·
Environmental scanning
Environmental scanning
·
Scenario-based development
Scenario-based development
·
SWOT analysis and how they are important to the business managers.
SWOT analysis and how they are important to the business managers.
Definition of Environmental Scanning
Environmental scanning can be defined as ‘the
study and interpretation of the political, economic, social and technological
events and trends which influence a
study and interpretation of the political, economic, social and technological
events and trends which influence a
business, an industry or even a total
market’. The factors which need to be considered for environmental scanning are
events, trends, issues and expectations of the different interest groups.
Issues are often forerunners of trend breaks. A trend break could be a value
shift in society, a technological innovation that might be permanent or a
paradigm change. Issues are less deep-seated and can be ‘a temporary
short-lived reaction to a social phenomenon’. A trend can be defined as an
‘environmental phenomenon that has adopted a structural character.
Environmental scanning is one of the essential components of the global environmental analysis. Environmental monitoring, environmental forecasting and environmental
assessment complete the global environmental analysis. The global
environment refers to the macro environment which comprises industries,
markets, companies, clients and competitors. Consequently, there exist
corresponding analyses on the micro-level. Suppliers, customers and competitors
representing the micro environment of a company are analyzed within the
industry analysis.
assessment complete the global environmental analysis. The global
environment refers to the macro environment which comprises industries,
markets, companies, clients and competitors. Consequently, there exist
corresponding analyses on the micro-level. Suppliers, customers and competitors
representing the micro environment of a company are analyzed within the
industry analysis.
Approaches Used For Environmental Scanning
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.
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.
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.
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.
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.
The experts have suggested three approaches,
which could be adopted for, sort out information for environmental scanning:
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.
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.
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.
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 in Environmental Scanning
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.
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:
verified for correctness before it is processed and decisions are taken based
on it. The various sources from where information can be
gathered include:
1.
An internal document such
as files, records, management information system, employees, standards,
drawings, charts, etc.
An internal document such
as files, records, management information system, employees, standards,
drawings, charts, etc.
2.
Trade directories,
journals, magazines, newspapers, books, newsletters, government publications,
annual reports of companies, case studies, etc.
Trade directories,
journals, magazines, newspapers, books, newsletters, government publications,
annual reports of companies, case studies, etc.
3.
Internet, television, radio
news etc.
Internet, television, radio
news etc.
4.
External agencies like
customers, suppliers, inspection agencies, marketing intermediaries, dealers,
advertisers, associations, unions, government agencies, share holders,
competitors, etc.
External agencies like
customers, suppliers, inspection agencies, marketing intermediaries, dealers,
advertisers, associations, unions, government agencies, share holders,
competitors, etc.
5.
Market research reports,
consultants, educational institutions, testing laboratories etc.
Market research reports,
consultants, educational institutions, testing laboratories etc.
6.
Spying considered as a
powerful way of extracting information from other companies.
Spying considered as a
powerful way of extracting information from other companies.
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.
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:
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:
1.
Major events and trends in
environment are studied.
Major events and trends in
environment are studied.
2.
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.
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.
3.
Diagrams showing
interrelationships amongst various factors are prepared and an attempt is made
to quantify the results.
Diagrams showing
interrelationships amongst various factors are prepared and an attempt is made
to quantify the results.
4.
The study is reviewed by a
group of experts who deliberate on each aspect and on the possible strategies
that may be decided.
The study is reviewed by a
group of experts who deliberate on each aspect and on the possible strategies
that may be decided.
Scenario-Based Development
The process of scenario-based development when
it is infused with identification and analysis of relevant narratives can
produce potent insights. Bringing these two methodologies together represents
an important evolution in the use of scenarios to inform and drive strategy.
The three-step process of revealing the narratives – understanding the
conversations, determining which stories motivate behaviour and discerning the
narratives – produces unique insight into how leaders and others will likely
act in response to the trends that environmental scanning identifies. And it is
those actions that define what alternative futures are most worthy of our
consideration as planners and leaders.
it is infused with identification and analysis of relevant narratives can
produce potent insights. Bringing these two methodologies together represents
an important evolution in the use of scenarios to inform and drive strategy.
