Environmental Scanning can be defined as the process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business for the purpose of taking strategic decisions.
Factors to be Considered for Environmental Scanning
The external environment in which an organization exists consists of a bewildering variety of factors. These factors (could also be termed as influences) are events, trends, issues and expectations of different interested groups. These factors are explained below:
Events are important and specific occurrences taking place in different environmental sectors. Trends are the general tendencies of the courses of action along which events take place. Issues are the current concerns that arise in response to events and trends. Expectations are the demands made by interested groups in the light of their concern for issues.
Take the example of the first public issue of shares of Reliance Industries in 1977. That was a specific event. The trend that started was of wider participation of public in equity investment in private sector companies. Note that earlier to that event, equity participation in India was limited to an exclusive class of investors and the general public was not aware or interested in investing money in shares. The issue that emerged was of the development of equity culture in India. The expectations by the general public that resulted was that the fruits of the economic development in the corporate sector would be shared by all and sundry. An allied expectation that ensued was of protection of small or minority shareholders from rapacious private business persons through legislation and governmental action.
Environmental influences are a complex amalgam of the events, trends, issues and expectations that continually shape the business environment of an organization. There is some research evidence to suggest that Indian organizations conduct environmental scanning for strategic planning.
By monitoring the environment through environmental scanning, an organization can consider the impact of the different events, trends, issues and expectations on its strategic management process. Since the environment facing any organization is complex and scanning it is absolutely essential, strategists have to deal cautiously with the process of environmental scanning.
Approaches to Environmental Scanning
Kubr has suggested three approaches which could be adopted for sorting out information for environmental scanning. We could call these approaches as systematic, ad hoc and processed-form approaches.
1. Systematic Approach: Under this approach, information for environmental scanning is collected systematically. Information related to markets and customers, changes in legislation and regulations that have a direct impact on an organisation’s activities, government policy statements pertaining to the organisation’s business and industry, etc. could be collected continuously to monitor changes and take the relevant factors into account. Continuously updating such information is necessary not only for strategic management but also for operational activities.
2. Ad hoc Approach: Using this approach, an organization may conduct special surveys and studies to deal with specific environmental issues from time to time. Such studies may be conducted, for instance, when an organization has to undertake special projects, evaluate existing strategies or device new strategies. Changes and unforeseen developments may also be investigates with regard to their impact on the organization.
3. Processed-form Approach: For adopting this approach, the organization uses information in a processed form, available from different sources both inside and outside the organization. When an organization uses information supplied by government agencies or private institutions, it uses secondary sources of data and the information...
Please join StudyMode to read the full document