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 the light of their concern for issues.
By monitoring the environment through environmental scanning, an organization can consider the impact of the different eve trends, issues and expectations on its strategic management process. Similarly any organization-facing environment as a complex the scanning is absolutely essential, and strategists have to deal cautiously with process environmental scanning.
The effort has to be to deal with it is such a manner that unnecessary time and effort is 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, sort 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 pertaining the organization’s business and industry, etc, could be collected continuous 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 organization has to undertake special projects, evaluate existing strategy or devise new strategies. Changes and unforeseen developments may be investigated 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 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 form secondary sources may sometimes even misguide strategy managers.
Hence it is important that information should 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, share holders, competitors, etc.
- Market research reports, consultants, educational institutions, testing laboratories etc.
- Spying considered as a powerful way of extracting information from other companies.
It is found that 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 to intuitive. Selection of a technique depends on 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 institutive techniques are also widely used.
The entire process consists of following steps:
- Major events and trends in environment are studied.
- A cause and effect relationship established with regard to events and trends for long and short term. This is done through brain storming in a group.
- Diagrams showing interrelationships amongst 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.