The three-step process of revealing the narratives – understanding the
conversations, determining which stories motivate behaviour and discerning the
narratives – produces unique insight into how leaders and others will likely
act in response to the trends that environmental scanning identifies. And it is
those actions that define what alternative futures are most worthy of our
consideration as planners and leaders.
When organizations start to use the scenarios
they have crafted to develop and test strategies, the understanding of
relevant narratives is of crucial significance. Strategy is about defining the
set and sequence of actions that will overcome obstacles and take advantage of
sources of strength to get the organization where it wants to go. Sometimes
narratives – for example, beliefs about the rules of competition in a market,
or about who has a “legitimate” right to compete – must be addressed before
progress is possible. Sometimes narratives can be used to persuade a market, or
the organization itself, regarding the objectives being pursued. In practice,
narrative-based strategies can be a key differentiator for those that employ
them.
they have crafted to develop and test strategies, the understanding of
relevant narratives is of crucial significance. Strategy is about defining the
set and sequence of actions that will overcome obstacles and take advantage of
sources of strength to get the organization where it wants to go. Sometimes
narratives – for example, beliefs about the rules of competition in a market,
or about who has a “legitimate” right to compete – must be addressed before
progress is possible. Sometimes narratives can be used to persuade a market, or
the organization itself, regarding the objectives being pursued. In practice,
narrative-based strategies can be a key differentiator for those that employ
them.
And, just as many organizations continue their
environmental scanning activity on an ongoing basis after their scenarios and
strategies are developed, continuous monitoring and analysis of the narrative
landscape can be used to watch for “indicators and warnings” or “signposts” of
important developments and trends. Through the process, organizations can track
and evaluate which narratives are becoming “louder” by gaining more adherents,
or are becoming a threat in ways they hadn’t previously been, and adjust
strategy accordingly.
environmental scanning activity on an ongoing basis after their scenarios and
strategies are developed, continuous monitoring and analysis of the narrative
landscape can be used to watch for “indicators and warnings” or “signposts” of
important developments and trends. Through the process, organizations can track
and evaluate which narratives are becoming “louder” by gaining more adherents,
or are becoming a threat in ways they hadn’t previously been, and adjust
strategy accordingly.
SWOT Analysis
A SWOT analysis is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats
involved in a project
or in a business
venture. A SWOT analysis can be carried out for a product, place, industry or
person. It involves specifying the objective of the business venture or project
and identifying the internal and external factors that are favorable and
unfavorable to achieve that objective. Some authors credit SWOT to Albert
Humphrey, who led a convention at the Stanford Research
Institute (now SRI International)
in the 1960s and 1970s using data from Fortune 500
companies. However, Humphrey himself does not claim the creation of SWOT, and
the origins remain obscure. The degree to which the internal environment of the
firm matches with the external environment is expressed by the concept of strategic fit.
involved in a project
or in a business
venture. A SWOT analysis can be carried out for a product, place, industry or
person. It involves specifying the objective of the business venture or project
and identifying the internal and external factors that are favorable and
unfavorable to achieve that objective. Some authors credit SWOT to Albert
Humphrey, who led a convention at the Stanford Research
Institute (now SRI International)
in the 1960s and 1970s using data from Fortune 500
companies. However, Humphrey himself does not claim the creation of SWOT, and
the origins remain obscure. The degree to which the internal environment of the
firm matches with the external environment is expressed by the concept of strategic fit.
·
Strengths: characteristics of the business or project that
give it an advantage over others.
Strengths: characteristics of the business or project that
give it an advantage over others.
·
Weaknesses: characteristics that place the business or project
at a disadvantage relative to others.
Weaknesses: characteristics that place the business or project
at a disadvantage relative to others.
·
Opportunities: elements that the project could exploit to its
advantage.
Opportunities: elements that the project could exploit to its
advantage.
·
Threats: elements in the environment that could cause
trouble for the business or project.
Threats: elements in the environment that could cause
trouble for the business or project.
