Environmental scanning is obviously very important for all the firm’s. It helps the firm to analyze its internal and external environment so that the firm can run itself successfully.
In this blog, we will learn in detail about Environmental Scanning.
Let’s Find Out
2. Factors for Environment Scanning
3. Components of Environmental Scanning
4. Internal and External analysis of environment
5. Techniques of Environment Scanning
6. Importance of Environment Scanning
Environmental scanning is the process of analyzing the internal as well as external environment of an organization. It does so, for the identification of strength, weaknesses, opportunities, threats, trends etc., for developing new strategies and objectives of an organization.
Environmental scanning also helps the firm to make new strategies as well as policies as per the changing environment.
Factors for Environment Scanning
Given below, are some of the most important factors which should be considered for the environment scanning, they are:
- Firstly, Events
- Secondly, Trends
- Thirdly, Issues
- Lastly, Expectations
Generally, events are the important occurrences that takes place in the different environmental sectors of the business.
Basically, trends are referred as the general course of action with which the events takes place. Hence, with the help of trends, the organization identifies the various changes in the strength of events in a particular area of an organization.
Generally, issues are referred to the various concerns occur in response to events and trends. Once, organizations identify the issues which appear in environmental scanning it can take corrective action.
Expectations are basically those demands which are made by the interested groups for the concern of the issues.
Components of Environment Scanning
Following are the two components of environmental scanning, they are:
- Firstly, Internal environmental components
- Secondly, External environmental components
Internal environmental components
Internal environmental components are particularly those components which exist inside the organization.
To clarify, some of the examples of internal environmental components are capital resources, technological resources, structure of an organization, employees, and furthermore.
External environmental components
External environmental components are basically those components which exist outside the organization. These components are further divided into 2 parts, they are:
- Firstly, Micro external environmental components
- secondly, Macro external environmental components
Micro external environmental components
Micro external environmental components includes suppliers, competitors, consumers, public as well as market inter mediators.
Macro external environmental components
Macro external environmental components moreover includes economic environment, demographic environment, cultural environment, political environment, and furthermore.
Internal and External analysis of environment
Internal analysis of environment
Analysis of internal environment is done in order to know the strength and weaknesses of the firm.
Moreover, it includes the interaction of managers with the employees, interaction of employer with the employees. It also includes interaction of employees with other employees as well as analyze of organization structure and furthermore.
Internal environment can also be analyzed through interviews, surveys, questionnaires, etc.
External analysis of environment
Analysis of external environment is done in order to know the opportunities and threats for the firm in the competitive market.
In external environment following three environment are analyzed, they are:
Techniques of Environment Scanning
Following are the major techniques which are used for environmental scanning, they are:
- Firstly, SWOT analysis:
- Secondly, PEST analysis
- Thirdly, ETOP analysis
- Fourthly, QUEST analysis
- Lastly, SAP
Undoubtedly, it stands for:
S- Strength of an organization
W- Weakness of an organization
O- Opportunity of an organization
T- Threat of an organization
Altogether they mean, SWOT – Strength, Weakness, Opportunity and Threat
It analyses all the four (strength, weakness, opportunity as well as threat) factors. Moreover it also tells if they are favorable or unfavorable for our organizational environment.
Basically, this analysis says that, the organization should increase its strength and must decrease its weaknesses. It also tells that organization must grab the opportunities and must diffuse off all the threats in order to survive the organization.
Basically, PEST analysis stands for:
P- Political analysis
E- Economic analysis
S- Social analysis
T- Technological analysis
Altogether they mean, PEST Analysis – Political, Economic, Social and Technological Analysis
It is the analysis of political, economic, social and technological factors that influence the existence of the organization in the overall competitive market.
It also determine how these four factors can affect the performance, activities as well as operations of the business of an organization in the long run.
ETOP analysis basically stands for
E- Environmental analysis
T- Threat analysis
O- Opportunity analysis
P- Profile analysis
Altogether they mean, ETOP analysis – Environmental Threat and Opportunity Profile analysis
ETOP analysis is the process in which the organization not only monitors but also analyze the environment. It do so, in order to identify the opportunities and threats that affect the business of an organization.
ETOP analysis also divides the environment into various environmental sectors. Moreover, it also analyze the effect of each sector on the organization.
QUEST analysis specifically stands for
Altogether they mean, QUEST analysis – Quick Environmental Scanning Technique analysis
QUEST analysis gives the comprehensive first approximation to the trends and events of environment which are critical to overall strategic decisions of organizations.
QUEST is the systematic as well as intensive process. It not only develops the understanding of various high priority issues but also gains quick management attention on these strategic areas.
Basically, it stands for
S – Strategic
A – Advantage
P – Profile
Altogether, they mean SAP – Strategic Advantage Profile
Strategic advantage profile is the overall summary statement. It gives the overviews of all the advantages as well as disadvantages of all the important areas which affects the further future operations and activities of an organization.
Moreover it is an effective technique for the systematic evaluation of all the strategic advantage components. Significantly, these components plays an important role for an organization in its environment.
Importance of Environment Scanning
Following are the importance of environmental scanning:
Environment scanning not only helps the organization but also the firms to know their advantages as well as their internal strength. It also help organization for increasing its internal strength.
Environment scanning not only identifies the limitations but also states the weaknesses that are present inside the organization. Moreover, it also provide measures for reducing the weaknesses of the organizations.
Most importantly, environment scanning helps the organization to identify the overall opportunities in the competitive market. It also provides tools for grasping the opportunities present in the competitive market.
Optimum utilization of resources
Environment scanning also helps the firms to make optimum utilization of all the resources i.e. human, national and capital resources.
It also guides the firms to reduce the wastage of the resources.
Survival and growth
Undoubtedly, proper and systematic analysis of business environment helps the organizations to increase their strength, reduce their weaknesses ans also grab the opportunities.
It also diffuse off all the threats and enables the organization to survive and grow in the overall competitive business world.
To plan long-term strategy
Environmental scanning particularly helps the organization for building long term business strategy. It helps so, for facing the competitive situation of the market as well as for standing in the competitive market.
Generally, environment scanning helps the organization for the selection of best alternative from the group of various alternatives. Moreover, it helps to take decision as per the situation of the environment for the growth of an organization.
Identification of threat
Environment scanning helps the organization to identify the threats present in the overall external environment of an organization. As a result, identification of these threat helps the organization to diffuse these threat.
Environmental scanning analyze all the internal as well as external environment of an organization. Moreover, it also give all the information of the environmental scanning to the organization.
Basically, it enables organizations to make proper plans and strategies as per the data of environmental scanning in order to survive in the overall competitive business world.
In short, every organization must do their environmental scanning for increasing its overall strength, reducing its weaknesses, for knowing as well as grasping the available opportunities in the competitive market and also for diffuse off all the threats.
Hence, every organization must do environmental scanning for analyzing its overall environment.
(Ans.) Yes, environmental scanning is necessary for overall entrepreneurial activity. Since it provides entrepreneur the major key factors which are likely to change or happen in the future. In the meantime, the entrepreneur can adopt the business to overcome the major threats as well as can take advantage of the opportunities coming in their way.
(Ans.) Basically, environmental scanning is done for the identification of strength, weakness, opportunity and threats of the business firm.
(Ans.) Environmental scanning affect business in following ways:
Firstly, it helps and allows the business firms to take the best decision for the success and growth of the business.
Secondly, it identifies all the strength and opportunities for the business and also points out all the threats and weaknesses of the firms.