ENVIRONMENTAL

SCANNING
 2

ENVIRONMENTAL SCANNING:

The monitoring, evaluating, and

disseminating of information from
the external and internal
environments to key people within
the corporation to avoid strategic
surprise and ensure the long-term
health of the firm.
IDENTIFYING EXTERNAL
ENVIRONMENTAL VARIABLES

Natural Environment:

Includes physical resources,

wildlife, and climate that are an
inherent part of existence on
Earth - form an ecological
system of interrelated life
 5

External Environment
External Environmental Variables:

Societal\community environment:
General forces that do not
directly touch on the short-run
activities but often influence its
long-run decisions.
 6

External Environment
External Environmental Variables:

Task environment:
Those elements or groups that
directly affect the corporation and,
in turn, are affected by it. The task
environment is the industry within
which that firm operates.
 7

External Environment
Societal environment forces:

 Economic forces
 Regulate the exchange of materials, money,
energy, and information
 Technological forces
Generate problem-solving inventions
 Political-legal forces
 Allocate power, provide laws and regulations
 Socio-cultural forces
 Regulate values, mores\traditions, and customs
SCANNING THE NATURAL
ENVIRONMENT
Natural Environment includes:
Physical Resources
Wildlife
Climate
Exploit not Conserve?
 Once they were controlled by a person or
entity, these resources were considered assets
and thus valued as part of the general
economic system—a resource to be bought,
sold, or sometimes shared.
 Side effects, such as pollution, were considered
to be externalities, costs not included in a
business firm’s accounting system, but felt by
others.
 Eventually, the government passed regulations
to force business corporations to deal with the
side effects of their activities.
Concept of Sustainability
-argues that a firm’s ability to continuously
renew itself for long-term success and survival
is dependent not only upon the greater
economic and social system of which it is a
part, but also upon the natural ecosystem in
which the firm is embedded.
-Management must therefore scan not only
the natural environment for possible strategic
factors, but also include in its strategic
decision-making processes the impact of its
activities upon the natural environment.
STEEP ANALYSIS

STEEP Analysis- monitoring trend in the

societal and natural environment.
 Socio Cultural
 Technological
 Economic
 Ecological
 Political-legal force
 It may also be called PESTEL Analysis for Political,
Economic, Sociocultural, Technological, Ecological,
and Legal forces.

 Obviously,trends in any one area may be very

important to firms in one industry but of lesser
importance to firms in other industries.
 SOCIO CULTURAL

Socio Cultural- includes the demographic and cultural aspects of

the external macroenvironment.

 Lifestyle changes
 Health Consciousness
 Population growth rate
 Housing choices
 Household size
Eight Current Sociocultural Trends

1. Increasing environmental awareness

2. Growing health consciousness
3. Expanding seniors market
4. Impact of Generation Y Boomlet
5. Declining mass market
6. Changing pace and location of life
7. Changing household composition
8. Increasing diversity of workforce and markets
Technological

Technological - it focuses on technological

advancements.

 Transportation
 Research and Development
 Information technology
 Telecommunication
 Internet Availability
 Researchers at George Washington University have
identified a number of technological
breakthroughs that are already having a
significant impact on many industries:

 Portable information devices and electronic

networking
 Alternative energy sources
 Precision farming
 Virtual personal assistants
 Genetically altered organisms
 Smart, mobile robots
Economic
Economic- strongly associated with the consumers’
buying position.

 Interest Rates  Money Supply

 Unemployment levels
 Inflation


Economic
Economic- strongly associated with the consumers’
buying position.

 Interest Rates  Money Supply

 Unemployment levels
Inflation
Ecological


Ecological- it involves ecosystem factors such

as water, wind, food, soil, energy, pollution &
environmental regulations.
 Atmospheric Carbon  Extractive resource
Dioxide availability (petroleum,
 Climate change natural gas, minerals)
POLITICAL-LEGAL FORCE
 Trendsin the political–legal part of the societal
environment have a significant impact not only on
the level of competition within an industry but also
on which strategies might be successful.

