The environmental scanning definition is a study or activity which helps an organization to identify the opportunities and threats in its ecosystem to create new strategies and objectives that improve its performance in the industry.

Definition of Environmental Scanning

Environmental scanning refers to the collection and utilization of information regarding events, relationships, and trends in an organization's industry, and the use of the acquired knowledge in shaping the organization's future strategies and objectives. Environmental scanning requires people in an organization to search for opportunities, important lessons, trends, and weaknesses or threats outside of their organization which can affect the success of the company. Identifying these variables enables the organization to develop strategies to either exploit or counter the effects of these external industry forces.

What is the Purpose of Environmental Scanning?

Environmental scanning is important for a variety of reasons. It is the responsibility of company executives to keep tabs on issues that have a direct impact on their customers and suppliers. They must also be aware of the strengths and weaknesses of competitors, changes in regulatory standards, as well as macroeconomic and political changes that can affect their company. The business landscape is highly dynamic due to the rapid advancement in technological innovations. This makes it critical for organizations to have an in-depth understanding of the market dynamics to create winning business strategies. Businesses can prevent being left behind through consistent research and learning as well as organization-wide knowledge sharing to keep everybody up to date on the most important industry trends.

How Often Should Organizations Perform Environmental Scanning?

The number of environmental scans a company should perform depends on its needs. If an organization is active in a highly dynamic and technology-driven environment, the company needs to consistently track trends and developments in its industry and apply the results to develop improved strategies and processes. However, organizations operating in less dynamic environments may only require environmental scans once in a while.

What are the Areas Covered by Environmental Scanning?

To survive, grow, and succeed in a highly competitive and constantly changing commercial landscape, organizations must become adept at identifying and adapting to the multiple challenges and opportunities in the industry. One of the best ways of conducting a successful, result-oriented environmental scan requires assessment of the factors listed below.

  1. Economic conditions
  2. Competition
  3. Global opportunities
  4. Employment trends
  5. Technological advancement
  6. Industry
  7. Geopolitical climate
  8. Socio-cultural expectations

What are the Guidelines in Performing an Effective Environmental Scanning?

Professor Eileen Abels of the Drexel University of Philadelphia highlights the following as essential to an effective environmental scan:

  1. Deliberate data acquisition using market research studies.
  2. Gaining insights through informal conversations with executives.
  3. Gathering information through secondary sources such as magazines, newspapers, journal literature and web articles.
  4. Monitoring demographic data.
  5. Setting up a benchmark of metrics that compare the organization or industry's performance, finances and other vital variables to another organization or industry.

Example of Environmental Scanning

Here is an example of a company that is using environmental scanning to increase its market reach and bottom-line.

PepsiCo has been able to successfully use its knowledge of the changing environment in the food and beverage industry towards healthier and functional foods to increase its bottom-line and boost its footprint in the environment. The long-term strategy of the company's CEO is to make Pepsi one of the biggest brands in the nutrition business. To achieve this, the company has acquired Naked, a big name in the functional food and beverage subsector and is increasing R&D to create healthier food ingredients that will be more acceptable by an increasing health conscious buying public and regulatory agencies. Not many companies have been able to adapt successfully as PepsiCo.

The Importance of Environmental Scanning

Environmental scanning offers many advantages to companies irrespective of their industry or market environment. Here are some of the ways by which environmental scanning can benefit an organization:

  1. Environmental scanning allows an organization to have current information about its external environment and develop coping strategies.
  2. It enables companies to quickly identify and exploit opportunities before their competitors, counter threats before they grow into bigger issues and also position the company to meet the demand of the commercial landscape.

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