ENVIRONMENTAL SCANNING & ITS TECHNIQUES

Introduction:

Every organization exist in the environment. So environmental factors such as customer, supplier, govt. policies & international condition etc. plays a very important role in the growth of any organization. So, scanning of business is very important for the management. To identify the various opportunity & threats for the business. Environmental scanning help the top management in the formation of policies & strategies.

Environmental Scanning is a continuous process , business environment is a continuously changing so management has to regularly analyze the environment. It is process by which organization monitor their relevant environment to identify the opportunity & threats affecting their business.

Meaning :

Scanning means “to look carefully or to examine”. The term environmental scanning in business means ” Carefully analyze the various factors influencing the business ”

Definition :

Environmental Scanning is a process by which Strategist monitor the environmental factors to determine opportunities threat to their firms. Environmental Scanning also consist of managerial decision made by accessing the significance of data of the Environmental analysis.

Need/Importance of environmental scanning :

• To frame policies & help in decision-making.

• To identify the strength & weaknesses of the business.

• To identify the opportunities & threats faced by business.

• To analyze competitors strategies.

• To bring innovation & change.

• To know the internal environment.

• To understand market conditions.

• To forecast demand.

• To make time gap arrangement.

• To understand economic policies of government & their impact on business.

KINDS

Ad-hoc Regular Continous

Process of environmental scanning:

• Defining mission & objective.

• Formulation of scanning team.

• Scanning internal & external environment. Analyses of resources.

Collection of data.

• Monitoring the result of scanning.

• Forecasting the future trend in relevant environmental factors.

• Accessing implication.

• Defining alternative strategies to achieve objective.

Techniques of Environmental scanning:

• SWOT Analyses : S Strength W Weakness O Opportunity T Threats

Strength & weakness are determine by internal analyze whereas opportunities & threats are determine by external analyze.

Strengths: characteristics of the business or project that give it an advantage over othersWeaknesses: are characteristics that place the team at a disadvantage relative to othersOpportunities: elements that the project could exploit to its advantageThreats: elements in the environment that could cause trouble for the business or project

•ETOP Analyze:

It was developed by GLUECK. ETOP stands for Environmental threat & opportunity profile. The preparation of ETOP involve following steps:-

Dividing the environment into different sectors.

Analyze the impact of each sector on the organization.

Sub- dividing each environmental factors into sub- factors.

Analyzing the impact of each sub factors on the organization in the form of a statement.

Preparing a summary to show the major factors.

Importance of ETOP:

Provide clear picture to the strategist about the sectors & factors in these sectors which may have favorable impact on the organization.

It help an organization in formulating an appropriate strategy to take advantage of opportunity & threats to the business.

•Spying:

It is usually done when direct collection of information is not possible. So in those cases information is collected by spying. There are certain agencies which give report about competitors plans & activities that have a bearing on strategic planning of the firm.

Ratio analyze:

Ratio is the expression of one number in terms of another. Ratio analysis techniques are used for scanning & analyses of external environment, specially for cost control etc.

Interpolation & Extrapolation:

Interpolation & Extrapolation are statistical technique through which the projected figure of some future number of years can be calculated. Interpolation is used where historic data is missing whereas Extrapolation is used for future forecasting. Interpolation has limited utility compared to extrapolation.

TOWS Heinz Weihrich developed a matrix called TOWS

matrix by comparing strengths and weaknesses of an organization with the opportunities and threats.

SO – Generate strategies that use strengths to take advantage of opportunities

WO - Generate strategies that take advantage of opportunities by overcoming weaknesses

ST – generate strategies that use strengths to avoid threats.

WT – generate strategies for retrenchment, divestment and closure.

QUEST

Quick environment scanning technique was proposed by B. Nanus. It involves 4 step process which uses scenario-writing for scanning the environment and identifying strategic options.