The external environment in which an organization exists consists of a bewildering variety of factors. These factors are events, trends, issues and expectations of different interested groups. Events are important and specific occurrences taking place in different environmental sectors.
Trends are the general tendencies or 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 light of their concern for issues.
By monitoring the environment through environmental scanning, an organization can consider the impact of the different trends, issues and expectations on its strategic management process. Similarly, any organization-facing environment as complex as scanning is absolutely essential, and strategists have to deal cautiously with process environmental scanning.
The effort has to be to deal with it in such a manner that unnecessary time and effort are not expended, while important facts are not ignored. For this to take place, it is important to devise an approach or a combination of different approaches, to environmental scanning.
Approaches to Environmental Scanning:
The experts have suggested three approaches, which could be adopted for, sorting out information for environmental scanning.
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 organization’s activities, government policy statements about the organization’s business and industry, etc, could be collected. Continuous updating of 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 devise new strategies. Changes and unforeseen developments may be investigated for 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 is available in processed form.
Sources of Information:
A company can obtain information from different sources, but it should be ensured that the information is correct. The correct source should be tapped for specific information for more accuracy. Information received from secondary sources may sometimes even misguide strategy managers.
Hence information must be verified for correctness before it is processed and decisions are taken based on it.
The various sources from where information can be gathered include:
An internal document viz, files, records, management information system, employees, standards, drawings, charts, etc.
Trade directories, journals, magazines, newspapers, books, newsletters, government publications, annual reports of companies, case studies, etc.
Internet, television, radio news etc.
External agencies like customers, suppliers, inspection agencies, marketing intermediaries, dealers, advertisers, associations, unions, government agencies, shareholders, competitors, etc.
Market research reports, consultants, educational institutions, testing laboratories etc.
Spying is considered a powerful way of extracting information from other companies.
It is found that the chronological order of information is also quite important for strategy managers. Usually, information received from government agencies is quite complex since processing takes more time. The information received from competitors is quite expensive but it is usually fresh and is quite useful.
Techniques Used for Environmental Scanning:
The techniques used for environmental scanning may be either very systematic or intuitive. The selection of a technique depends on the data required, source of data, timelines of information, relevance, cost of information, quantity, quality and availability of information, etc.
Some of the methods widely used can be categorized as follows: Scenario Writing, Simulation, Single Variable Extrapolation, Morphological Analysis, Cross Impact Analysis, Field Force Analysis, Game Theory, etc. The techniques are either statistical or mathematical in nature. However, judgmental and institutional techniques are also widely used.
The entire process consists of the following steps:
Major events and trends in the environment are studied.
A cause-and-effect relationship is established about events and trends for the long and short term. This is done through brainstorming in a group.
Diagrams showing interrelationships among various factors are prepared and an attempt is made to quantify the results.
The study is reviewed by a group of experts who deliberate on each aspect and on the possible strategies that may be decided.
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