38 The I n f o r ma t i o n Managemen t J ou r na l • Ma y/ June 2004

Environmental scanning – the internal communication of external information about

issues that may influence an organization’s decision-making process – can identify

emerging issues, situations, and potential pitfalls that may affect an organization’s future

ENVIRONMENTALSCANNING:RADAR FOR SUCCESSKendra S. Albright

Ma y/ June 2004 • T he I n f o r ma t i o n Managemen t J ou r na l 39

rganizations today face unprecedented challenges in maintainingcommercial survival and success. This is true for organizationsboth large and small, for-profit and non-profit. Success requires akeen strategic understanding of external influences in order torespond in ways that will ensure the organization’s survival and

success. Environmental scanning is one tool in an organization’s arsenal that canbe used to gain this understanding.

OAt the Core

This article

➢ defines environmental scanning

➢ explains why it is vital to anorganization’s strategic planning

➢ describes the process involved inenvironmental scanning

What Is EnvironmentalScanning?

Environmental scanning is theinternal communication of externalinformation about issues that maypotentially influence an organiza-tion’s decision-making process.Environmental scanning focuses onthe identification of emerging issues,situations, and potential pitfalls thatmay affect an organization’s future.The information gathered, includ-ing the events, trends, and relation-ships that are external to an organ-ization, is provided to key managerswithin the organization and is usedto guide management in futureplans. It is also used to evaluate anorganization’s strengths and weak-nesses in response to external threatsand opportunities. In essence, envi-ronmental scanning is a method foridentifying, collecting, and translat-ing information about externalinfluences into useful plans anddecisions.

Why Environmental Scanning?There are many important reasons

to do environmental scanning.Because of rapid changes in today’smarketplace and new and emergingbusiness practices, it is easy for anorganization to fall behind by notkeeping up in areas such as technol-ogy, regulations, and various risingtrends. Environmental scanningreduces the chance of being blind-sided and results in greater anticipa-tory management.

The relationship among markets,strategic planning, and the environ-

ment external to an organization iswhat defines an organization’s suc-cess. As external forces are identified,organizations have the opportunityto examine their options in responseto the challenge and consider theirinternal strengths and weaknesses torespond to these challenges.

According to John D. Stoffels’Strategic Issues Management: AComprehensive Guide to Environ-mental Scanning, environmentalscanning allows an organization toaddress external competitive, social,economic, and technical issues thatmay be hard to identify and are per-sistent. Specifically, its intent is notmerely one of information gathering;rather, its purpose is to focus onfuture impacts on the organizationrather than those centered on thepresent situation. Environmentalscanning helps an organization learnabout the potential influences fromexternal environments and how itcan respond strategically. Throughunderstanding these two elements –external influences and the organiza-tion’s internal processes – the organi-zation can respond in a more timelyand effective manner.

The focus of environmental scan-ning is on strategic thinking andplanning. Its value comes from theidentification and understanding ofcomplex issues facing the organiza-tion. Environmental scanning helpsan organization form a strategicposition from which it can addressexternal forces over which it has little,if any, control. Through consistentmonitoring of external influences,

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organizations can shape their owninternal processes to reflect necessaryand effective responses. The processof understanding the match betweenexternal influences and internalresponses assists in adjusting organi-zational structure and strategic plansthat are designed to be more effectiveand flexible to changing marketforces. Thus, the successful organiza-tion is focused on learning as well ason flexibility and responsiveness.

Environmental scanning is not astagnant process. It should be con-stant and ongoing in order to main-tain a preparative stance as environ-mental influences arise. This organi-zational learning process is a keycomponent to organizational suc-cess. Through constant monitoringof the environment, managementhas the ability to make necessaryadjustments in the organization’sresponse that can mean the differ-ence between success and failure.

External EnvironmentsThere are several external environ-

ments that may impact an organiza-tion. These can be grouped into cat-egories including social, regulatory,technological, political, economic,and industry. [See “External Environ-ments Impacting the Modern Organ-ization” on page 42]. Influences ofeach can negatively affect an organ-ization, resulting in poor perform-ance or ultimate failure. Of theseenvironments, as Chun Wei Choonotes in Information Managementfor the Intelligent Organization: TheArt of Scanning the Environment, theindustry’s environment is the mostsignificant, with its focus on cus-tomers, suppliers, and competitorsand their intricate relationships.