Identification
of SWOTs is important because they can inform later steps in planning to
achieve the objective.
of SWOTs is important because they can inform later steps in planning to
achieve the objective.
First,
the decision makers should consider whether the objective is attainable, given
the SWOTs. If the objective is not
attainable a different objective must be selected and the process repeated. Users
of SWOT analysis need to ask and answer questions that generate meaningful
information for each category (strengths, weaknesses, opportunities, and
threats) to make the analysis useful and find their competitive advantage.
the decision makers should consider whether the objective is attainable, given
the SWOTs. If the objective is not
attainable a different objective must be selected and the process repeated. Users
of SWOT analysis need to ask and answer questions that generate meaningful
information for each category (strengths, weaknesses, opportunities, and
threats) to make the analysis useful and find their competitive advantage.
Importance of SWOT Analysis to the Business Manager
The
following are the importance of SWOT analysis to the business manager:
following are the importance of SWOT analysis to the business manager:
1. Using Resources Efficiently: Every
company–even the largest ones that dominate their markets–has a finite supply
of manpower, production capacity and capital. Evaluating the company’s
strengths helps it determine how to allocate these resources in a manner that
will result in the highest possible potential for revenue growth and profitability.
The management team examines where the company can compete most effectively.
The company often discovers it has competitive strengths that have not been
fully utilized in the past.
2. Improving Operations: When
the management team looks at the company’s weaknesses, it is not to assign
blame for past shortfalls in performance. It is to identify the most critical
areas that need to be improved in order for the business to more effectively
compete. A realistic assessment of weaknesses also prevents strategic blunders
like entering a market with products that are clearly inferior to what
well-entrenched competitors are offering. Continuous improvement in all areas
of a company’s operations is an important aspect of staying ahead of
competitors. Current weaknesses can–and must–be turned into future strengths.
3. Discovering Opportunities: Growth
in business requires seeking out new opportunities, including new potential
customer groups, broader product distribution, developing new categories of
products and services and geographic expansion. In SWOT analysis the management
team identifies emerging opportunities to take advantage of right now and tries
to forecast longer term opportunities so advance planning can be made to be
ready to enter the market when the time is right.
4. Dealing with Risks: A threat in SWOT analysis
is another term for risk–an occurrence outside the company’s control that
could have a negative impact on performance. Companies face many threats beyond
those caused by direct competitors. Changes in the regulatory environment can
have an adverse impact on performance. Consumer tastes can abruptly change such
as when a recession causes consumers to cut back on purchasing luxury goods and
services. Risks are less threatening to an organization when it takes the time
to develop contingency plans to quickly implement should the threats become a
reality. SWOT analysis helps a company be better prepared for whatever it will
encounter in the external environment.
5. Competitive Positioning: Many
companies do a form of SWOT analysis on their key competitors. Combined with
the information from the company’s SWOT analysis of itself, the management team
begins to get a picture of how the company should position itself against
competitors. The company wants to attack competitors’ weaknesses with its own
strengths. It is much like game planning in football–trying to locate where
the opposing team is vulnerable. Conversely, it does not want to meet a
competitor’s strengths head on if the competitor has an overwhelming advantage.
SWOT analysis shows a company that even its most powerful competitors have
weaknesses that can be exploited.
References
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(1995), “General Management” (2nd ed.). Pretoria: Pearson Inc.
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Jeffs, C. (2008), “Strategic Management”,
New York: SAGE Publications Ltd.
New York: SAGE Publications Ltd.
Menon, A.
(1999). “Antecedents and Consequences of Marketing Strategy Making”. Journal
of Marketing 63 (2): 18–40.
(1999). “Antecedents and Consequences of Marketing Strategy Making”. Journal
of Marketing 63 (2): 18–40.
Armstrong.
M. (2006) A handbook of Human Resource Management Practice (10th ed.). London:
Kogan Page
M. (2006) A handbook of Human Resource Management Practice (10th ed.). London:
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Chermack,
J., & Bernadette, K. (2007). “The Use of and Misuse of SWOT analysis
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J., & Bernadette, K. (2007). “The Use of and Misuse of SWOT analysis
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