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What is Environmental Scanning?

Environmental Scanning can define a process of monitoring the relevant environments to identify the opportunities that could benefit an organisation’s business or industry and the threats that should be avoided known as environmental scanning.

This process consists of tracing the source of any opportunity or threat and dividing the whole into parts so as to examine its nature and interrelationship.

In this article, we will discuss Environmental scanning and its characteristics, approaches, process and also the need for environmental scanning

Characteristics of Environmental Scanning

The following are the characteristics of environmental scanning:

1. As a Holistic Exercise
2. Continuous Process
3. Environmental Scanning Is a Heuristic or Exploratory Process

As a Holistic Exercise

Environmental scanning is a holistic exercise, that must take a total view of the environment rather than making a piecemeal analysis of various trends or components of the environment.

Continuous Process

Environmental scanning is a continuous process because the nature of the business environment itself is dynamic. Any intermittent scanning system will not yield desired results.

Environmental Scanning Is a Heuristic or Exploratory Process

It seeks to explore the unknown or uncertain terrain and various aspects of what could possibly happen in future. Therefore, the emphasis must be on alternative futures, seeking classifications on the assumptions about the uncertain future, speculating systematically about alternative courses of action, assessing probabilities or drawing more rational conclusions.

3 Approaches to the Environmental Scanning

The 3 approaches to the environmental scanning are as follow:

1. Systematic Approach
2. Ad-hoc Approach
3. Processed Form Approach

Systematic Approach

the systematic approach includes the development and implementation of such a system which will ensure scientific and continuous collection of information for environmental scanning.

Information relating to various factors of the environment which are relevant to the organisation’s business and industry are continuously collected to monitor changes occurring in them. Information related to markets, customers, changes in government policy, rules or regulations and 1egislation etc.

Ad-hoc Approach

This approach includes the conduct of special surveys and studies to deal with certain environmental issues from time to time. An ad-hoc approach, the organization may take up a specific project for scanning whenever it needs to evaluate its existing strategy or desire a new strategy.

Processed Form Approach

In this approach, the organisation uses information in a processed form which may be available from various sources both inside and outside the organisation. The information in processed form is usually supplied by government agencies or private institutions engaged in the compilation and processing of such information.

Process of Environmental Scanning

The process of environmental scanning involves the performance of the following steps in a sequential manner.

1. Examine environmental variables
2. Identification of Sources of Information
3. Selecting the Approaches of Environmental Scanning
4. Uses of Techniques of Environmental Scanning
5. Identification of Important Environmental Factors
6. Structure the Environmental Appraisal

Examine environmental variables

The first step in the process of environmental scanning involves the examination of environmental variables which have an impact on the organisation’s business and industry. These environmental variables comprise both the micro and macro environments of business.

The organisation requires identifying those variables which are relevant and also the variables which are general in nature. The key environmental variables can be customer-related, competition or market related, technology-related, regulatory framework related etc.

Identification of Sources of Information

Environmental scanning requires information which can be acquired from different sources. These could be formal and informal sources. These could be written as well as verbal sources. The origin of the sources of data could be internal as well as external. Some of the important types of sources of information are:

• Internal sources such as company files and documents, databases generated by management information systems, company employees, and so on.
  
  
• Secondary sources of information such as government publications, newspapers, journals, magazines, trade and industry associations newsletters, annual reports of competing firms, etc.
  
  
• Mass media such as radio, television and the internet.
  
  
• Formal studies were conducted by external agencies such as marketing research agencies, consultants and educational institutions.
  
  
• Spying and surveillance through industrial espionage agencies or through ex-employees of the competitors or by planting own persons in the rival companies.

Selecting the Approaches of Environmental Scanning

The organisation may adopt either a systematic approach or ad-hoc approach or processed form approach or a combination of these approaches in varying degrees depending upon the need of the situation.

Uses of Techniques of Environmental Scanning

The next step involves the use of various techniques of environmental scanning. There are formal or systematic techniques as well as intuitive methods available to the strategist. And these techniques may be selected depending upon the need and cost involved. Various authors have identified different methods or techniques of environmental scanning. Some of these techniques are:

• Scenario writing
  
• simulation
  
• morphological analysis
  
• structured and unstructured expert opinion
  
• dynamic modelling
  
• single variable extrapolation
  
• multivariable interaction analysis
  
• cross-impact analysis

Identification of Important Environmental Factors

There are several factors which affect environmental scanning. These factors are events, trends, issues and expectations of different groups which have an interest in the organisation or its stakeholders. Events are important and specific occurrences taking place in different environmental sectors.

The identification of important environmental factors becomes easier if each factor is tested with regard to its impact on the business of the organisation and the probability of such an impact.

Structure the Environmental Appraisal

The last step in the process of environmental scanning is to structure the environmental appraisal in such a way that the environmental issues identified in the earlier steps are classified into opportunities and threats and this needs to be done in a systematic manner.

Need for Environmental Scanning

These are the following need and importance of environmental scanning:

1. Anticipate the Unknown and Uncertain Environmental Changes
2. Recognition of Opportunities
3. Identifying Key Variables
4. For Strategic Decisions Making
5. For Monitoring the Environmental Changes

Anticipate the Unknown and Uncertain Environmental Changes

With the help of environmental scanning, organisations must be able to anticipate the unknown and uncertain environmental changes so that they are able to utilize the opportunities to grow and respond to the challenges and threats.

Recognition of Opportunities

The business scenario is highly competitive and no organisation can afford to miss opportunities that environmental changes are providing for the simple reason that the organisations which are efficient will grab such business opportunities and bring the inefficient and non-performing business organisations out of competition.

Identifying Key Variables

Environmental scanning is aimed at identifying key variables that offer actionable responses. The organisations should be able to respond either offensively or defensively to these key factors by formulating strategies that take advantage of external opportunities or that minimize the impact of potential threats.

For Strategic Decisions Making

It should provide inputs for strategic decision making. Mere collection of information or data is not enough. The information collected must be used for strategic decision making.

For Monitoring the Environmental Changes

We know that the environment is dynamic, complex, multifaceted, and has a far-reaching impact on the business. It is precisely for this reason that the environment has to be monitored and scanned continuously.

FAQ Related to Environmental Scanning