Environment is anything and everything surrounding us. It consists of the living and nonliving things around us.
Characteristics of environment
- It is complex – It consists of many interrelated factors
- It is dynamic – Due to its shape and character
- It is multifaceted – The environment developed is perceived differently by different people
- It has a far reaching compact – The growth and profitability of the organization critically depends upon its environment.
Components of environment
|Internal or micro environment||External or macro environment|
|Competition||Legal and political environment|
|Market – cost structure ,price sensitivity, distribution system, technology, market stability||Socio-cultural environment|
Environmental Scanning is the process by which an organization monitors the relevant environment the identify opportunities and threats affecting the business for the purpose of making strategic decisions.
Factors to be considered while conducting an environmental appraisal –
- Events – Important and specific occurring taking place in different environment sectors
- Trends – General tendencies or course of action around which events and trends take place.
- Issues – Current concern that arise or respond to events and trends
- Expectations – Demand which are made by interested group in the light of current issue
Dimensions of Environmental Scanning:
SPECTACLES – Social, Political, Economic, Cultural, Technological, Aesthetic, Customer, Legal, Environmental and Sectoral
Approach’s to environmental scanning
- Systematic approach – In this approach information for environmental scanning is collected systematically. Information related to markets and customers, change in legislation and regulations etc. have a direct impact on the business therefore it is continually monitored for relevant facts. This approach is beneficial for strategic management and operational activities.
- Ad-hock approach -An organization may conduct a special survey related to specific environmental issues from time to time… such studies may be undertaken when an organization has to take up new projects or update existing strategies. Changes and unforeseen developments may be investigated which affect the organization
- Processed form approach-The organization under this approach uses information in a processed form available from both internal and external environment.eg. Information supplied by government agencies, private institutions, it uses secondary data method.
Sources of information for environment scanning
- Secondary sources of information- newspapers,magazines,journals,documentaries
- Mass media- radio, TV. , internet
- Internal sources- Internal files , documents, reports ,records , database
- External agencies-Customers, market intermediaries, suppliers, retailers etc.
- Spying and surveillance- through ex-employees of competitors, industrial espionage, planting a mole in rival company.
Factors affecting Environmental scanning / Environmental Appraisal
- Strategist related factors – Since strategist play a central role in formulation of strategies ,there characteristics such as age, education, experience, motivation, cognitive styles ,ability to withstand time pressure and responsibility have an impact to the extent to which they are able to appraise the environment.
- Organization related factors – Characteristics of the organization which affect the environment are nature of the business, its age, size, complexity, nature of it market, product or service that it provides.
- Environment related factors – The nature of environment faced by the organization determines how its appraisal could be done. The nature of the environment depends upon its complexity, volatility, hostility and diversity.