This essay will provide a critical analysis of a business looking at internationalization. It will examine the benefits of environmental scanning on aspects such as organization performance, as well as the importance of creating an internationalisation strategy. It will also use past studies to demonstrate the opportunities environmental scanning can bring, in comparison to those business who merely use it.
“With fading barriers to trade, investment opportunities and technological innovation, more companies are advertising their products and services online as they see new openings for increased profit and growth” (Clipici, & Hagiu, 2009, p. 375). However, before a business begins to advertise their products or services over the web, it is curial that they undertake environmental scanning and create an internationalisation strategy. Environmental scanning is the process of collecting information about events, trends, and relationships extracted from an organization’s external environment to support top strategic planning and decision-making (Lau, Liao, Wong, & Chiu, 2012).
The purpose of environmental scanning is to help identify strategic factors, that will help determine the future of the organization. Many businesses can conduct such a procedure through a PEST Analysis or a SWOT Analysis. A PEST analysis is a useful business measurement tool for understanding market growth or decline and a direction for a business. PEST is an acronym for political, economic, social and technological analysis. Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs. The economic factors relate to changes in the wider economy such as economic growth, interest rates, exchange rates and inflation rate. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns (Research and markets, 2012). Once these factors have been determined the use of a SWOT analysis can be extremely helpful in identifying the “strengths, weaknesses, opportunities, and threats” towards selling a product online. (Adriana & Monica, 2008, p. 152) This scanning can allow a business to develop a product that will fit with potential consumers wants and needs, and also be able to create a internationalisation strategy to help the business keep a competitive advantage.
If organisations use these analysis’s effectively they can have “an information advantage over those that do not and become better aligned with the external conditions” (Daft, Sormunen, & Parks 1988, as cited in Cho, 2011, p. 152) Business should regularly undertake environmental scanning as there is consistent environmental changes which “increase information processing needs within organizations as managers must detect and interpret problem areas, identify opportunities, and implement strategic adaptations” (Rahim& Marvel, 201, p. 83) This will also allow businesses to “act quickly, take advantage of opportunities before competitors do and respond to environmental threats before significant damage is done” (Babatunde & Adebisi, 2012, p. 25).
Several studies suggest that environmental scanning can improve organisational performance. One of these studies was conducted by West (1988) who examined the relationship of organizational strategy and environmental scanning in regards to organisational performance. The study found that strategy and environmental scanning had a substantial influence on the firm's return on assets and return on sales (Choo, 2001, para. 7). Also Babatunde & Adebisi (2012) conducted a study that found the use of strategic environmental scanning enables an organization in opportunities to avoid threats existing within the environment, as well as leading to positive organisational performance.
Failure to collect information before starting plans can result in costly mistakes and missed...
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