BUSINESS STRATEGY XI

Environmental Scanning

DEFINITIONS & FACTORS

The process by which an organisation monitors its relevant environment for identification of opportunities & threats is environmental scanning Factors to be considered are Events which are specific and important occurrences in different sectors, Trends general tendencies and courses of action along which evens take place, Issues current concerns in response to events & trends & Expectations are the demands made by the interested in the light of their concerns

ONE EXAMPLE

First public issue of Reliance Industries in 1977-EVENT TREND started was of wider participation of public in equity investments in private sector companies ISSUE was of developing equity culture in India EXPECTATIONS among general public that fruits of corporate sector will be shared by all & sundry

APPROACHES

Systematic Approach- information collected systematically and continuously re: markets, customers, legislation, govt. policies and updated continuously Ad Hoc Approach- special studies and surveys regarding specific issues very often for special projects Processed Form Approach- using information from different sources inside and outside

SOURCES OF INFORMATION

Documentary or Secondary Sources- from different forms of publications print media, trade and industry association newsletters, govt. publications, annual reports of competitors Mass Media- radio, TV, Internet Internal Sources- company files, databases, company employees etc.

SOURCES OF INFORMATION

External Agencies- customers, dealers, trade associations, govt. agencies Formal Studies made by employees, market research bodies, consultants, institutions etc. Industrial Espionage- spying and surveillance agencies

METHODS & TECHNIQUES OF SCANNING

Single Variable Extrapolations Unstructured Expert opinion Structured expert opinion Structured inexpert and unstructured inexpert opinions Scenario building Simulation

METHODS & TECHNIQUES OF SCANNING

Complexity Theory- a set of mathematical techniques to deal with the dynamic nature of real world problems- fractals, fuzzy logic, genetic algorithms, swarm stimulations, Monte Carlo Method, the chaos theory Techniques based on artificial intelligence, neural networks, data mining etc.

PITFALLS

Over focusing on the relevant environment and missing out on the trends and issues in the general environment Paralysis by analysis- study of environment does not mean number-crunching and paper pushing The Scanning should be done to uncover influences that matter for the future of corporate strategic decision making

PITFALLS

Scanning should be kept separate from operations Scanning cannot become an impersonal Staff function It should not be too far from the realities of the organisation

FACTORS AFFECTING ENVIRONMENT APPRAISAL

Strategist-related Factors- the personality and the identity of the strategist has a central role and when a group of consultants is used the group dynamics among them Organisation-related factors- size, nature of the business Environment-related factors- is it complex, stable, changing, turbulent and so on and so forth