It is increasingly vital to the con-tinued growth and improved per-formance of an organization tomonitor these external environ-ments in order to make necessaryadjustments to these influences.Environmental scanning offers aprocess by which the value of an

Environmental scanning helps tofocus the organization’s strategicand tactical plans on those externalforces that may threaten its stabilityand turn those potential problems toits advantage

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organization may be maintained orenhanced even in the face of adver-sarial challenges. Environmentalscanning helps to focus the organi-zation’s strategic and tactical planson those external forces that maythreaten its stability and turn thosepotential problems to its advantage.An organization manages thisprocess by identifying and examin-ing those external events that mayotherwise be unpredictable anduncontrollable. The process assumesthat potential impacts on the organi-zation may come from unexpectedsources. Therefore, environmentalscanning is integrally linked to orga-nizational and strategic planning andplans for unexpected changes thatwill affect the organization.

Environmental scans must beconducted on an ongoing basis inorder to effectively monitor externalforces that are likely to impact anorganization. Issues for each of theexternal environments should beexplored. A comprehensive envi-ronmental scanning process willkeep a watchful eye on the potentialimpacts of the following differentenvironments:

• Industry/Market: Because the in-dustry/market environment gen-erally seems to be the most signif-icant, it is useful to examine thestructure of the industry andidentify the key competition inthe industry. Understanding therole of the competitors in themarket and their relationshipwith each other, their customers,and their suppliers will provideuseful information on trends andpotential problems for competingorganizations.

• Technology: The emergence ofnew technologies can impactorganizations’ overall businessand production processes. It isuseful, therefore, to monitorchanges in technologies, particu-larly those that influence businessefficiencies, changes in produc-

tion, existing infrastructures (e.g.,energy, transportation, and com-munication), and the rise of newproducts or services.

• Regulatory: Changes in laws and reg-ulatory guidelines may also have asignificant impact on the organiza-tion. Communications media own-ership laws, for example, can havedramatic effects on the numbers of

stations one owner may have, therebypotentially affecting the overall mar-ket structure and market share. Lawsregarding minimum wage and busi-ness taxes can have direct bearing onhiring practices within an organiza-tion. Regulatory information onemployment practices, intellectualproperty, and those that are industry-specific are important to consider.

tinizing developments based upon aset of criteria developed in conjunc-tion with the primary decision-makers in the organization, priori-tizing those trends and events withthe potential for the most criticalimpact.

Scanning the external environ-ment identifies potential threats toand opportunities for an organiza-tion; an internal assessment of anorganization identifies its strengthsand weaknesses. Informal sourcesand the information they produce,emerging issues, as well as thestrengths and weaknesses of anexisting system, can be identified. Amore formal scanning system canbe used to correct the weaknesses.

A formal environmental scanningprocess has five basic steps that areintegrally linked and may overlapwith others:

1) Identify the environmental scan-ning needs of the organization.The overall purpose of thescanning, participants in theprocess, and allocation of timeand resources must be deter-mined prior to beginning thescanning process. This meansthat senior management has torecognize the need for scanningin order for it to be successful.It is useful to have participants

• Economic: Local, regional, national,and international economies canaffect an organization, dependingon its size, scope, and market. Ratesof unemployment and inflation canhelp or hinder growth if the organ-ization is caught off-guard. Eco-nomic information can help theorganization prepare for changesin these and other related issues(e.g., exchange rates and grossnational product of potentialtrading nations).

• Social: Market changes are some-times driven by changes in society.Demographic shifts in the popula-tion may cause an increase ordecrease in demand for a givenproduct or service. Demographicinformation should be monitoredfor changes in variables such as sizeand distribution of population, age,education, and income. Additional,qualitative indicators (e.g., con-sumer attitudes) are also importantand should be monitored.

• Political: Local, national, and inter-national politics can influence anorganization in ways that may bedirect or indirect. Certainly, theacts of terror on September 11,2001, directly affected manynational and international busi-ness practices. Tariffs can concernorganizations by either restrictingtrade flows or by encouragingthem, depending on how they areset. It is useful for an organizationto have a clear understanding ofthe political climate in which itoperates so that it can be preparedfor sudden changes that resultfrom elections or changes in exist-ing policies or laws.

