CHAPTER 4

Environmental Scanning
Identifying Forces Driving Change

By Anil Bilgihan for Dr. DeMicco

KEY CONCEPTS
 KEY CONCEPTS

• Environmental scanning

• Establishing an enviromental scanning system

• Need to scan the business environment

• Techniques of scanning business environment

WHAT IS ENVIRONMENTAL
SCANNING ?
 ENVIRONMENTAL SCANNING

• Environmental scanning is the process of continually acquirin

g information on events occurring outside the organisation to
identify and interpret potential trends.

• It is a process that systematically survey and interprets releva

nt data to identify and external opportunity and threats. An
organisation gathers information about the external world, its
competitors and itself.
 WHY IS IT NECESSARY ?

• Environmental analysis will help the firm to und

erstand what is happening both inside and outsi
de the organisation.

• Environmental scanning is necessary because th

ere are rapid changes taking place in the enviro
nment that has a great impact on the working of
the business firm.
Scanning the Business Environment
 Establishing an Environmental Scanning
System

• Establish domain definition

• Organizational structure issues
• Gathering Information
• Determine Information Medium
• Choose scanning activities
 Domain Definition

• The task of domain definition is the first step in

establishing an effective environmental scanning
system.
• The domain of an organization refers to the context
in which it exists and functions.
 Organizational Structure Issues

• Who participates in the process, what resources

are allocated to this endeavor, and how the
information is processed and used.
• Scanning the environment must fit into that
structure because resources
must be allocated to this
important management activity.
 Determining the Information Medium

• Most common medium is face-to-face personal

interaction.
• The written medium, both personal and impersonal,
continues to be an important one.
• The telecommunication revolution will no doubt
bring about rapid changes in the mediums used.
New Communication in the Information
Age
 Choosing Scanning Activities

• Scanning is an activity that does not lend itself to

neatly defined processes or timetables.
• It cannot be done effectively without strong
cognitive, experimental, and perceptional skills.
NEED OF ENVIRONMENTAL
SCANNING
• Identification of strength:
Strength of the business firm means capacity of the firm to gain advantage
over its competitors. Analysis of internal business environment helps to ide
ntify strength of the firm.
• Identification of weakness:
Weakness of the firm means limitations of the firm. Monitoring internal envi
ronment helps to identify not only the strength but also the weakness of the
firm.
• Identification of opportunities:
Environmental analyses helps to identify the opportunities in the market. T
he firm should make every possible effort to grab the opportunities as and
when they come.
• Identification of threat:
Business is subject to threat from competitors and various factors. Enviro
nmental analyses help them to identify threat from the external environment
. Early identification of threat is always beneficial as it helps to diffuse off so
me threats.
• Optimum use of resources:
Proper environmental assessment helps to make optimum utilisation of sc
are human, natural and capital resources. Systematic analyses of business
environment helps the firm to reduce wastage and make optimum use of av
ailable resources.
• Survival and growth:
Systematic analyses of business environment help the firm to maximise the
ir strength, minimise the weakness, grab the opportunities and diffuse threa
ts. This enables the firm to survive and grow in the competitive business wo
rld.
• To plan long-term business strategy:
A business organisation has short term and long-term objectives. Proper an
alyses of environmental factors help the business firm to frame plans and po
licies that could help in easy accomplishment of those organisational objecti
ves.
• Environmental scanning aids decision-making:
Decision-making is a process of selecting the best alternative from among v
arious available alternatives. An environmental analysis is an extremely imp
ortant tool in understanding and decision making in all situation of the busin
ess. Success of the firm depends upon the precise decision making ability.
TECHNIQUES OF SCANNING
 SWOT

• Identification of threats and opportunitiesin the envir

onment(external) and strenghths and weaknesses
of the firm
 Case Study

• Please read Case Study: ‘Technology as a Competi

tive Method: The Case of InterContinental Hotels’
(page 119-125).

• Please answer the discussion questions at the end

of the Case Study.
 Case Study Answers
InterContinental Hotels

HRIM 603
Strategic Hospitality Management
Case Study #4
Technology as a Competitive Method: The Case of
InterContinental Hotels
F.Anil Bilgihan

1) Technology, broadly, is a tool or set of tools aimed at making some aspect of life better, easier, or more efficient. Science and technology have great
potential to improve lives in all communities around the world. Technology is evolving at such a rapid pace it's hard to tell what will happen in six
months. It's hard to predict what products will make it to the market and which will take the crown and end up as everybody's favorite toy, business
companion or home entertainment device. Every technology has changed our lives, some of them in manner more aggressive than other. It’s hard to
point out to a specific technology and makes it responsible for the major changes in a life of person, because every one of us may be influenced by
other things. Businesses are using technology to gain industry advantage in many ways. “The successful companies of the next decade will be the ones
that use digital tools to reinvent the way they work. These companies will make decisions quickly, act efficiently, and directly touch their customers in
positive ways.” Bill Gates.

