Environmental Scanning and Monitoring

It consists of a process of gathering, analyzing, and dispensing information for tactical or strategic purposes about the environments in which an organization is operating.

Some organizations regularly carry out the processes of environmental scanning and monitoring to provide them with early warning about important future changes in an effort to “keep ahead of the pack”.

Environment scanning and monitoring helps the signals of potential changes in the environment. It also detects the changes that are already under way.

It normally reveals ambiguous, incomplete, or unconnected data and information. It involves a detailed and micro study of the environment.

Hence, it is also called the X-ray of the environment. The environment uncertainty, complexity and dynamism are studies to assess the trend of environment. It is the base of environment analysis. It is normally done when there is high level of uncertainty in the environment. It is a continuous process.

It also helps to evaluate the long term strategic plan that will be aligned with future business conditions.

The scanning system should be aligned with the organizational context. Hence, a scanning system designed for a volatile environment may be inappropriate for a stable environment. Many organizations even use special software and internet for environment scanning.

Techniques of Environmental Scanning and Monitoring

Following are the techniques of environmental scanning and monitoring:-1) SWOT Analysis:-This method was created in the 1960s by Albert

Humphrey of the Stanford Research Institute, during a study conducted to identify why corporate planning consistently failed.

Since its creation, SWOT has become one of the most useful tools for business owners to start and grow their companies.

Elements of a SWOT analysis

As its name states, a SWOT analysis examines four elements:

• Strengths: Internal attributes and resources that support a successful outcome.

• Weaknesses: Internal attributes and resources that work against a successful outcome.

• Opportunities: External factors that the entity can capitalize on or use to its advantage.

• Threats: External factors that could jeopardize the entity's success.

A SWOT analysis is a compilation of your company's strengths, weaknesses, opportunities and threats.

The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision.

A SWOT (strengths, weaknesses, opportunities and threats) analysis is a planning process that helps your company overcome challenges and determine what new leads to pursue.

The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision.

A SWOT matrix is often used to organize items identified under each of these four elements. A SWOT matrix is usually a square divided into four quadrants, with each quadrant representing one of the specific elements. Decision-makers identify and list specific strengths in the first quadrant, weaknesses in the next, then opportunities and, lastly, threats.

Entities undertaking a SWOT analysis can opt to use any one of the various SWOT analysis templates in existence; these templates are generally variations of the standard four-quadrant SWOT matrix.

• Using a SWOT analysis

A SWOT analysis should be used to help an entity, whether it is an organization or an individual, to gain insight into its current and future position in the marketplace or against a stated goal.

The idea is that because entities can see competitive advantages and positive prospects, as well as existing and potential problems, they can develop plans to capitalize on positives, address deficits or do both.

In other words, once the SWOT factors are identified, decision-makers should be better able to ascertain if an initiative, project or product is worth pursuing and what is required to make it successful. As such, the analysis aims to help an organization match its resources to the competitive environment in which it operates.

• SWOT analysis pros and cons

SWOT analysis can help the decision-making process by creating a visual representation of the various factors that are most likely to impact whether the business, project, initiative or individual can successfully achieve an objective.

Although that snapshot is important for understanding the multiple dynamics that impact success, a SWOT analysis does have its limits. The analysis may not include all relevant factors for all four elements, thereby giving a skewed perspective.

Moreover, because it only captures factors at a particular point in time and doesn't allow for how those factors could change over time, the insight it offers could have a limited shelf life.

2) PESTLE:- A PESTLE analysis or PESTEL analysis (formerly known as PEST analysis) is a framework or tool used to analyze and monitor the macro-environmental factors that may have a profound impact on an organization's performance.

This tool is especially useful when starting a new business or entering a foreign market. It is often used in collaboration with other analytical business tools such as the SWOT analysis and Porter’s Five Forces to give a clear understanding of a situation and related internal and external factors.

PESTEL stands for:

• P – Political

• E – Economic

• S – Social

• T – Technological

• L – Legal

• E – Environmental

• Political Factors:

These factors are all about how and to what degree a government intervenes in the economy or a certain industry. Basically all the influences that a government has on your business could be classified here.

This can include government policy, political stability or instability, corruption, foreign trade policy, tax policy, labour law, environmental law and trade restrictions.

Furthermore, the government may have a profound impact on a nation’s education system, infrastructure and health regulations. These are all factors that need to be taken into account when assessing the attractiveness of a potential market.

• Economic Factors:

Economic factors are determinants of a certain economy’s performance. Factors include economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers and unemployment rates.

These factors may have a direct or indirect long term impact on a company, since it affects the purchasing power of consumers and could possibly change demand/supply models in the economy. Consequently it also affects the way companies price their products and services.

• Social Factors:

This dimension of the general environment represents the demographic characteristics, norms, customs and values of the population within which the organization operates.

This includes population trends such as the population growth rate, age distribution, income distribution, career attitudes, safety emphasis, health consciousness, lifestyle attitudes and cultural barriers.

These factors are especially important for marketers when targeting certain customers. In addition, it also says something about the local workforce and its willingness to work under certain conditions.

• Technological Factors:

These factors pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. This refers to technology incentives, the level of innovation, automation, research and development (R&D) activity, technological change and the amount of technological awareness that a market possesses.

These factors may influence decisions to enter or not enter certain industries, to launch or not launch certain products or to outsource production activities abroad.

By knowing what is going on technology-wise, you may be able to prevent your company from spending a lot of money on developing a technology that would become obsolete very soon due to disruptive technological changes elsewhere.

• Legal Factors:

Although these factors may have some overlap with the political factors, they include more specific laws such as discrimination laws, antitrust laws, employment laws, consumer protection laws, copyright and patent laws, and health and safety laws.

It is clear that companies need to know what is and what is not legal in order to trade successfully and ethically. If an organisation trades globally this becomes especially tricky since each country has its own set of rules and regulations.

In addition, you want to be aware of any potential changes in legislation and the impact it may have on your business in the future. Recommended is to have a legal advisor or attorney to help you with these kind of things.

• Environmental Factors:

Environmental factors have come to the forefront only relatively recently. They have become important due to the increasing scarcity of raw materials, pollution targets and carbon footprint targets set by governments.

These factors include ecological and environmental aspects such as weather, climate, environmental offsets and climate change which may especially affect industries such as tourism, farming, agriculture and insurance.

PESTEL Analysis In Sum

3) QUEST Analysis:- B. Nanus proposed QUEST. It is a four-step process that uses scenario writing for environmental scanning. Following are the four steps involved in this technique:

• Strategy planners first observe the events and trends of the organization.

• Then, from that observation they broadly consider important issues, which may affect the organization, using environment appraisal.

• Summarizing these issues, their effects and different scenarios to show the implementation of these strategies, creates a report.

• In the last step, the planners who decide the feasibility of the suggested strategy that is beneficial for the organization review reports and scenarios.

1. Internal strategists will observe and identify the major events and trends in the Industry

2. Speculate on a wide range of important ISSUES that might affect the future of their organization

3. Preparing a report summarizing the major issues and their implications and 3-5 scenarios incorporating the major themes of their discussion.

4. Report and scenarios are reviewed by a group of strategists who identify feasible strategic options to deal with the evolving environment.

After the environmental scanning process is complete, the strategists start to appraise the environment - called environmental appraisal. It is structured by the preparation of the environmental threats and opportunities profile (ETOP), which involves dividing the environment into different sectors and then analyzing the impact of each sector on the organization .