Environmental scanning is a constant and careful analysis of the internal and external environment of an organization in order to detect opportunities, threats, trends, important lessons, and weaknesses which can impact the current and future strategies of the organization.
Identification of these variables can either be used to build strategies either to expand the business or to minimize their impacts on the growth of the business.
What is Environmental scanning?
Environmental scanning is an important part of the business process as it is the responsibility of an organization to keep a check on things which can put negative impacts on their business and their consumers.
The members of the organization look for the prominent internal and external threats which adversely affect the organization. Not only the issues which directly impact their consumers and suppliers but also the issues which impact the competitors and overall environment of the industry are scanned and new strategies are developed to deal with these issues.
Large organizations have employees specially hired for the research purpose who constantly research and learn about market changes and provide information to the higher management so that company doesn’t lag behind because of the lack of the knowledge about the market place changes.
Having knowledge about the issues in the business and market changes, management can take important decision for the future of the organization.
Followings are the efforts made by the organization to do an environmental scanning:
- Market research is performed and the data collected from the market research process is studied in order to make planning for future actions.
- Comparing the performance of the competitor company in order to learn about their strategies and business ideas.
- Learning from the executives of the organization.
- Analyzing and making decisions on the basis of the demographic data.
- Collecting information from articles issued, web pages, journals, magazines, and newspapers, etc.
Importance of environmental scanning
Environmental scanning plays an important role in the business process of an organization. There are many advantages of performing environmental analysis that helps the organization to stay safe from the business loss and to stay ahead in the competition.
- By performing environmental analysis, you can learn about the strengths, opportunities, opportunities available, and threats lurking around the industry. Having knowledge about all these things you can take a decision regarding your business and can reform your business strategies.
- The environmental analysis helps us to determine whether the resources such as human resource, capital resource, etc. are being used properly or not. It helps us to curb down the wastage of these important resources.
- Constant environment scanning helps the organization to learn about the opportunities and threats occurring in the industry and on the basis of that information future strategies can be planned and implemented. Hence, it helps the organizations to stay strong in the game.
- Environmental scanning helps you to learn about the business strategies of your competitors. You can take ideas from the strategies and can also form your strategies accordingly so that you can give constant competition to them.
- The data collected from environmental scanning plays an important role in long-term business planning.
- Environmental scanning helps you to stay connected with your consumers. You can learn about the changing expectations of your consumers and provide them services accordingly.
Components of Environmental Scanning
Business environment of an organization can be divided into two types of environment external environment and internal environment. there are different components associated with both the environments. Let us learn about them one by one.
#1 Internal Environmental components:
Internal environmental components are the components which lie within the organization and changes in these components impacts the overall performance of the organization. There are various internal environmental components such as different resources like human resources, capital resources, technological resources, etc., Objectives, Organizational structure, Value system, corporate structure, and labor union, etc.
These components play an important role in structuring the future of an organization therefore, it is important to analyze these components as a part of environmental scanning.
#2 External Environmental components:
External components are the components which exist outside the walls of an organization. Even though these components are not part of the organization, they still impact the business of the organization. The external environment can be divided into two categories such as Microenvironmental components and macro environmental components.
A) Micro Environmental components:
Micro environment components consist of components such as Competitors, suppliers, industry, organization, consumers, and market, etc.
B) Macro Environmental Components:
Macro environmental components consist of components such as Demographical environment, Economic environment, political environment, cultural environment, technological environment, etc.
Purpose of Environmental Scanning
Environmental scanning is conducted to collect data on for the various areas such as competition, employment trends. Geopolitical climate, economic condition, industry, technological advancement, industry, and global opportunities, etc.
It is important for an organization to consistently track the changing trends and to develop strategies accordingly. It also helps in decision making, for example, you can learn about the current demands and expectations of the consumers and produce and sell products accordingly so that you can expand your business.
However, in less dynamic organization environmental scanning can be done once in a year to just to learn about the issues faced by the organization.
Techniques of Environmental scanning
Environmental scanning is a process where deep analysis of an environment is done in order to learn about the new opportunities and threats on the basis of which new strategies can be prepared.
Here, you will learn about the different techniques which are used for environmental scanning purpose.
Environment scanning is conducted to learn about the latest trends of the industry and the lurking threats so that opportunities can be exploited and precautionary steps can be taken to reduce the impacts.
Research is an old method that has been used by various industries to learn about the industry in detail. Even there is a different department named as “Research and Development (R&D) department to conduct all research.
#2 Getting the opinions of experts:
In this method, the management of the organization take the opinion experts who have deep knowledge about the industry and can easily decode its latest trends and recognize the first appearance of the opportunities.
#3 SWOT analysis:
SWOT stands for Strength, Weaknesses, Opportunities, and Threats. This is a strategic technique opted by an organization to learn about its internal strengths and weaknesses. It is important to learn about business competition and project planning.
SWOT analysis is a technique to learn to identify internal and external factors which can be helpful in achieving the goal of an organization.
#5 PEST analysis:
PEST analysis is done to learn about the external macro environmental factors. PEST stands for P: Political, E: Economic, S: Social, T: Technological. These external macro environmental factors put an impact on the business of the organization and it is important for an organization to keep a track of them.
Political factors are regulated by the government and the changes in the political factors can put a great impact on the business environment, for example, the change in the tax policy or employment laws, etc.
#5 Analysis of industry:
There is a different organization in an industry which can be your direct or indirect competitors. They are part of the microenvironment. Environmental scanning is done to learn and understand the business strategies of your competitors in order to plan strategies to give competition to them.
Examples of Environmental scanning
The PepsiCo company is planning to shift its investment from producing beverages to producing healthier and functional foods using the knowledge from the environmental scanning and market research.
They are planning to collaborate with various food companies to produce healthy food and beverages by following the demand of the time as more and more people are now preferring healthy drinks and foods and not cold drinks and fast food.