Environmental scanning

From Wikipedia, the free encyclopedia

Environmental scanning is a process of gathering, analyzing, and dispensing information for tactical or strategic purposes. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering.

There are three ways of scanning the business environment:

• Ad-hoc scanning - Short term, infrequent examinations usually initiated by a crisis
• Regular scanning - Studies done on a regular schedule (say, once a year)
• Continuous scanning(also called continuous learning) - continuous structured data collection and processing on a broad range of environmental factors

Most commentators feel that in today's turbulent business environment the best scanning method available is continuous scanning.This allows the firm to :

-act quickly
-take advantage of opportunities before competitors do
-respond to environmental threats before significant damage is done

The Macro Environment

 Environmental scanning usually refers just to the macro environment, but it can also include:
-industry 
-competitor analysis 
-marketing research(consumer analysis) 
-New Product Development(product innovations)
- the company's internal environment

Macro environmental scanning involves analysing:

• The Economy

GDP per capita
economic growth
unemployment]] rate
inflation]] rate
consumer and investor confidence
inventory levels
currency exchange rates
merchandise trade balance
financial and political health of trading partners
balance of payments
future trends

• Government

political climate - amount of government activity
political stability and risk
government debt
budget deficit or surplus
corporate and personal tax rates
payroll taxes
import tariffs and quotas
export restrictions
restrictions on international financial flows

• Legal

minimum wage laws
environmental protection laws
worker safety laws
union laws
copyright and patent laws
anti- monopoly laws
Sunday closing laws
municipal licences
laws that favour business investment

• Technology

efficiency of infrastructure, including: roads, ports, airports, rolling stock, hospitals, education, healthcare,           communication, etc.
industrial productivity
new manufacturing processes
new products and services of competitors
new products and services of supply chain partners
any new technology that could impact the company
cost and accessibility of electrical power

• Ecology
  • ecological concerns that affect the firms production processes
  • ecological concerns that affect customers' buying habits
  • ecological concerns that affect customers' perception of the company or product
• Socio-Cultural
  • demographic factors such as:
    • population size and distribution
    • age distribution
    • education levels
    • income levels
    • ethnic origins
    • religious affiliations
  • attitudes towards:
    • materialism, capitalism, free enterprise
    • individualism, role of family, role of government, collectivism
    • role of church and religion
    • consumerism
    • environmentalism
    • importance of work, pride of accomplishment
  • cultural structures including:
    • diet and nutrition
    • housing conditions
• Potential Suppliers
  • Labour supply
    • quantity of labour available
    • quality of labour available
    • stability of labour supply
    • wage expectations
    • employee turn-over rate
    • strikes and labour relations
    • educational facilities
  • Material suppliers
    • quality, quantity, price, and stability of material inputs
    • delivery delays
    • proximity of bulky or heavy material inputs
    • level of competition among suppliers
  • Service Providers
    • quantity, quality, price, and stability of service facilitators
    • special requirements
• Stakeholders
  • Lobbyists
  • Shareholders
  • Employees
  • Partners

Scanning these macro environmental variables for threats and opportunities requires that each issue be rated on two dimensions. It must be rated on its potential impact on the company, and rated on its likeliness of occurrence. Multiplying the potential impact parameter by the likeliness of occurrence parameter gives us a good indication of its importance to the firm.

[edit] Responses

When an issue is detected, there are generally six ways of responding to them:

• opposition strategy - try to influence the environmental forces so as to negate their impact - this is only successful where you have some control over the environmental variable in question
• adaptation strategy - adapt your marketing plan to the new environmental conditions
• offensive strategy - try to turn the new influence into an advantage - quick response can give you a competitive advantage
• redeployment strategy - redeploy your assets into another industry
• contingency strategies - determine a broad range of possible reactions - find substitutes
• passive strategy - no response - study the situation further