What is environmental scanning?
Environmental scanning is the communication of external information about facts that could influence an organization on its’ strategic decision-making process. It is a method of analyzing relevant gathered information and use to determine strategic and premeditated action on the business environment. The environmental scanning process seek obtain both realistic and subjective information on the business environments where a corporation is functioning or considering entering. It is the possession and use of information concerning events, trends, and interaction in an organization's external environment, the data of which could support management in scheduling the organization's future line of action. Organizations should scan the environment in order to recognize any external factors that could affect their position on the market, and therefore build up successful responses to protected or improve their position in the future. They scan in order to evade surprises, spot pressure and opportunities, increase competitive advantage, and improve long-term and immediate planning. An organization's capability to adapt to its external environment is strongly dependent on the interpretation of external factors. Environmental scanning focuses on the detection of rising issues, circumstances, and potential issues that could determine an organization's future. The gathered information is provided to key managers on the organization and used to direct management in future plans. It is also used to evaluate an organization's strengths and weaknesses in response to external threats and opportunities. In essence, environmental scanning is a process to identify, collect, and transmit information about external factors to be converted into plans and decisions. Environmental scanning assesses the internal strengths and weaknesses of an organization in relation to the external opportunities and threats it faces. All organizations need examine at some stage what goes on in their environments and be familiar with their strengths and weaknesses in relation to it. The importance of environmental information depends on the extent to which the accomplishment of the organization itself depends on its environment. The correlation between an organization and its environment depends upon on the internal strengths and weaknesses of the company, which means that an opportunity for one company will be viewed as a risk to another, depending on how well each is placed to deal with the particular concern. In the industry literature, this dependency of the organization on its environment is referred to as: Perceived Environmental Uncertainty (PEU). Gordon and Narayanan (1984, p33-47) acknowledged some factors that determine PEU. These factors consist of the character of the society, economic stability, legal constancy, political constraints, and nature of the industry, customer base and the nature of the organization. Khandwalla (1977, p326-354) identifies three probable relationships between organizations and their environments: •
Dominant organization/dominated environment
Dominant environment/dominated organization
Symbiotic relationship – neither the environment nor the company dominates.
There are numerous important reasons to carry an environmental scanning activity. Because of fast changes in today's market and recent and emerging business practices, it is easy for an organization to fall behind by not keeping up in areas such as technology, regulations, and various rising trends. Environmental scanning reduces the possibility of being blindsided and results in superior anticipatory management. Environmental scanning helps organizations gain knowledge of possible influences from outside environments and how it can react strategically. Understanding two elements: external influences and the organization's internal practices. An organization can take action in a more suitable and efficient manner. The aim of...
References: and Further Reading
Bryson, J.M. (1989). “Strategic Planning for Public and Nonprofits Organizations.” San Francisco: Jossey-Bass.
Choo, Chun Wei. “Environmental scanning as information seeking and organizational learning.” Information Research, Vol. 7 No. 1 (October 2001). [Online] Available from: http://informationr.net/ir/7-1/paper112.html [Accessed 31 October 2008].
Gillespie: “Foundations of Economics - Additional chapter on Business Strategy.” Oxford University Press. (2007). [Online] Available from: http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm [Accessed 03 November 2008].
Gordon, Lawrence A. and Narayanan, V.K. (1984). “Management Accounting Systems, Perceived Environmental Uncertainty and Organization Structure: An Empirical Investigation.” Accounting Organizations and Society, 9(1).
Khandwalla, Pradip N. (1977). “The Design of Organizations.” New York: Harcourt Brace Jovanovich, Inc.
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