How Does EnvironmentalScanning Work?

Executives and other decision-makers within an organizationmust not spend their entire timemonitoring the environment. Theenvironmental scanning functioncan be set up as a distinct unit, scru-

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meet to initially discuss poten-tial changes that may influencethe organization based upontheir tacit knowledge and expe-riences.

2) Gather the information. Theorganization’s needs must thenbe translated into specific ele-ments of information that willbe required. A list of questionsand selected sources should beprepared in advance in order tomake scanning activities moretargeted and effective.

3) Analyze the information. Onceinformation has been collected,it should be analyzed for issuesand trends that may influencethe organization. This step mayneed to be repeated if there aregaps in the information or ifnew questions arise from thecompiled information.

4) Communicate the results. Infor-mation that has been analyzedand translated into potentialeffects on the organization cannext be reported to the appro-priate decision-makers withinthe firm. Because managersprefer to minimize the amountof time necessary to studyinformation and make deci-sions, reports should be pre-sented in concise format and

External Environments Impacting the Modern Organization

ORGANIZATION

POLITICAL

ECONOMIC

TECHNOLOGICAL

INDUSTRY/MARKET

REGULATORY

SOCIAL

ences of other organizations. Thisallows them to examine alternativesolutions, then develop effective poli-cies and decisions.

Managers obtain their informationfrom a variety of sources, includingprint and online materials. Choo saysthey often rely most heavily, however,on a small group of individuals whoserve as their network of resources.Managers prefer to receive informa-tion that is presented in person ratherthan through reading. This methodallows managers to get only thatinformation that they determine isnecessary for making decisions, toask questions, and to control the flowof information, which is not possiblewhen depending on a book or report.

Which Organizations ShouldConsider Scanning?

Organizations considering theestablishment or formalization of anenvironmental scanning functionshould ask themselves the followingquestions:

• Does the organization currentlycapture environmental informa-tion? In what ways? Is it formallystructured?

• Is environmental scanning infor-mation considered to be impor-tant to strategic decision-makingand planning? To operations?

• Is the organization flexible andopen to new ideas?

• Does the organization’s seniormanagement support the idea of

come from informal sources such asdirect interaction with a customer orfrom experts in the field. Later indi-cators may come from sources suchas newswires or press releases. By thetime information has been pub-lished, its effects will have likelyalready made their way into theorganization and may be too late tocounteract.

How Do Managers UseInformation?

Organizational managers and exec-utives are responsible for makingquick decisions that may significantlychange an organization. Environ-mental scanning offers anticipatoryand forecasting information to assistmanagers in making these decisionswhile attempting to identify crisesbefore they occur. Managers are alsoresponsible for making many deci-sions and, therefore, do not havemuch time to devote to systematicallysearching for information. Instead,they need timely information that hasbeen distilled down to the mainpoints that are relevant to the organi-zation.

Managers have certain preferencesfor how to receive information. Choosays that managers prefer informa-tion that is presented in concreteterms, clearly focused with attentiongiven to detail, and in a way thatallows them to scan and absorb theinformation quickly. Case studiesand examples are particularly usefulbecause managers often learnthrough comparison with experi-

customized to meet individualmanagers’ preferences.

5) Make informed decisions. Oncethe environmental scanning act-ivities have been presented, orga-nizational leadership can takeappropriate steps to position theorganization in the manner thatwill be most responsive to theopportunities or threats thathave been identified.

Information Sources forEnvironmental Scanning

There are a variety of sources com-monly used in environmental-scan-ning practices. These include bothexternal and internal information.External information sources caninclude a wide range of materialssuch as printed newspaper articlesand experts in the field. Externalsources do not have to be published;in fact, most managers get much oftheir information from word-of-mouth through a personal networkof contacts. Internal informationincludes organization-specific infor-mation that can be compared to thefindings of external scanning inorder to maximize organizationalresponsiveness. Examples of externaland internal information sources arelisted in the table above.

