Environmental scanning is a process of gathering, analyzing, and dispensing information for tactical or strategic purposes. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering.
Methods
There are three ways of scanning the business environment:
Ad-hoc scanning - Short term, infrequent examinations usually initiated by a crisis
Regular scanning - Studies done on a regular schedule (say, once a year)
Continuous scanning - (also called continuous learning) - continuous structured data collection and processing on a broad range of environmental factors
Most commentators feel that in today's turbulent business environment the best scanning method available is continuous scanning.This allows the firm to act quickly, take advantage of opportunities before competitors do, and respond to environmental threats before significant damage is done.[1]
The Macro Environment
Environmental scanning usually refers just to the macro environment, but it can also include industry and competitor analysis, consumer analysis, product innovations, and the company's internal environment. Macro environmental scanning involves analysing:
financial and political health of trading partners
balance of payments
future trends
Government
political climate - amount of government activity
political stability and risk
government debt
budget deficit or surplus
corporate and personal tax rates
payroll taxes
import tariffs and quotas
export restrictions
restrictions on international financial flows
Legal
minimum wage laws
environmental protection laws
worker safety laws
union laws
copyright and patent laws
anti- monopoly laws
Sunday closing laws
municipal licences
laws that favour business investment
Technology
efficiency of infrastructure, including: roads, ports, airports, rolling stock, hospitals, education, healthcare, communication, etc.
industrial productivity
new manufacturing processes
new products and services of competitors
new products and services of supply chain partners
any new technology that could impact the company
cost and accessibility of electrical power
Ecology
ecological concerns that affect the firms production processes
ecological concerns that affect customers' buying habits
ecological concerns that affect customers' perception of the company or product
Socio-Cultural
demographic factors such as:
population size and distribution
age distribution
education levels
income levels
ethnic origins
religious affiliations
attitudes towards:
materialism, capitalism, free enterprise
individualism, role of family, role of government, collectivism
role of church and religion
consumerism
environmentalism
importance of work, pride of accomplishment
cultural structures including:
diet and nutrition
housing conditions
Potential Suppliers
Labour supply
quantity of labour available
quality of labour available
stability of labour supply
wage expectations
employee turn-over rate
strikes and labour relations
educational facilities
Material suppliers
quality, quantity, price, and stability of material inputs
delivery delays
proximity of bulky or heavy material inputs
level of competition among suppliers
Service Providers
quantity, quality, price, and stability of service facilitators
special requirements
Stakeholders
Lobbyists
Shareholders
Employees
Partners
Scanning these macro environmental variables for threats and opportunities requires that each issue be rated on two dimensions. It must be rated on its potential impact on the company, and rated on its likeliness of occurrence. Multiplying the potential impact parameter by the likeliness of occurrence parameter gives us a good indication of its importance to the firm.
Responses
When an issue is detected, there are generally six ways of responding to them:
opposition strategy - try to influence the environmental forces so as to negate their impact - this is only successful where you have some control over the environmental variable in question
adaptation strategy - adapt your marketing plan to the new environmental conditions
offensive strategy - try to turn the new influence into an advantage - quick response can give you a competitive advantage
redeployment strategy - redeploy your assets into another industry
contingency strategies - determine a broad range of possible reactions - find substitutes
passive strategy - no response - study the situation further
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