Environmental Scanning and Analysis

Environmental Scanning and Analysis.

Environmental Analysis can be defined as the process which examines all the components whether internal or external that has an influence on the performance of the organization. Here, the internal components indicates the strength and weaknesses of the business entity whereas the external components indicates the opportunities and threats outside the organization..

Environmental Analysis is the process through which an organization monitors and comprehends various environmental forces to determine the opportunities and threats that lie ahead in the future. Further, Environmental Analysis is also known as Environmental Appraisal or Environmental Scanning.

Characteristic of Environmental Analysis.

Holistic View:. Environmental Analysis is a holistic exercise in the sense that it must comprise a total view of the environment rather than viewing a trend piecemeal. The corporate must scan the circumference of its environment in order to minimize the chances of surprises and to maximize its utility.

Continuous Process:. The analysis of environment must be a continuous process rather than being an intermittent scanning system. It must operate continuously in order to keep track of the rapid pace of development. So, Environmental analysis becomes essential due to the dynamic nature of the environment..

Exploratory Process:. While the Monitoring aspect of the environment is concerned with the present development, a large part of the process seeks to explore the unknown dimensions of possible future. The analysis emphasizes on "What could happen" and not necessarily "What will happen.".

Importance of Environmental Analysis.

First Mover Advantage:. Awareness of environment helps an enterprise to take advantage of early opportunities instead of losing them to competitors. For instance, Maruti Udyog became the leader in the small car market because it was the first to recognize the need for small cars on account of rising Middle class.

Early Warning Signal:. Environmental awareness serves as an early warning signal. It makes a firm aware of the impending threat or crisis, so that the firm can take timely action to minimize the adverse effects if any. For instance, A MNC entering in to the Indian market would act as a early warning signal for Indian Firms..

Focus On Customer:. Environmental Understanding makes the management or Business organization sensitive towards the changing needs and expectations of customer. For instance, Several FMCG companies have launched small sachets of shampoo and other products realizing the wishes of customers..

Strategy Formulation:. Environmental Monitoring provides relevant information about the business environment. such information serves as the basis for strategy formulation. For Instance, ITC realized that there is a vast scope for growth in the travel and tourism industry in India and therefore ITC planned New hotels in India..

Change Agent:. Business leaders acts as the agents of change. They create a drive for change at the grassroot level. In order to decide the direction and nature of change, the leaders need to understand the aspirations of people and other environmental forces through Environmental Scanning..

Public Image:. A business firm can improve its image by showing that it is sensitive to its environment and responsive to the aspirations of public. Environmental understanding enables the business to be responsive to their environment..

Continuous Learning:. Environmental analysis keeps the organization in touch with the changing scenario so that they are never caught unaware. With the help of Environmental learning, managers can react in an appropriate manner and thereby increase the success of their organization..

Process of Environmental Analysis/Scanning.

Environmental Scanning:. It means the process of analyzing the environment for identifying the factors which may influence the business. Environmental Scanning alerts an organization to potentially significant forces in the external environment, so that suitable strategic initiatives may be taken before the organization reaches to a critical situation..

Environmental Monitoring:. At this stage, the information from the relevant environment is collected. Once this information is collected, adequate data is gathered to find out the patterns and trends of the environment. Further Monitoring is a follow up and deeper analysis of environmental forces. Several techniques such as company records, spying, publication and verbal talks with the customers, employees, dealers and suppliers are the main sources of collecting data..

Environmental Forecasting. Environmental Forecasting is the process of estimating the events of future based on the analysis of past records and present behavior. Further it is necessary to analyze or anticipate the future events before any strategic plans are formulated. Forecasts are made for economic, social and political factors. Several techniques such as Time series, Graph method, Delphi method etc. are used for this purpose..

Assessment Or Diagnosis:. At this stage, Environmental factors are assessed in terms of their impact on the organization. Some factors in the environment may entail an opportunity while others may pose a threat to the organization. For this purpose, SWOT analysis and ETOP analysis are used..

Diagram Showing Process Of Environmental Analysis/Scanning.

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