Generally, the planning phase ofthe environmental scan producestargeted issues likely to have an effecton the organization. Selecting whichsources to use will depend on thepotential point of impact on theorganization. Early warnings will

Sources of Information for Environmental ScanningExternal Information Sources• Personal contacts • Radio, television, Internet

• Journals/magazines • Professional colleagues

• Books • Customers

• Newspapers • Commercial databases

• Professional conferences/

meetings

Internal Information Sources• Personal contacts • Sales staff

• Internal reports • Other managers

• Conference papers • Other employees

• Internal memoranda • Internal databases

• Committees/meetings

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the assessment of new information,and the adjustment of internaloperations to meet new challengesas they arise. It can identify anorganization’s unique strengths,find weaknesses in its competitors,and identify new markets, prospec-tive customers, and emerging tech-nologies.Environmental scanning serves as anearly warning system, identifyingpotential threats to the organization.By alerting the organization to possi-ble changes in the environment,environmental scanning helps itmodify its strategies to the externalenvironment. The ultimate goal ofenvironmental scanning is to help anorganization learn about the externalenvironment in order to increase itsresponsiveness and flexibility in deci-sion-making processes.

environmental scanning at thehighest levels?

• Are the organization’s communi-cations channels open to environ-mental scanning activities?

• Is the level of investment allocatedto environmental scanning suffi-cient to benefit the organization?

• Where in the organization shouldthis function be coordinated andlocated?

If the organization’s senior man-agement or executive staff is strong-ly in favor of an environmentalscanning function, then it is morelikely to receive adequate invest-ment. In addition, managers whosupport the scanning function aremore likely to integrate it into thefull strategic planning function ofthe organization. This assimilationwill increase the likelihood of suc-cess in both the environmental scan-ning function as well as the overallorganization.

Barriers toEffective Scanning

There are several reasons whyenvironmental scanning may not beeffective in an organization. Thesheer volume of information may beoverwhelming, resulting in an infor-mation overload in which importantpieces of information may be over-looked or missed. There are alsomany sources of information thatscanners may not be aware of, and sothey may miss potentially importantinformation. Navigating the ocean ofexisting information is also difficultbecause of the sometime lack oforganization and completeness ofthat which is presented. Even in thebest of circumstances, informationmay no longer be timely by the timescanners are able to locate it. This isparticularly true of rapidly changingmarkets that are influenced by tech-nology or regulatory changes.

There are also problems withenvironmental scanning related tointerpretation of the informationthat has been gathered. Determina-

tion of relevance, familiarity withthe topic and information sources,language usage, time limitations,and accuracy of information all playa role in the analysis process. Inaddition, an overemphasis on scan-ning could have negative effects onan organization. This could be dueto the focus on a defensive strategyto external forces rather than a con-tinuation of process improvementand growth within the organization.

Environmental scanning offersmany advantages for modernorganizations. It contributes to anorganization’s transformation into alearning organization, one that con-tinually seeks new information thatmay change its overall position inthe marketplace. Environmentalscanning also assists in the develop-ment of strategic plans and policies,

Kendra S. Albright is Assistant Professor in the School of InformationSciences at the University of Tennessee, Knoxville. She may be contacted atalbright@utk.edu.

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Aguilar, Francis J. Scanning the Business Environment. New York: MacMillanCompany, 1967.

Choo, Chun Wei. Information Management for the Intelligent Organization: The Art ofScanning the Environment. Medford, N.J.: Information Today Inc., 2001.

“Environmental Scanning as Information Seeking and Organizational Learning.”Information Research 7 (October 2001). Available at http://informationr.net/ir/7-1/paper112.html (accessed 5 March 2004).

Snyder, Neil H. “Environmental Volatility, Scanning Intensity, and OrganizationalPerformance. Journal of Contemporary Business 10 (1981).

Stoffels, John D. Strategic Issues Management: A Comprehensive Guide toEnvironmental Scanning. Tarrytown, N.Y.: Elsevier Science Inc., 1994.

Read More About ItFahey, Liam, William R. King, and Vadake K. Narayanan. “Environmental Scanningand Forecasting in Strategic Planning: The State of the Art.” Long Range Planning 14(1981).

Kumar, Kamalesh, Ram Subramanian, and Karen Strandholm. “CompetitiveStrategy, Environmental Scanning and Performance: A Context Specific Analysis oftheir Relationship.” International Journal of Commerce & Management 11 (2001).

Thomas, Philip. S. “Environmental Scanning: The State of the Art.” Long RangePlanning 13 (February 1980).

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