ENVIRONMENT SCANNING

LOVELY PROFESSIONAL UNIVERSITY

LOVELY INSTITUTE OF MANAGEMENT (LIM)
INDEX
S.No. Particular PAGE NO. REMARKS
1. Introduction. 2
2. Acknowledgement 3
3. Introduction 4
4. Method of Environment Scanning 6
5. Environmental Scanning Cycle 8
6. Structure of Environment Scanning 9
7. Importance of environment Scanning 10
8. How companies Handling Environment Scanning 14
9. Literature Review 20
10. Factor Affecting Environment Scanning 23

ACKNOWLEDGEMENT

I take this opportunity to offer my deep gratitude to all those who have extende
d their valued support and advice to complete this term paper. I cannot in full
measure, reciprocate the kindness showed and contribution made by various person
s in this endeavor.
I acknowledge my sincere thanks to Miss. NAVNEET KAUR
(Faculty Member) who stood by me as a pillar of strength throughout the course
of work and under whose mature guidance the term paper arrives out successfully.
 I am grateful to his valuable suggestions.

ENVIRONMENTAL SCANNING
Environmental scanning is a process of gathering, analyzing, and dispensing info
rmation for tactical or strategic purposes. The environmental scanning process e
ntails obtaining both factual and subjective information on the business environ
ments in which a company is operating or considering entering. Environmental sca
nning is the process in which a firm continually collects and evaluates informat
ion about its external environment. There are six main categories of environment
al data to consider when evaluating marketing decisions. These are social forces
, demographic forces, economic forces, technological forces, political and legal
forces, and competitive forces.
SOCIAL FORCES: Potential customers in the automobile detailing business include
both car dealerships and private customers such as families.
DEMOGRAPHIC FORCES: The most important demographic force affecting the detailing
business is the location of people. There is a better chance for business in a
commercialized area with dealerships, than in a residential area with families.
ECONOMIC FORCES: The automobile industry needs to be analyzed for the high and l
ow points of buying during the year. For example, around December people do not
tend to purchase new cars, therefore causing a slow period in the industry. This
affects the amount of customers in the detailing business as well.
POLITICAL AND LEGAL FORCES: The automobile detailing business should be aware of
environmental and zoning laws that may vary from state to state.
COMPETITIVE FORCES: There is relatively low concern for competition from foreign
-based firms since the automobile detailing business is a service provided on a
personal level. However, there may be competition from other businesses in the a
rea.
There are several marketing procedures to consider when increasing customers in
the automobile detailing business. It is especially hard for smaller businesses
to get started. One of the most important marketing tools used is personal selli
ng. Sending a person from one car dealership to the next with fliers is a good w
ay to promote the company. Word of mouth can also attract customers such as fami
lies who may need their car cleaned, but not a daily basis. Another example of a
marketing procedure is to identify loyal customers and offer them special disco
unts.
The outside environment affects marketing in the automobile detailing business,
because automobile detailers are dependent on the car dealerships. If business i
s slow for the dealerships it will hurt the detailing business.
If there is a lot of competition in the area, then the business will have to con
centrate on marketing their business over the others. The size and reputation of
a company can also affect the business. There are many factors of marketing tha
t can affect the way that the automobile industry operates.
METHODS OF ENVIRONMENT SCANNING
There are three ways of scanning the business environment:
Ad-hoc scanning - Short term, infrequent examinations usually initiated by a cri
sis
Regular scanning - Studies done on a regular schedule (once a year)
Continuous scanning - (also called continuous learning) - continuous structured
data collection and processing on a broad range of environmental factors
-Most commentators feel that in today's turbulent business environment the best
scanning method available is continuous scanning. This allows the firm to act qu
ickly, take advantage of opportunities before competitors do, and respond to env
ironmental threats before significant damage is done.
Scanning these macro environmental variables for threats and opportunities requi
res that each issue be rated on two dimensions. It must be rated on its potentia
l impact on the company, and rated on its likeliness of occurrence. Multiplying
the potential impact parameter by the likeliness of occurrence parameter gives u
s a good indication of its importance to the firm.

