Every organization consists of its internal and external environment. Simply, scanning of the factors of these two (internal and external) environments is known as environmental scanning.
What is Environmental Scanning?
Environmental scanning is a process in which an organization monitors its internal and external environment with the aim to evaluate trends and make decisions on strategic plans. Its main objective is to let know managers about the changes in the environment.
It collects environmental information by monitoring and evaluating environmental trends. It also involves anticipation and interpretation of environmental changes.
Environmental scanning also called environmental analysis is the act of accumulating organizational internal and external environmental factors which may have direct or indirect, immediate or long term, operational or strategic issues. It facilitates managers to identify current situations, forecast the future, and determine the future direction of the organization.
It involves the ongoing tracking of trends, occurrences, patterns, and relationships within its different environments and detecting early indicators of opportunities and threats to the current and future plans of the organization. Managers need to move out of the organization, into and beyond their industry to global trends to make their business more competitive and global.
What Should Be Included in an Environmental Scan?
For successful environmental scanning, you should integrate the following vital information.
- The entire industry and its operating environment.
- The current level of services and how they might evolve.
- Current consumers and how their expectations might change.
- Visible and invisible issues are likely to affect the workplace and staff.
- Emerging and converging technologies.
- Emerging shifts in what we think are “business as usual”.
Methods of Environmental Scanning
There are different methods you can adapt to scan the environment. Some are:
Extrapolation is the method in which past information is recorded and analyzed to explore the future. The basic logic of the extrapolation method is that future is the function of the past.
It is a method in which some historical similar situations are prepared in order to estimate the future. This method of environment scan is used when the past data can not be used effectively to analyze an environmental trend.
In intuitive reasoning, the manager makes predictions about the future based on his theories and logic. It is a form of intellectual prediction in which the management makes an unbiased assumption about the future.
Expert Opinion Method
Experts are someone who has specialist experience and knowledge on particular issues. Under this method of environmental scanning, experts from outside of the organization are asked to estimate changing forces in the environment and forecast the future.
Brainstorming is the group problem-solving method in which a group of people is gathered, share their ideas, and a conclusion is drawn through collective discussion.
Process of Environmental Scanning
Environmental scanning is the sincere and in-depth analysis of the business environment to analyze opportunities and threats. It helps to gather information about the external world, competitors, and the organization itself. On the basis of the information scanned, organizations formulate new strategies, implement accordingly, and adjust them as necessary.
Environmental scanning is a systematic process consisting of a series of activities. These activities are:
Scanning Need Identification
Multiple pieces of information must be gathered for scanning from both the internal and exterior surroundings. As a result, at the first stage of the environmental scanning process, you should determine what information is needed and from what sources it may be obtained.
In order to get the data, it is necessary to evaluate the operating, internal, and remote environments. You should choose which internal and external factors need to be gathered and accessed at this point.
Clear concerns and difficulties faced by the organization for which scanning is to be undertaken must be known in order to accomplish this.
After determining the information needed, you should collect that information. The external environment provides information regarding the general environment information while resource capability, internal strengths, and task forces are collected from the internal environment and operating environment respectively.
In this stage, normally information is gathered for the purpose of accumulation.
Information Process and Synthesizing
The information must be processed and synthesized after it has been gathered. You should categorize the information as most influential, influential, less influential, and useless. They can also be divided into uses for the now and for the future.
More importantly, information needs to be classified on the basis of importance and impact. Some information can be processed to synthesize or formulate new information or more valid information is created.
After processing and synthesizing the information, on the basis of requirement they can be distributed or used for strategy formulation, or modification.
If the information is required for different units, departments, or decision-making centers they need to be distributed. More importantly, all the information can not be useful for all. Thus, only essential information at an essential degree is distributed.
Nowadays, management information systems, decision support systems, etc. store and supply important information for decision purposes. Many large organizations maintain information processing, storage, and dissemination center for continuous acts regarding environment scanning.
Information Evaluation and Use
Processed information finally is evaluated for appropriateness to formulate the strategies. Only the appropriate information is used for the purpose. As being environmental scanning a continuous process, this stage also provides feedback information to the scanning process. Evaluation and use of the information also identify the scope and need for further information.
Importance of Environmental Scanning
Proper environmental scanning is essential for environmental adaptation to achieve the desired goals. Following are some of its major importance.
It helps to analyze the strengths, weaknesses, opportunities, and threats of the organization. SWOT stands for strengths, weaknesses, opportunities, and threats.
It provides an analysis of internal and external environmental factors closely so that organization reveals valuable information for supporting and obstructing the growth of the organization.
Optimal Use of Resources
It provides valuable information to the organization which helps to conduct a deep analysis of opportunities and threats. The company develops strategies and action plans for the best use of resources based on the environmental analysis report.
Simply put, depending on the data obtained from the environmental study, companies may make the most efficient and effective use of their resources. Making the best use of resources, aids in the stability and growth of the company.
Helps in Decision-Making
As we know, decision-making is the management activity for the choice of the best alternative. The right information must be available to decision-makers in order for them to make efficient managerial judgments. Decision-makers receive this information from environmental scanning.
The organization’s threats and opportunities can be located and estimated by decision-makers. Additionally, they receive truthful information about the organization’s advantages and disadvantages. They can make the greatest choice to support organizational growth and prosperity based on such knowledge.
Growth and Stability of Business
The company uses environmental study methods to compile all the alterations in a corporate environment. Such knowledge offers useful insights into the types, timing, and degree of changes that will occur.
Organizations develop plans for enhancing their competitive advantage based on this knowledge. Based on environmental analysis data, an organization can manage its resources to decrease hindrances and increase gain, enabling the organization to grow and remain stable.
Business Strategy Formulation
Based on the opportunity, threats, strengths, and weaknesses of the organization, it is essential to formulate the most effective strategy for the future. Organizations need to formulate expansion as well as diversity decisions for organizational growth and stability.
Sometimes, for organizational existence as well, organizations need to take bold decisions. Such decisions, which may sometimes challenge organizational existence, must be based on accurate information. The environmental analysis provides such information so that organizations can formulate necessary business strategies.