ENVIRONMENTAL SCANNING
DEFINITION
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Environmental scanning is a process of gathering, analyzing, and dispensing
information for tactical or strategic purposes.
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Careful monitoring of an organization's internal and external environments for
detecting
early
signs
of
opportunities
and
threats
that
may influence its current and future plans. In comparison, surveillance is confined
to a specific objective or a narrow sector.
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It is monitoring and interpreting sweep of social, political, economic, ecological,
and technological events to spot budding trends that could eventually impact
industry
PURPOSE OF ENVIRONMENTAL SCANNING
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Effective utilisation of resources
Constant monitoring of resources
Strategy formulation
Identification of threats and opportunities
Useful for the managers
Prediction of future
FACTORS TO BE CONSIDERED FOR
ENVIRONMENTAL SCANNING
Events
Trends
External
environment of
business
Issues
Expectatio
ns of
people
APPROACHES TO ENVIRONMENTAL
SCANNING
• SYSTEMATIC APPROACH
 information for environmental scanning collected systematically
 Information pertaining to business and industry could be collected
continuously to monitor changes
 Continuous updating necessary not only for strategic management but also for
operational activities
 In this approach information is collected relating to mkt customers,changes in
legislation govt. policy have a direct impact on organisation.
 ADHOC APPROACH
 Organisations conduct special surveys and studies to undertake special
projects, evaluate existing strategies or devise new strategies
 Changes and unforeseen developments may also be investigated
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PROCESSED FORM APPROACH
 Information used is supplied by govt agencies or private instituitions
 Secondary data available from external and internal sources may also be used
FACTORS AFFECTING ENVIRONMENTAL
APPRAISAL
 Factors relating to nature of
environment
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Complexity
Flexibility
Hostility
Diversity
 Factors relating to the organisation
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Nature of the business
Age of the organisation
Size of the organisation
Nature of the markets
Nature of the products
 Factors relating to the
Strategies
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This is master level stretgy:- corporate
level strategy to achieve corporate
objective.
Sub level strategy:-for specific purpose
and to help master stretgy.
Functional level strategy:-how the
stretgy is translated into functions like
marketing,finance, production and R
AND D.
 Factors relating to strategists:
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Age , education and experience
Motivational level
Ability to withstand pressure and strain
Interpersonal relations
STRUCTURING THE ENVIRONMENTAL APPRAISAL
• Two most important techniques of
environmental appraisal are:
ETOP(environmental threats and
opportunities) Analysis
SWOT(strengths, weaknesses, opportunities
and threats) analysis
ETOP
Steps involved in the preparation of ETOP:
 Dividing the environment into different sectors
 Analysing the impact of each sector on the organisation
 Subdividing each environmental factor into sub factors for a
comprehensive ETOP
 Analysing the impact of each subfactor on the organisation in
the form of a statement
 Preparing a summary to show the major factors for the sake
of simplicity
Importance of ETOP
• Provides a clear picture to the strategists of
the sectors and the different factors in those
sectors
• Helps the organisation in knowing where it
stands with respect to its environment
• Helps the organisation in formulating
appropriate strategy to take advantage of the
opportunities and threats in its business
SWOT Analysis
• SWOT stands for Strengths, Weaknesses,
Opportunities and Threats
 Identification of the threats and opportunities in the
external environment and strengths and weaknesses
in the internal environment of the firms are the
cornerstone of business policy formulation.
 It is the SWOT analysis which determines the course
of action to ensure the growth / survival of the firm.
Strengths
Strengths—internal to the unit; are a unit’s resources and capabilities that can be
used as a basis for developing a competitive advantage; strength should be
realistic and not modest.
The list of strengths should be able to answer:
• What are the unit’s advantages?
• What does the unit do well?
• What relevant resources do you have access to?
• What do other people see as your strengths?
• What would you want to boast about to someone who knows nothing about this
organization and its work?
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Examples: good reputation among customers, resources, assets, people, :
experience, knowledge, data, capabilities
Think in terms of: capabilities; competitive advantages; resources, assets, people
(experience, knowledge); marketing; quality; location; accreditations
qualifications, certifications; processes/systems
Weaknesses
Weaknesses—internal force that could serve as a barrier to maintain or achieve a
competitive advantage; a limitation, fault or defect of the unit;
It should be truthful so that they may be overcome as quickly as possible
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The list of weaknesses should be able to answer:
What can be improved?
What is done poorly?
What should be avoided?
What are you doing as an organization that you feel could be done more
effectively/efficiently?
What is this organization NOT doing that you feel it should be doing?
If you could change one thing that would help this department function more effectively,
what would you change?
Examples: gaps in capabilities, financial, deadlines, morale
lack of competitive
Opportunities
Opportunities—any favorable situation present now or in
the future in the external environment.
• Examples: unfulfilled customer need, arrival of new
technologies, loosening of regulations, global influences,
economic boom, demographic shift
• Where are the good opportunities facing you?
• What are the interesting trends you are aware of?
• Think of: market developments; competitor; vulnerabilities;
industry/ lifestyle trends;; geographical; partnerships
Threats
External force that could inhibit the maintenance or attainment of a
competitive advantage; any unfavorable situation in the external environment
that is potentially damaging now or in the future.
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Examples: shifts in consumer tastes, new regulations, political or legislative
effects, environmental effects, new technology, loss of key staff, economic
downturn, demographic shifts, competitor intent; market demands; sustaining
internal capability; insurmountable weaknesses; financial backing
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The list of threats should be able to answer:
What obstacles do you face?
What is your competition doing?
Are the required specifications for your job/services changing?
Is changing technology threatening your position?
Do you have financial problems?
Could any of your weaknesses seriously threaten your unit?
Pest Analysis
• It is very important that an organization
considers its environment before beginning
the marketing process. In fact, environmental
analysis should be continuous and feed all
aspects of planning. The macro-environment
consists of e.g. Political (and legal) forces,
Economic forces, Sociocultural forces, and
Technological forces. These are known
as PEST factors.
PEST
political
economic
socialcultural
technological
POLITICAL FACTORS
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The political arena has a huge influence upon the
regulation of businesses, and the spending power of
consumers and other businesses. One must consider
issues such as:
1.How stable is the political environment?
2.Will government policy influence laws that regulate or tax
your business?
3.What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and
religion?
6. Is the government involved in trading agreements such
as EU, NAFTA, ASEAN, or others?
ECONOMIC FACTORS
Marketers need to consider the state of a
trading economy in the short and long-terms.
This is especially true when planning for
international marketing. One need to look at:
• 1. Interest rates.
• 2. The level of inflation Employment level per
capita.
• 3. Long-term prospects for the economy Gross
Domestic Product (GDP) per capita, and so on.
SOCIO-CULTURAL FACTORS
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The social and cultural influences on business vary from country to
country. It is very important that such factors are considered.
Factors include:
1.What is the dominant religion?
2.What are attitudes to foreign products and services?
3.Does language impact upon the diffusion of products onto
markets?
4.How much time do consumers have for leisure?
5.What are the roles of men and women within society?
6.How long are the population living? Are the older generations
wealthy?
7.Do the population have a strong/weak opinion on green issues?
TECHNOLOGICAL FACTORS
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Technology is vital for competitive advantage, and is a
major driver of globalization. Consider the following
points:
1. Does technology allow for products and services to be
made more cheaply and to a better standard of quality?
2.Do the technologies offer consumers and businesses
more innovative products and services such as Internet
banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g.
books via the Internet, flight tickets, auctions, etc?
4.Does technology offer companies a new way to
communicate with consumers e.g. banners, Customer
Relationship Management (CRM), etc?