When an issue is detected, there are generally six ways of responding to them:
1. OPPOSITION STRATEGY - Try to influence the environmental forces so as to
negate their impact – this is only successful where you have some control over th
e environmental variable in question
2. ADAPTATION STRATEGY - Adapt your marketing plan to the new environmental
conditions.
3. OFFENSIVE STRATEGY - Try to turn the new influence into an advantage - q
uick response can give you a competitive advantage
4. REDEPLOYMENT STRATEGY - Redeploy your assets into another industry.
5. CONTINGENCY STRATEGIES - Determine a broad range of possible reactions -
find substitutes.
6. PASSIVE STRATEGY - No response - study the situation further.

ENVIRONMENTAL SCANNING CYCLE

ENVIRONMENT SCANNING STRUCTURE

The structure of the scanning system does not need to be elaborate. The chair of
the scanning committee is responsible for assigning information sources to each
scanner and for collecting and filing copies of articles and scanning abstracts
. Assigning scanners specific materials for regular monitoring provides a measur
e of confidence that most "blips" on the radar screen will be spotted. In making
this assignment, ascertain first what sources are reviewed regularly by the sca
nners. This list should be compared to the list of important information resourc
es identified by the scanning committee. Assign scanners material they already r
egularly review. Also ask for volunteers to review material not regularly read b
y committee members. If there is an abundance of scanners, build in redundancy b
y having two or more scanners review the same information resource.
Periodically the planning committee should meet to sort, sift, and evaluate the
significance of the abstracts the scanners write. At the conclusion, the planner
s should summarize by sector (i.e., social, technological, economic, environment
al, and political) all abstracts for use in the institution's strategic planning
process.

The most important criterion for literature selection is diversity. To ensure th

at you adequately scan the task environment, industry environment, and macro env
ironment, identifies information resources in each of the STEEP sectors. If your
institution does not have the human resources to implement a continuous scannin
g system, you may wish to employ a scanning service.

IMPORTANCE OF ENVIRONMENTAL SCANNING

Without taking into account relevant environmental influences, a company cannot
expect to develop its strategy. It was the environmental influences emerging out
of the energy crisis that were responsible for the popularity of smaller, more
fuel-efficient automobiles and that brought about the demise of less efficient r
otary engines. It was the environmental influence of a coffee bean shortage and
geometric price increases that spawned the “coffee-saver” modification in Mr. Coffee
automatic drip coffee makers. Shopper and merchant complaints from an earlier e
ra contributed to the virtual elimination of deposit bottles; recent pressures f
rom environmental groups, however, have forced their return and have prompted co
mpanies to develop low-cost, recyclable plastic bottles. Another environmental t
rend, Americans’ insatiable appetite for eating out (in 1990, restaurant sales acc
ounted for $0.44 of every $1 spent on food; this number is expected to reach $0.
63 by the year 2000), worries food companies such as Kraft. In response, Kraft i
s trying to make cooking as convenient as eating out (e.g., by providing high-qu
ality convenience foods) to win back food dollars. The sad tales of companies th
at seemingly did everything right and yet lost competitive leadership as a resul
t of technological change abound. Du Pont was beaten by Celanese when bias-ply t
ire cords changed from nylon to polyester. B.F. Goodrich was beaten by Michelin
when the radial overtook the bias-ply tire. NCR wrote off $139 million in electr
o-mechanical inventory and the equipment to make it when solid-state point-of-sa
le terminals entered the market.
Xerox let Canon create the small-copier market. Bucyrus-Erie allowed Caterpillar
and Deere to take over the mechanical excavator market. These companies lost ev
en though they were low-cost producers. They lost even though they were close to
their customers. They lost even though they were market leaders. They lost beca
use they failed to make an effective transition from old to new technology. In b
rief, business derives its existence from the environment. Thus, it should monit
or its environment constructively. Business should scan the environment and inco
rporate the impact of environmental trends on the organization by continually re
viewing the corporate strategy. The underlying importance of environmental scann
ing is captured in Darwinian laws: (a) the environment is ever-changing, (b) org
anisms have the ability to adapt to a changing environment, and (c) organisms th
at do not adapt do not survive. We are indeed living in a rapidly changing world
. Many things that we take for granted today were not even imagined in the 1960s
. As we enter the next century, many more “wonders” will come to exist. To survive a
nd prosper in the midst of a changing environment, companies must stay at the fo
refront of changes affecting their industries. First, it must be recognized that
all products and processes have performance limits and that the closer one come
s to these limits the more expensive it becomes to squeeze out the next generati
on of performance improvements. Second, one must take all competition seriously.
Normally, competitor analyses seem to implicitly assume that the most serious co
mpetitors are the ones with the largest resources. But in the context of taking
advantage of environmental shifts, this assumption is frequently not adequate. T
exas Instruments was a $5- to $10-million company in 1955 when it took on the mi
ghty vacuum tube manufacturers RCA, GE, Sylvania, and Westinghouse and beat them
with its semiconductor technology. Boeing was nearly bankrupt when it successfu
lly introduced the commercial jet plane, vanquishing larger and more financially
secure Lockheed, McDonnell, and Douglas corporations. Third, if the environment
al change promises potential advantage, one must attack to win and attack even t
o play the game. Attack means gaining access to new technology, training people
in its use, investing in capacity to use it, devising strategies to protect the
position, and holding off on investments in mature lines. For example, IBM capit
alized on the emerging personal computer market created by its competitor, Apple
Computer. By becoming the low-cost producer, distributor, seller, and servicer
of personal computers for business use, IBM took command of the marketplace in l
ess than two years. Fourth, the attack must begin early. The substitution of one
product or process for another proceeds slowly and then predictably explodes. O
ne cannot wait for the explosion to occur to react. There is simply not enough t
ime. B.F. Goodrich lost 25 percentage points of market share to Michelin in four
years. Texas Instruments passed RCA in sales of active electronic devices in fi
ve to six years. Fifth, a close tie is needed between the CEO and the operating
managers. Facing change means incorporating the environmental shifts in all aspe
cts of the company’s strategy.
Scanning improves an organization’s abilities to deal with a rapidly changing envi
ronment in a number of ways:
1. It helps an organization capitalize on early opportunities rather than lose t
hese to competitors.
2. It provides an early signal of impending problems, which can be defused if re
cognized well in advance.
3. It sensitizes an organization to the changing needs and wishes of its custome
rs.
4. It provides a base of objective qualitative information about the environment
that strategists can utilize.
5. It provides intellectual stimulation to strategists in their decision making.
6. It improves the image of the organization with its publics by showing that it
is sensitive to its environment and responsive to it.
7. It is a means of continuing broad-based education for executives, especi
ally for strategy developers.

STATE OF THE ART

Scanning serves as an early warning system for the environmental forces that may
impact a company’s products and markets in the future. Environmental scanning is
a comparatively new development. Traditionally, corporations evaluated themselve
s mainly on the basis of financial performance. In general, the environment was
studied only for the purpose of making economic forecasts. Other environmental f
actors were brought in haphazardly, if at all, and intuitively. In recent years,
however, most large corporations have started doing systematic work in this are
a. A pioneering study on environmental scanning was done by Francis Aguilar. In
his investigation of selected chemical companies in the United States and Europe
, he found no systematic approach to environmental scanning. Aguilar’s different t
ypes of information about the environment that the companies found interesting h
ave been consolidated into five groups: market tidings (market potential, struct
ural change, competitors and industry, pricing, sales negotiations, customers);
acquisition leads (leads for mergers, joint ventures); technical tidings (new pr
oducts, processes, and technology; product problems; costs; licensing and patent
s); broad issues (general conditions relative to political, demographic, nationa
l issues; government actions and policies); other tidings (suppliers and raw mat
erials, resources available, other). Among these groups, market tidings was foun
d to be the dominant category and was of most interest to managers across the bo
ard.
Aguilar also identified four patterns for viewing information: undirected viewin
g (exposure without a specific purpose), conditioned viewing (directed exposure
but without undertaking an active search), informal search (collection of purpos
e oriented information in an informal manner), and formal search (a structured p
rocess for collection of specific information for a designated purpose). Both in
ternal and external sources were used in seeking this information. The external
comprised both personal sources (customers, suppliers, bankers, consultants, and
other knowledgeable individuals) and impersonal sources (various publications,
conferences, trade shows, exhibitions, and so on). The internal personal sources
included peers, superiors, and subordinates. The internal impersonal sources in
cluded regular and general reports and scheduled meetings. Aguilar’s study conclud
ed that while the process is not simple, a company can systematize its environme
ntal scanning activities for strategy development. Aguilar’s framework may be illu
strated with reference to the Coca-Cola Company. The company looks at its enviro
nment through a series of analyses. At the corporate level, considerable informa
tion is gathered on economic, social, and political factors affecting the busine
ss and on competition both in the United States and overseas. The corporate offi
ce also becomes involved in special studies when it feels that some aspect of th
e environment requires special attention. For example, in the 1980s, to address
itself to a top management concern about Pepsi’s claim that the taste of its cola
was superior to Coke’s, the company undertook a study to understand what was going
on in the minds of their consumers and what they were looking for. How was the
consumption of Coca-Cola related to their consumers’ lifestyle, to their set of va
lues, to their needs?
This study spearheaded the work toward the introduction of New Coke. In the mid-
1980s, the corporate office also made a study of the impact of antipollution tre
nds on government regulations concerning packaging. At the corporate level, envi
ronment was scanned rather broadly. Mostly market tidings, technical tidings, an
d broad issues were dealt with. Whenever necessary, in-depth studies were done o
n a particular area of concern, and corporate information was made available to
different divisions of the company. At the division level (e.g., Coca-Cola, USA)
, considerable attention is given to the market situation, acquisition leads, an
d new business ventures. The division also studies general economic conditions (
trends in GNP, consumption, income), government regulation (especially antitrust
actions), social factors, and even the political situation. Part of this divisi
on-level scanning duplicates the efforts of the corporate office, but the divisi
onal planning staff felt that it was in a position to do a better job for its ow
n purpose than could the corporate office, which had to serve the needs of other
divisions as well. The division also undertakes special studies. For example, i
n the early 1980s, it wondered whether a caffeine-free drink should be introduce
d and, if so, when. The information received from the corporate office and that
which the division had collected itself was analyzed for events and happenings t
hat could affect the company’s current and potential business. Analysis was done m
ostly through meetings and discussions rather than through the use of any statis
tical model. At the Coca-Cola Company, environmental analysis is a sort of forum
. There is relatively little cohesion among managers; the meetings, therefore, r
espond to a need for exchange of information between people. A recent study of e
nvironmental scanning identifies four evolutionary phases of activity, from prim
itive to proactive. The scanning activities in most corporations can be characte
rized by one of these four phases.

Some of the scanned information may never be looked into; some is analyzed, unde
rstood, and stored. As soon as the leading firm in the industry makes a strategi
c move in a particular matter, presumably in response to an environmental shift,
the company in Phase 3 is quick to react, following the footsteps of the leader
. For example, if the use of cardboard bottles for soft drinks appears uncertain
, the Phase 3 company will understand the problem on the horizon but hesitate to
take a strategic lead. If the leading firm decides to experiment with cardboard
bottles, the Phase 3 firm will quickly respond in kind. In other words, the Pha
se 3 firm understands the problems and opportunities that the future holds, but
its management is unwilling to be the first to take steps to avoid problems or t
o capitalize on opportunities. A Phase 3 company waits for a leading competitor
to pave the way. The firm in Phase 4, the proactive phase, practices environment
al scanning with vigor and zeal, employing a structured effort. Careful screenin
g focuses the scanning effort on specified areas considered crucial. Time is tak
en to establish proper methodology, disseminate scanned information, and incorpo
rate it into strategy. A hallmark of scanning in Phase 4 is the distinction betw
een macro and micro scanning.
Micro scanning is often practiced at the product/market or SBU level. A corporat
e-wide scanning system is created to ensure that macro and micros scanning compl
ement each other. The system is designed to provide open communication between d
ifferent micro scanners to avoid duplication of effort and information. A multin
ational study on the subject concluded that environmental scanning is on its way
to becoming a full-fledged formalized step in the strategic planning process. T
his commitment to environmental scanning has been triggered in part by the recog
nition of environmental turbulence and a willingness to confront relevant change
s within the planning process. Commitment aside, there is yet no accepted, effec
tive methodology for environmental scanning.

How companies Handling the environment scanning?

Methodology and research design
In the context of this research, the case study was considered appropriate for p
roviding a holistic approach to the study of environmental scanning in industria
l organizations operating in the chemical industry. In creating the case study,
several types of data and information were collected, including general data abo
ut the industry and specific information about the companies that agreed to part
icipate.
The data about the companies included:
formal data concerning the character of the company (official designation, addre
ss, telephone and fax number, name of the managing director, SIC code of the mai
n industry, sales volume, number of workers, social capital and distribution, ty
pe of ownership) obtained through the two business databases consulted, Dun & Br
adstreet and MOPE publicly available data provided by the annual reports of the
companies, promotional material and newsletters; historical and cultural informa
tion provided by the managers interviewed, either orally - as an introductory pa
rt of the interview - or in printed form, when available, as well as organizatio
nal charts.

All this information was of great importance to contextualize and illuminate the
core data regarding the environmental scanning phenomenon in the companies anal
yzed. Not all cases, however, provided equally rich frameworks.
The usefulness of the case study approach when used with grounded theory. Ground
ed theory seeks to generate theoretical statements and, ultimately, complex theo
ries based on empirical evidence, although it can be used in different ways and
reach various degrees of complexity. The research design framework adopted in th
is study can be described as a multiple case study, composed according to the th
eory building structure, as described by Yin (1989), i.e., where the sequence of
chapters follow a theory-building logic, and using the grounded theory method o
f qualitative data analysis.
Research design
The main tool used for collecting the core data for this research was the semi-s
tructured interview, a tool flexible enough to favoring adaptation to each conte
xt, organization and individual, and also to pursuing unexpected paths and cues
suggested by the theoretical sensitivity developed by the researcher throughout
the research process. Observation played a minor, but non-negligible role. Visit
s to the premises, including the factory plants in some cases, meals in the cant
eens of some of the organizations, attention paid to the way-of-doing-things in
the several companies - how visitors were announced, how meetings were scheduled
and cancelled, absence or frequency and type of interruptions in the course of
the interviews, degree of formality or informality in interpersonal relations -
contributed to consolidate impressions or confirm information based on documenta
ry evidence or on the interviews.

Conceptual framework: the categories and the model

The information that emerged out of the data provides an empirical basis for the
articulation of a grounded theory of environmental scanning. The articulation o
f the theory implies the identification and description of a set of categories a
nd relationships, which explain a significant part of the phenomenon under study
. Those categories and relationships must be clearly defined and easily measurab
le, and the theory itself should be meaningful for both organizational theorists
and information scientists. The grounded theory proposed comprises three main c
omponents: the categories (the core category and the subsidiary categories), the
principal relationships among them, and the contextual factors that shape the c
ategories and relationships. From an internal perspective, these factors include
corporate history and culture. From an external perspective, these contextual f
actors include the overall economic, social, cultural and political conditions t
hat characterize modern Portugal and shape, at least to a certain extent, the or
ganizations operating in that reality.
The model of organization implied by the theory is that of an open system. The c
omponents that make up the grounded theory are shown in Figure 1.
The core category identified was that of environmental scanning, to which a set
of subsidiary categories was related. Environmental scanning refers to the expos
ure to and acquisition of "information about events and relationships in a compa
ny s outside environment, the knowledge of which would assist top-management in
its task of charting the company s future course of action. This interrelated se
t of categories contributes to understanding how contextual factors - external a
nd internal to the organization, influence the scanning activity, and also how p
erceived environmental change affects strategic change. The task of explaining v
ariance among companies resides with a few key relationships among those categor
ies.
External factors perceived as causing change in the environment were identified
as pertaining to two main categories: the regulatory framework and the business
structure. The changes of a regulatory nature were linked to joining the EC and
to government intervention, while the changes of a business nature were linked t
o the trend for concentration in the chemical industry and the crisis of client
industries.
The analysis of the data regarding managers perceptions of environmental change
, showed that the impact of joining the EC was evaluated mainly in terms of the
changes in the regulatory framework, bringing in new rules and procedures to fol
low, such as regulations concerning the registration of drugs, the adoption of t
he patent regime in force in Europe and the demand for higher standards regardin
g product quality. It was also evaluated in terms of the progressive elimination
of customs tariffs and its consequences upon the fragile competitiveness of the
national companies, and the fear that customs barriers would be replaced by tec
hnical barriers. The growth of the market was a positive issue associated with j
oining the EC.
The government was accused of excessive intervention in the regulation of the ma
rket, especially in the health sector, by approving or rejecting the production
of new medicines and by establishing prices of the medicines; the policy of high
interest rates practiced by the banking system was another negative issue, whic
h was blamed upon the government, as most of the banks were nationalized when th
e field-work was carried out and high interest rates were in fact part of the go
vernment policy to keep inflation down. The government was also accused of faili
ng to defend the national interests within the EC and of the mismanagement of de
velopment programmers such as PEDIP (Strategic Programmed for the Dynamization a
nd Modernization of the Portuguese Industry).
Changes in the business structure were described as multifold, due to the acquis
itions and mergers taking place, and also to the disappearance of smaller compan
ies that sank under the pressure of competition, as a result of the trend for co
ncentration that prevails in the chemical industries at large, especially in the
pharmaceutical and cosmetics sub-sectors, and also in the segments of resin-der
ived products and synthetic fibre products. An important factor of instability w
as said to be the crisis of some of the client industries, such as the shoe indu
stry and the textile industry. Factors of a cultural nature were invoked to expl
ain the reticence of the Portuguese entrepreneurs to engage in strategic allianc
es.
The assessment of the environmental attributes showed that the environment had b
ecome extremely hostile and rather complex, even though turbulence was thought t
o stay relatively low. The comparative analysis of results regarding environment
al change, obtained through the assessment of environmental attributes and throu
gh the analysis of perceptions of environmental change, evidenced compatible res
ults.
On the other hand, the advent of the Single Market was seen as inevitable and wa
s faced predominantly with a moderate degree of optimism, as it was widely belie
ved that the worst had passed, meaning that the adaptation process to the Common
Market had been hard enough and that something positive could still be expected
from the Single Market, like keeping market shares or conquering a niche market
or realizing a successful alliance. Plans of internationalization did not go fu
rther than Spain in most of the cases. The peripheral position of Portugal in Eu
rope was seen as a hindrance for penetration in other regions as well as a prote
ction against competitors from central Europe, especially for industries produci
ng low-value-added products with high costs of transportation.
Strategic change
More than any other factor, the changeability of the environment proved to be de
terminant in the rejection of tight planning schemes, while the size of the comp
any influences the adoption of planning (larger companies tend to engage in plan
ning) but other factors interfere with that tendency, such as the form of the or
ganization and the management style or the dominant culture. There emerged no ev
idence that industrial segments or sub-sectors might influence the adoption of p
lanning as a management tool. On the other hand, planning offices are rare and t
heir main role is to collect the hard data needed to support top managers decis
ion making.
Strategic change in the companies analyzed revolved mainly around increasing pro
duct quality, which involved in some cases the improvement of the conditions of
production and was associated, in specific cases of highly pollutant industries,
with measures of environment protection. Other important changes of strategic n
ature were internationalization and diversification, pursued by dynamic companie
s enjoying a steady growth trend. Growth through acquisitions was pursued by com
panies targeting internationalization, and strategic alliances were embraced mai
nly by companies oriented to the internal market, needing to secure a position t
hreatened by strong competitors. Specialization was adopted by companies with li
ttle scope for growth.
Increasing product quality was a generalized target. However, some companies mad
e clear that they had always pursued quality, while others admitted that they ha
d to improve the quality of their products and the conditions of production in o
rder to satisfy EC regulations. This concern was particularly acute among the co
mpanies of the plastics sub-sector and the large manufacturers in declining indu
stries, such as the chlorine producer and the synthetic fibre manufacturer. In t
his last case, fear was expressed that technical barriers would replace customs
barriers. The companies that engaged in improving product quality as part of an
adaptive process to cope with EC regulations denote, generally speaking, poor op
erating conditions to face the Single Market, and present a typical reactive beh
avior.
The companies that opted to specialize were in the paints and in the pharmaceuti
cal sub-sectors, where multi-national companies have dominated for decades, henc
e the need to seek product and market niches not covered by the giant corporatio
ns. An option made in these conditions may be regarded as an adaptive behavior,
but is not necessarily a reactive behavior. Growth, diversification and internat
ionalization involve complex, risky and slow processes and are, therefore, more
clearly associated with proactive behaviors.
Internal factors influencing the scanning activity were identified as being of a
n individual nature - information consciousness and individual exposure to infor
mation - and of an organizational nature – outwardness and information climate.
Information consciousness was assessed through the attitude of top managers towa
rds environmental scanning and through the communication pattern established amo
ng managers within each organization. All the interviewees agreed about the vita
l role of information in business. Top managers of large and medium-size compani
es operating in different sub-sectors described their role, as far as environmen
tal scanning is concerned, as a mix of personal monitoring and dissemination of
information among direct collaborators. A significant difference was detected be
tween managers of larger companies and managers of smaller companies. In larger
companies, managers tend to minimize their role as monitors and emphasize their
role as disseminators; dissemination of information becomes an important issue i
n larger organizations, where more complex structures and functional diversifica
tion are dominant features. On the other hand, managers of smaller companies ass
ume environmental scanning as a personal responsibility and attribute great impo
rtance to that activity, while the dissemination factor is irrelevant, because i
n most of the cases there is nobody else to pass the information to.
Communication is generally intense between the top manager and the functional di
rectors, and among functional directors. Communication among managers is made up
of a mix of oral information and written information; the nature of this mix an
d the reasons that determine the choice of either of the forms of communication
was not entirely clarified. However, some evidence associates the choice of oral
communication with the generic scope of the information or its potential for st
arting action.
SCIENTIFIC METHOD
1. Define Question
2. Develop Hypothesis
3. Gather Data
4. Filter & Organize Data
5. Analyze Appropriate Data
6. Prepare Findings and Select Best Recommendation
7. Prepare Draft Report
8. Review & Approve
9. Issue Report & Deliver Presentation
10. Seek Feedback from Client

Perceived environmental change refers to the alteration in the pattern of events

and relationships occurring in the company s outside environment, as perceived
by managers, which may lead the company to adjust to the new conditions. Strateg
ic change refers to the alteration of the company s course of action in order to
create new conditions or adapt to new conditions. The perceived environmental c
hange-strategic change connection translates the decisive role of top managers
perceptions of environmental change upon their decisions to change their compani
es course of action.
Information consciousness means the value attributed to information, and it is a
construct that emerged within the individual sphere but in the cross-section of
the individual behavior and the organizational way-of-doing things. Information
climate emerged within the organizational sphere as a set of conditions that de
termine access to and use of information. The information consciousness-informat
ion climate connection translates the strong influence detected between the top
manager s attitude towards information-related activities and the type of inform
ation climate established in each company.
Outwardness means the openness of a company to the outside and permeability to e
xternal influences and is rooted in the concept of organizations as open systems
. Exposure to information refers to the frequency of opportunities of contact wi
th well-informed people and information-rich contexts. It is rooted in the conce
pt of boundary spanning personnel, as people establishing the connection between
their organizations and the environment, as well as in the concept of gate keep
ing and information stars, and emerged as the individual face of the organizatio
nal phenomenon of outwardness. The outwardness - exposure to information connect
ion translates the determinant weight of the organizational capacity to relate t
o the environment, upon the degree of exposure to information of individual
LITERATURE REVIEW
Auster and Choo (1993) see environmental scanning as the acquisition and use of
information about events and trends in an organization’s external environment, the
knowledge of which would assist management in planning the organization’s future
courses of action. Also, Lester and Waters remark that environmental scanning is
needed to provide the information for top management to make decisions that cre
ate strategic advantage for the organization to succeed in a changing environmen
t (Lester and Waters 1998). Daft et al. (1988) and Auster and Choo (1992) lookin
g at the effect of environmental uncertainty found that managers who perceive gr
eater environmental uncertainty tend to do more scanning. However, Jain (1984) a
nd Ghosal and Kim (1986) focus their studies of environmental scanning on market
-related environmental sectors. They found that information about customers, com
petitors, and suppliers is of great importance. Kobrin et al (1980) reported tha
t the information sources most often used by managers and staff within the organ
ization are personal sources, while sources like the company library and online
databases were less used. Scanning methods can range from ad hoc informal activi
ties to systematic formalized efforts, depending on the organization’s size, its e
xperience, and its perception of the environment (Preble et al. 1988).
Taylor (1991) suggests that a more complete picture of information seeking by a
group of users may be gained by analyzing their information use environment, whi
ch includes sets of people, dimensions of the problems to be solved, the work se
tting, and the ways problems are considered to be resolved. When an organization
places a high priority on external information, its decision-makers access vari
ous sources to aid their strategic planning and find solutions to problems confr
onting the organization. Presently, the effective adaptability of bank business
operations to external change (i.e. turns in the business cycle, technological a
dvances, governmental policies and laws, and labour union programmes) can be inc
reased through environmental scanning. The banking industry in a deregulated eco
nomy like Nigeria with a high political instability is full of uncertainty. Also
, uncertainty arises because the bank managers experience a dearth of informatio
n about an external environment that is complex and variable. Furthermore, the m
ore important or strategic that environmental change is perceived to be, the gre
ater the amount of scanning. Therefore, perceived strategic uncertainty is assum
ed as endogenous variable that would affect the bank managers’ scanning behaviors.
Information searching entails both selection and utilization of sources. Allen
(1977) argued that users prefer information sources that are perceived to be mor
e accessible rather than sources that are perceived to be of higher quality. How
ever, Nilan et al. (1988) and Halpern and Nilan (1988) believed that perceived s
ource quality based on relevance and reliability of the information provided by
the source may influence the users’ environmental scanning. Relevance information
could be viewed as information that is needed and useful with respect to the goa
ls and activities of the users’ banks, while information is reliable when it is au
thoritative and dependable. Although it is possible to look at other organizatio
nal and personal variables that could affect scanning, focusing on environmental
uncertainty, source accessibility, and source quality, provides a helpful guide
in knowing key informational parameters that influence the amount of scanning a
nd the utilization of information sources to do the scanning. Culman (1983) opin
ed that perceived source accessibility could be operationalised as the amount of
effort required to locate a source and then to get the needed information from
that source.
Effective study of environmental scanning of a specific user group begins with a
clear identification of their environmental sectors. The external business envi
ronment of a bank is classified into six main environmental sectors from which s
canning can be done. These are:
i) Customer sector implies those banks or individuals that buy or consume the se
rvices offered by the bank.
ii) Competition sector includes the banks, services, and competitive strategies
banks that offer similar services, substitute services or value – added services,
competitive actions between banks and other financial institutions in the same i
ndustry.
iii) Technological sector consists of development of new service techniques and
methods, innovation in materials and services, and general trends in research an
d science and technology especially information technologies relevant to the ban
k.
iv) Regulator sector includes government legislation and regulations, policies,
and political developments affecting your banking operations.
v) Economic sector comprises of economic factors such as stock markets, rate of
exchange, rate of inflation, governmental budgets, external trade balance, unemp
loyment and economic growth rate.
vi) Socio-cultural sector encompasses social values in the general population, t
he work ethic, banking habit, crime rate, and rate of women in the work force.
According to Boyd (1989) “the perceived importance of trends in the various enviro
nmental sectors has a major effect on scanning activity.” The perceived strategic
uncertainty, a combination of uncertainty measured by the complexity and variabi
lity of an environmental sector, and the importance to the bank of event in the
sector are key factors to be considered in the environmental scanning of manager
s in the banking industry. Also Auster and Choo (1994) posit that to know the am
ount of scanning, it is necessary to consider how each environmental sector come
s to the knowledge of the user and the degree to which the user keeps him inform
ed about developments in each sector. Thus, the level of interest of the user wo
uld be affected by his cognitive traits and value system, while the frequency wi
th which information comes to his knowledge would be associated with other facto
rs like the type of information channels in the bank industry and the manager’s sc
anning style. Similarly, the use of environmental information in decision making
is also a vital aspect of the study of environmental scanning of bank managers.
Accessibility to information and positional authority empowers the manager to p
erform four basic decisional roles (Mintzberg 1973). These are entrepreneurship,
resource allocation, disturbance handling and negotiation; they form the basic
functions of managers in the banking industry.

Areas such as competitive intelligence and environmental scanning are becoming i

ncreasingly more important business practices, particularly under the intense co
mpetition of the technology industry. However, organizations are reluctant to se
arch for information which they cannot act on immediately and are also reluctant
to experiment in the absence of reliable information; conditions leading to org
anizational inattention. On the other hand, many organizations are spending valu
able resources either on projects assessed with insufficient information or on i
nformation that they are unable to internalize. This paper provides a framework,
based on environmental turbulence and organizational flexibility, to aid organi
zations in developing the appropriate strategy for effective environmental scann
ing and analysis.
FACTORS INFLUENCING ENVIRONMENTAL SCANNING
INDIVIDUAL FACTORS
The individual factors identified as influencing the scanning activity were info
rmation consciousness and exposure to information.
Information consciousness means the attitude towards information-related activit
ies, denoting the value attributed to information. This category emerged in the
course of the analysis process, as a result of grouping together events, and the
concepts describing them, which were judged as pertaining to the same category
of events. