Methods of Environmental Scanning
Environmental scanning is the in-depth analysis of business environment factors that have a direct or indirect, immediate or future impact on an organization’s performance. Below are the common methods/techniques of environmental scanning you can adapt to scan the environment.
The extrapolation method of scanning the environment is the method by which past data and information are used to explore future events. The basic belief of this method is that the future is assumed to be a consequence i.e. future is the function of the past.
For extrapolation, different methods like trend analysis, forecasting, and regression analysis can be used. The basic assumption of this method is that the environmental situations remain as previous.
Historical analogy is the method in which past parallel situations are taken into consideration to forecast the future. Historical analogy is more suitable for estimating qualitative changes than quantitative changes like social norms, values, attitudes, work culture, etc.
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For example, the work culture of developing countries can be estimated by making a comparison of the situation in developed countries in a similar developing stage of the past. This method enables us various information regarding similar situations of the past.
Intuitive reasoning is when you use your own mind, knowledge, thinking, and justification to estimate the future. Here you only use your intuition without the use of any direct evidence, thus, it is also called the opposite of the extrapolation method.
Thus, here you analyze the environmental factors based on your own critical reasoning power. For this, you should have free thinking unconstrained by past experiences and personal biases.
Under the scenario-building method of environmental scanning, events are logically ordered sequences that have a logical cause-and-effect relationship to one another. In a certain environment, this method helps a lot, but in more flexible environments, it may not provide more reliable forecasting.
For example, businessmen maintain good inventory for festival seasons as more people spend on purchasing goods during these seasons. Farmers use scenarios to predict whether their products will be high or not depending upon the weather and forecast their sales and profits.
Cross-impact matrix is the method of studying the impact on each other of two conflicting situations or trends. Under this, the potential impact of two trends is estimated.
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For example, if the urban population and drone use increase, the probable situation could be air traffic issues in cities, congestion, safety, and parking issues could increase.
Morphological analysis is the method in which all possible ways to achieve organizational objectives are studied and analyzed. It can be used to anticipate and develop ideal patterns for achieving desired objectives.
It is a technique for locating, organizing, and looking at every single relationship that might exist within a specific multidimensional problem complex. The morphological analysis defines, connects, and internally evaluates the parameters of complicated issues to produce solution models and flexible conclusions.
The network method of scanning is a procedure of identifying active factors on the network by employing a feature or features in the network. Two types of network methods are popular: Contingency Trees and Relevance Trees.
Contingency Tree – A contingency tree is a graphic display of logical relationships among environmental trends that focuses on branch points at which several alternate outcomes are possible.
Relevance Tree – It is a logical network similar to a contingency tree, but assigning degrees of importance to various environmental trends with reference to an outcome.
Model building is similar to network methods of environmental scanning but relies more on developing mathematical representations of the environmental phenomena in question.
A huge number of scenarios and outcomes are created as part of the model-building process using the computer simulation model. Statistical and computer modeling is frequently used in simulation to examine how well a business process performs in new circumstances or to enhance a current set of procedures.
Companies can reduce the typical risks associated with change management initiatives by simulating various process scenarios and outcomes.
Executive Opinion Method
Executives are the persons holding top positions like CEO, MD, Managers, etc. with specific experience and authority. Under this method, such executives are allowed to scan the environment based on their experience.
They put their views and opinions based on their judgments. To balance the views and opinions of different executives, mostly, a panel of these executives is formed.
Expert Opinion Method
Experts are those with specialized knowledge and experience in a given field. This approach to environmental scanning involves asking specialists from outside the company to estimate and project future environmental factors.
Experts have expert views on certain issues, for example, the experts in marketing have better knowledge about market conditions, customer tastes, and preferences. The expert opinion method is similar to the executive opinion method but the experts are hired from outside the organization.
Brainstorming is the process of coming to a conclusion through a group discussion. Here, a group is formed to resolve a new problem. And, all the group member present their views, ideas, and solutions and finally, they come to a conclusion through mutual consent.
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The Delphi method involves systematic expert opinion gathering at various phases and applying the feedback to create fresh forecasts. The expansion of the expert opinion approach is this one.
It entails assembling a panel of specialists and asking each member of the panel about the expected environmental trend in the future. The responses were afterward summarized and given back to the participants for review. This procedure is repeated until a satisfactory consensus is reached.
Under the survey method, a field survey is conducted to estimate the future environment. Here, the opinions of different stakeholders such as customers, suppliers, debtors, creditors, experts, competitors, etc. are collected and analyzed in order to forecast future trends.
For the survey method to be successfully executed, a person or a group of people is put into the field. This method provides both qualitative and quantitative information to decision-makers.
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