 Environmental protection laws

 Global warming legislation
 Antitrust regulations
 Tax laws
 International Societal Considerations. Each
country or group of countries in which a
company operates presents a unique
societal environment with a different set of
economic, technological, political–legal,
and sociocultural variables for the company
to face.
 International societal environments vary so
widely that a corporation’s internal
environment and strategic management
process must be very flexible.
 Before planning its strategy for a particular
international location, a company must scan
the particular country environment in
question for opportunities and threats, and it
must compare those with its own
organizational strengths and weaknesses.
 The key is to be able to identify the trigger
point when demand for a particular product
or service is ready to boom.
 How can anyone monitor and keep track of
all the trends and factors in the worldwide
societal environment? With the existence of
the Internet – creating a scanning system.
SCANNING THE TASK ENVIRONMENT
The task environment includes those
elements or groups that directly affect
a corporation and, in turn, are
affected by it
Governments Creditors
Local communities Employees
 Suppliers Special-interest
Competitors groups, and
Customers Trade associations
A corporation’s scanning of the
environment includes analyses of
all the relevant elements in the
task environment.
The many reports resulting from
these scanning efforts, when
boiled down to their essentials, act
as a detailed list of external
strategic factors.
IDENTIFYING EXTERNAL
STRATEGIC FACTORS

External strategic factors are the key

environmental trends that are judged
to have both a medium to high
probability of occurrence and a
medium to high probability of impact
on the corporation.
EXAMPLES OF EXTERNAL STRATEGIC
FACTORS
 Why we must identify external
strategic factors?

The origin of competitive advantage lies

in the ability to identify and respond to
environmental change well in
advance of competition.
No firm can successfully monitor all external
factors.
Important
CHOICES
not important
Personal values and functional experiences of
a corporation’s managers as well as the
success of current strategies are likely to bias
both their perception of what is important to
monitor in the external environment and
their interpretations of what they perceive.
Strategic myopia- the willingness to reject
unfamiliar as well as negative information.
- Phenomenon with managers
- See new ventures as unrealistic and
impractical
- Managers learn by tall and error
- Easily can reject things they have little
experience with
 ISSUES PRIORITY MATRIX
The issues priority matrix can then be used to help
managers decide which environmental trends should be
merely scanned (low priority) and which should be
monitored as strategic factors (high priority). Those
environmental trends judged to be a corporation’s
strategic factors are then categorized as opportunities
and threats and are included in strategy formulation.

It also:
1. Identify a number of likely trends emerging in the natural,
societal, and task environments.
2. Assess the probability of these trends actually occurring, from
the low to medium to high.
3. Attempt to ascertain the likely impact (from low to high) of
each of these trends on the corporation being examined.
1. A corporation uses this tool to
avoid strategic surprise and to
ensure its long-term health.
a. STEEP Analysis
b. Environmental Scanning
c. Both a and b
ANS.
b. Environmental Scanning
2. These are factors affect
multiple industries except.

a. Sociocultural forces
b. Economic forces
c. Political-legal forces
d. Technological forces
e. Natural environment forces
ANS.
Natural environment forces
3. It includes physical resources, wildlife,
and climate that are inherent part of the
existence on earth
ANS.
Natural Environment
3. Environmental Sustainability Issue
means that aspects of the natural
environment , such as sea level,
weather, and climate, are becoming
increasingly uncertain and difficult to
predict.

true or false?
ANS.

FALSE- Global Warming

4. STEEP Analysis may also be called what?

a. PESTLE Analysis
b. PESTEL Analysis
c. PEST Analysis
d. All of the above
ANS. d. all of the above

STEEP Analysis is also known around the

world as PEST, PESTEL & PESTLE.
5.
ANS.
POLITICAL
ability to achieve its goals?
Answer: Task Environment

 Scanning the Task Environment

The key environmental
trends that are judged to
have both a medium to
high probability of
occurrence and a
medium to high
probability of impact on
the corporation.
ANSWER
External Strategic Factors