Environmental Scanning

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Learning objectives
Describe the concept of environment in the
context of strategic management
Explain the process of SWOT analysis
Name, describe, and exemplify eight
environmental sectors
Describe the process of environmental
scanning
Prepare Environmental Threats and
Opportunities Profile (ETOP) for an
organization
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Concept of environment
The environment of any organisation
is "the aggregate of all conditions,
events and influences that surround
and affect it."

K. Davis, The Challenge of Business, (New York, N.Y.: McGraw-Hill, 1975),p.43
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Characteristics of environment
Environment is complex
Environment is dynamic
Environment is multi-faceted
Environment has a far-reaching
impact
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Internal environment
The internal environment refers to all factors
within an organisation that impact strengths or
cause weaknesses of a strategic nature.

Strength is an inherent capacity which an organisation
can use to gain strategic advantage. Examples of
strength are: good reputation among customers,
resources, assets, people, experience, knowledge, data,
and capabilities.
Weakness is an inherent limitation or constraint which
creates strategic disadvantages. Examples of weakness
are: gaps in capabilities, financial deadlines, low morale,
and overdependence on a single product line.


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External environment
The external environment includes all the
factors outside the organisation which provide
opportunities or pose threats to the
organisation.
Opportunity is a favourable condition in the organisation's
environment which enables it to consolidate and strengthen
its position. Examples of opportunity are: economic boom,
favourable demographic shifts, arrival of new technologies,
loosening of regulations, favourable global influences, and
unfulfilled customer needs.
Threat is an unfavourable condition in the organisation's
environment which creates a risk for, or causes damage to,
the organisation. Examples of threat are: economic downturn,
demographic shifts, new competitors, unexpected shifts in
consumer tastes, demanding new regulations, unfavourable
political or legislative, new technology, and loss of key staff.
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Technique of SWOT analysis
Setting the objectives of the organization or its unit
Identifying strengths, weaknesses, opportunities, and
threats
Asking four questions
How do we maximise our strengths?
How do we minimise our weaknesses?
How do we capitalise on the opportunities in our
external environment?
How do we protect ourselves from threats in our
external environment?
Recommending strategies that will optimise the
answers from the four questions
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The business environment of an
organisation
ORGANIZATION
RELEVANT
ENVIRONMENT
GENERAL ENVIRONMENT
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Eight sectors of the business
environment
Economic
International
Market
Political
Regulatory
Socio-cultural
Supplier
Technological
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Factors in environmental scanning
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.
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Approaches to environmental
scanning
Systematic approach
Ad hoc approach
Processed-form approach
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Sources of information for
environmental scanning
Documentary or secondary sources
Mass media
Internal sources
External agencies
Formal studies
Spying and surveillance
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Factors affecting environmental
appraisal
Strategist-related factors
Organisation-related factors
Environment-related factors
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Identifying high priority
environmental issues
Impact on Business
__________________________________________________________
Probability High Medium Low
of impact
----------------------------------------------------------------------------------
High Critical High priority Low priority

Medium High priority High priority Low priority

Low To be watched Low priority Low priority
---------------------------------------------------------------
Source: Adapted from the William R.Boulton: Business Policy: The Art of Strategic
Management (New York: Macmillan Publishing Co., 1984) p.120.
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Environmental threats and
opportunities profile (ETOP)
Environmental Nature of impact Impact of each sector
Sectors

Economic
International
Market
Political
Regulatory
Socio-cultural
Supplier
Technological