2) InterContinental Hotels used the technology as one of their competitive methods to gain industry advantage. For instance AT&T announced that it
has deployed an Internet Protocol Virtual Private Network (IP VPN) for InterContinental Hotels Group and its managed Candlewood Suites Hotel
portfolio, the first of its kind in the hospitality industry. The AT&T solution leverages the VPN and Multi-Protocol Label Switching (MPLS) technology to
provide a multi-faceted and highly reliable – but low cost – network. MPLS prioritizes data traffic between the hotel and the property management
application residing at AT&T’s IDC, ensuring application performance and uninterrupted communications. It is a very unique technology for hospitality
industry. Their success is behind their corporate decisions of how to invest in technology. Their company strategy was based on the leadership of its
CEO, Brian Langton, who believed in the need to integrate key marketing, reservations and operating systems into one strong technology based system
that would lead the industry as Holiday Inn had during the 1960s. He prophesied the future of technology, which was e-commerce, and integrated
necessary technologic developments to his company. The company applied the strategic plan. And with the help of that competitive method, company
gained considerable advantage over others in the industry.
 Case Study Answers

Their success is behind their corporate decisions of how to invest in technology. Their company strategy
was based on the leadership of its CEO, Brian Langton, who believed in the need to integrate key
marketing, reservations and operating systems into one strong technology based system that would lead
the industry as Holiday Inn had during the 1960s. He prophesied the future of technology, which was e-
commerce, and integrated necessary technologic developments to his company. The company applied the
strategic plan. And with the help of that competitive method, company gained considerable advantage
over others in the industry.

3) Distinguishing among competitors and gaining more market share by using technology as competitive
methods have challenges. It is very important to scan the environment in this situation also. The key to
gain more market share by using technology is to have the right choice at the right time. Everyday
technology is developing so fast and these developments can be adapted to hospitality industry as well.
For example when VOIP is developed, it is very important to use this technology in your hotel first. You
need to look the environment and then adopt the technology where it fits in your industry. However,
those upgrades seem to be endless as the development of technology is not likely to stop. On the other
hand, hospitality organizations allocate a budget for technology every year. That budget is often narrow;
most of the hospitality organizations do not have enough economical power to buy all of the available
technologies. The point here is to decide which technology to integrate with, by scanning the environment
and foreseeing which technology will be demanded most by the customers. Strategic alignment is the key.
It should support the companies’ mission.
4) As we discussed in the third question, strategic alignment plays the key role. Companies should select the right technology at the right time
and this technology should be parallel to company strategy. For example, McDonalds used free Wi-Fi at their restaurants but it failed, because it
didn’t fit into company strategy which was ‘fast’. Table turnovers increased. Later they put time limit for Wi-Fi, and then it became successful.
Amount of the budget allocated to be spent in technological development is another important issue.

5) The investments that IHG has done in technology were very successful. The first reason was, they realized the need in e-commerce and
invested enough money for the upgrade. The second reason was that they realized this need at the right time and put it into process right away.
And the third reason was their understanding that the developments they have done were not a technology game but an issue of customer
service fulfillment. In 2000, selection of Web-enabled PMS was a unique strategy.

6) Although main goal of IHG was customer satisfaction, those two hotels stand as prototypes. They were used as our “experimental guestroom”
in University of Delaware to show what can be done with the latest technology. So, it can be said that there are differences between the
corporation and those two hotels. That does not mean other brands of the corporation lacks technology, but it would be useful to keep in mind
that those two hotels are not one of those Hampton Inns or Embassy Suites which are also brands of the corporation.

7) Any information related to other companies technological status would be helpful in determining the overall demand for the technology
investments IHG has made over the years. This keeps IHG in competition with other companies. Moreover, customer feedbacks and data mining
methods can be used as well.

8) Academic researches, the media (technology magazines, internet), technology conferences like HITEC, and the researches that big companies
made and, surveys can be useful in tracking developments in technology for the travel industry.
Figures for Case Study

Figure 1
 Figures for Case Study

Figure 2
IT Planning Process
 Figures for Case Study

Figure 3
 Figures for Case Study

Figure 4
 Chapter Questions

• Which is NOT a function of the scanning system?

◦ Identify each force, the variables, and their

interdependencies with other variables
◦ Suggest cause and effect relationships
◦ Determine resource allocation
◦ Determine the history and timing of the development of
the forces
◦ Assist in estimating the impact of forces driving change
 Chapter Questions (cont’d)

• The concept of industry structure refers to

◦ the degree of complexity in the market place.

