Environmental

Scanning And
Industry Analysis

Chapter 2
Environmental Scanning
• Environmental scanning is the monitoring,
evaluation, and dissemination of information
from the external and internal environments to
key people within the corporation.

• A corporation uses this tool to avoid strategic

surprise and to ensure its long-term health.
IDENTIFYING EXTERNAL ENVIRONMENTAL
VARIABLES
1. Scanning the Natural Environment

Resources
Free resources
exploited

Serving future
markets with
Sustainability
sustainable
ideas
 2. Scanning the Societal Environment: STEEP
Analysis(Sociocultural, Technological, Economic,
Ecological, and Political-legal environmental forces)
Some Important Variables in the Societal Environment
STEEP Analysis: Monitoring Trends in
the Societal and Natural Environments
Technological
There are number of technological breakthroughs that are
already having a significant impact on many industries;
• Portable information devices (smart phones, tablets,
laptops etc.)
• Alternative energy sources(e.g. solar panels)
• Precision farming( e.g. irrigation technologies).
• Genetically altered organisms(e.g. Plant seeds can be
genetically modified to produce more needed vitamins
or to be less attractive to pests and more able to survive)
• Smart, mobile robots(for sophisticated factory work, run
errands, do household chores, and assist the disabled).
STEEP Analysis: Monitoring Trends in
the Societal and Natural Environments
Sociocultural
Eight current sociocultural trends are transforming the world
1. Increasing environmental awareness
2. Growing health consciousness
3. Entitled generation
4. Declining mass market(Maybelline’s “Shades of You” lines of
cosmetic products are specifically made for African-American
women).
5. Changing pace and location of life(Instant communication via
e-mail, cell phones etc.)
6. Changing household composition(e.g. Single-person
households)
7. Increasing diversity of workforce and markets(Heavy
immigration from the developing to the developed nations)
3. Scanning the Task Environment
IDENTIFYING EXTERNAL STRATEGIC FACTORS;
Issues Priority Matrix
Industry Analysis: Analyzing the Task
Environment
PORTER’S APPROACH TO INDUSTRY ANALYSIS
Forces Driving Industry
Competition
1. Threat of New Entrants
• Entry barrier

Economies of scale

Product differentiation

Capital requirements

Access to distribution channels

Switching costs
 2. Rivalry among Existing Firms
• Direct competition

Product or
Number of Rate of service Height of
competito industry Capacity exit Diversity
characteri of rivals
rs growth stics barriers
3. Threat of Substitute Products or Services

Substitute product
different but can satisfy the same need as another
product.
Fax email
Sugar  stevia
Plastic bag  cotton bag
4. Bargaining Power of Buyers
• A buyer purchases a large proportion of the seller’s product or service
(for example, oil filters purchased by a major auto maker).
• A buyer has the potential to integrate backward by producing the
product itself (for example, a newspaper chain could make its own
paper).
• Alternative suppliers are plentiful because the product is standard or
undifferentiated (for example, motorists can choose among many gas
stations).
• Changing suppliers costs very little (for example, office supplies are
easy to find).
5. Bargaining Power of Suppliers
• The supplier industry is dominated by a few companies,
but it sells to many.
• Its product or service is unique and/or it has built up
switching costs.
• Substitutes are not readily available.
• A purchasing industry buys only a small portion of the
supplier group’s goods and services and is thus
unimportant to the supplier.
 Miles and Snow’s STRATEGIC TYPES

Defenders Prospectors Analyzers Reactors

•limited product • fairly broad • operate in at least • lack a consistent
line product lines two different strategy-structure-
•focus on • focus on product product-market culture
improving the innovation and areas, one stable relationship.
efficiency of their market and one variable. • US airlines have
existing operations. opportunities. • stable areas, been forced to
•Lack of innovation • e.g. Google, Apple efficiency is respond to new
•e.g. Starbucks, etc emphasized. entrants such as
luxury watch brand • variable areas, • e.g. Airlines and
innovation is JetBlue
Rolex etc
emphasized.
• e.g. P & G
USING KEY SUCCESS FACTORS TO CREATE
AN INDUSTRY MATRIX
• Key success factors
J. Khaadi Nishat