The Dictionary meaning of the word scanning is to look carefully into or to examine. The term Environmental Scanning in business means to “Carefully analyse the various factors influencing the business.”
Environmental Scanning is not once and for all, rather it is a continuous process. As the business environment is continuously changing, management has to continuously analyse and diagnose the environment. It is a process by which the organisations monitor their relevant environment to identify opportunities and threats affecting their business.
“Environmental Scanning is used as a overview of wide range of phenomenon in the environment, projected usually in a time period beyond the typical formula planning range and designed to stimulate thinking of managers and staff about potential events that will have an important impact on company affairs.”
Scanning can also refer to short range projections. It can also be future studies, future research, Scenarios, foresight activities and monitoring to name a few.
Approaches of Environmental Scanning
(1) Systematic Approach – The important features of this technique is given below.
- In this approach, information for environmental scanning is collected systematically.
- Information which is pertaining to business and industry could be collected continuously to monitor changes and take the relevant factors into account.
- Continuous updating such information is necessary not only for strategic management but also for operational activities.
In this approach, the information which is collected generally relates to markets and customers, changes in legislation and regulation, Govt. policy statements etc. that have a direct impact on an organisation’s activities.
(2) Ad-hoc Approach – The Important Steps Involved In This Approach Are :-
- Under this approach organisation may conduct special surveys and studies to deal with specific environmental issues from time to time.
- Such studies may be conducted when an organisation has to undertake special projects, evaluate existing strategies or to devise new strategies.
- Changes and unforseen developments may also be investigated with regard to their impact on the organisation.
(3) Processed Form Approach –
- The organisations generally use information in processed form i.e.supplied by Government agencies or private institution.
- The organisations also use secondary sources of data, available from different sources both inside and outside the organisation.
Organisations generally use different practical combination of approaches to monitor their relevant environments. Whatever approach is used, but data collection is necessary for deriving information about environmental scanning.
Techniques of Environmental Scanning
(1) PEST Analysis – PEST denotes political, economic, social and technological analysis. It describes a framework of macro-environmental factors that are used in environmental scanning-a component of strategic management. Some experts called it as SLEPT-by adding legal forces where it stands for social, legal, economic, political and technological analysis. It is also called as PESTEL or PESTLE by rearranging each component force. Of late it further underwent a change by broadening it as STEEPLE-social, technological, economic, educational, political, legal and ecological analysis.
Another way of referring it as STEEPLED – social, technological, economic, ecological, political, legal, educational and demographic analysis. As this century has given much emphasis on ecological forces to encourage green business, this PEST analysis has caught the fancy of all business organisation notwithstanding any difference in size, type and age of business.
(2) QUEST Analysis – QUEST represents quick environmental scanning technique. QUEST analysis is a four step process that amply uses scenario writing for scanning the environment and tracing the strategic options. These four steps involved are :
- Observing the major events and trends in the industry. The strategists or the managers keenly and critically observe the major events and trends in their industry.
- Speculating of future happenings. Speculating on wide variety and range of vital issues that might affect the future of their organisations through the broad and comprehensive environmental scanning.
- Preparing summary renort. The chief or the director prepares a summary report highlighting the major issues and their implications writing at least three to five scenarios with variations in situations based on discussion.
- Reviewing report and scenarios by experts. Finally the report and the scenarios are reviewed by a group of strategists who trace feasible strategic options to deal with the evolving environment. Then the options are ranked and the teams are entrusted the task of developing strategies.
Once the environmental scanning is done, the strategists are busy with configuring the mass of information where the information is boiled down to clearly defined opportunities and threats that are thrown open by the environment and what opportunities are viable for the company.
(3) SWOT Analysis – SWOT stands for strengths and weaknesses which are purely internal to the individual firm and Opportunities and Threats that are thrown open by the external environment. SWOT analysis is an attempt to guage opportunities and threats that are made available by external environment and attempting to relate firm’s internal strengths and weaknesses to exploit the opportunities and converting threats into opportunities.
(4) ETOP Analysis – ETOP stands for environmental threat and opportunities profile. It is a very significant tool which is widely used in environmental diagnosis. Environmental diagnosis is to do with assessment of environmental factors in terms of opportunities and threats and their impact. It identifies opportunities and threats based on environmental marketing.
(5) TOWS Matrix – TOWS matrix is the conceptual framework designed for a systematic analysis which facilitates matching external threats and opportunities with internal strengths and weaknesses of a firm. Though SWOT analysis has been used over the longest period of time by the strategists, it fails to develop distinct and pragmatic alternative. strategies as it is static. That is why matrix analyses have been widely used. One of them is TOWS matrix . In TOWS matrix, each letter stands for : T = Threats, O Opportunities, W = Weaknesses and S = Strengths.