◦ the degree of uncertainty in the market place.
◦ another way to define the industry domain.
◦ the degree of concentration of suppliers.
◦ the degree of dispersion of customers.
 Chapter Questions (cont’d)

• In understanding industry structure, the manager must be able to assess

the degree of interdependencies that exist in the domain. This statement
refers to

◦ the firm's ability to lead competitors in creating new products and services.
◦ the investment in strategic alliances with other firms.
◦ the degree to which the firm is dependent upon its board of directors.
◦ the manager's ability to determine the cause and effect relationships in the business
domain.
◦ the manager's ability to utilize such management tools as yield management.
 Chapter Questions (cont’d)

• The term body of knowledge refers to

◦ the sum total of the firm's knowledge regarding its

competitive method.
◦ the ability of the firm to gain competitive advantage
because it possesses more knowledge.
◦ the sum total of all literature that has been written on
a particular topic.
◦ the consultants' reports on industry structure.
◦ none of the above
 Chapter Questions (cont’d)

• Which is not a criterion for evaluating the quality of

information sources?

◦ The influence it has on strategic thinking

◦ The number of sources
◦ Timing
◦ Validity
◦ Reliability
 Chapter Questions (cont’d)

• Which company led the hotel industry in utilizing tec

hnology in the1980s?

◦ Holiday Inn Worldwide

◦ Marriott
◦ Hilton
◦ Starwood
 Chapter Questions (cont’d)

• When discussing the structure of an environmental

scanning system, one must consider the following i
ssue(s):

◦ who should participate in the process.

◦ what resources should be allocated.
◦ how the information is being processed and used.
◦ all of the above
◦ none of the above
 Chapter Questions (cont’d)

• What skill is not required for the director of competit

ive intelligence or development analysis?

◦ Analytical skills
◦ Marketing skills
◦ Communication skills
◦ Self-management capability
 Chapter Questions (cont’d)

• Which is not considered a category of information?

◦ Quantitative
◦ Qualitative
◦ Personal and personal
◦ Signals and signs
 Chapter Questions (cont’d)

• Which field is not mentioned in the sampling of

disciplines and fields of study contributing to the
body of knowledge in the hospitality industry?

◦ Nutrition
◦ Sociology
◦ Safety and security
◦ Accounting
 Chapter Questions (cont’d)

• Which mode of scanning activities would most man

agers fit into now?

◦ Proactive
◦ Routine
◦ Reactive
◦ Null
 Chapter Questions (cont’d)

• Content analysis is a tool to help managers interpret the

large amount of information about the environment. In using
content analysis, which skills are not required for applying
the content analysis process?

◦ Comprehension skills
◦ Analytical skills
◦ Synthesizing skills
◦ Application skills
◦ Extrapolation skills
 Chapter Questions (cont’d)

• Environmental scanning activities should be carried

out:

◦ annually.
◦ bi-annually.
◦ quarterly.
◦ continuously.
 Chapter Questions (cont’d)

• Concept mapping is another tool to help interpret the large a

mount of data that a manager must review in analyzing the
environment. It is a useful tool to help managers:

◦ determine the frequency and volume of ideas that have emerged

from the content analysis process.
◦ assess the relationship among various themes identified in the
content analysis process.
◦ rank the most important themes.
◦ identify relationships among various themes.
◦ all of the above
 Chapter Questions (cont’d)

• Matrices are excellent ways of understanding the

relationship of:

◦ the task environment with the remote environment.

◦ the task environment with the resources of the firm.
◦ the firm environment with the multinational environment.
◦ the task environment with the resources of the firm; the
firm environment with the multinational environment.
◦ all of the above
 Chapter Questions (cont’d)

• Scanning is best accomplished by

◦ a team of individuals working independently on policy oriented

matters.
◦ a team of individuals working together on strategic issues.
◦ information shared equally among all the firm's employees.
◦ information sharing based on the total body of knowledge on the
subject.
◦ a team of individuals working together on strategic issues;
information sharing based on the total body of knowledge on the
subject.
 Student Learning Objectives

On completion of this chapter, you will be able to;

 Identify the environmental scanning process.
 Develop an appreciation to scan the business environment effectively.
 Describe the effective environmental scanning system.
 Identify the unique elements business domain.
 Identify and define the sources of information and give at least 1 hospitality
related example for each of them.
 Identify the timing information.
 Achieve a more practical understanding of forces that drive change in hospitality.
(Case Study)
 Comprehend the feedback and evaluation systems.