’’s not a one-time activity, or even a s not a one-time activity, or even a

once-a-year activity. once-a-year activity. It must be conducted on a continuous It must be conducted on a continuous

basis since the environment is dynamic basis since the environment is dynamic and new trends can arise at any time. and new trends can arise at any time.

Scanning on a continuous basis allows Scanning on a continuous basis allows your business to:your business to: Act quicklyAct quickly Take advantage of opportunities before Take advantage of opportunities before

competitors docompetitors do Respond to threats before they can Respond to threats before they can

cause damagecause damage

• Sometimes, businesses attempt to influence their external environments.

• They might lobby the government for changes in laws that affect them or their industries.

• They might contribute to campaign funds for political candidates who are on “their side.”

• Some people think it is unethical for businesses to involve themselves in government this way.

• What do you think?

MBAResearch

Acknowledgments

Original DevelopersChristopher C. Burke,

Sarah Bartlett Borich, MBAResearch

Version 1.0

Copyright © 2010MBA Research and Curriculum Center®

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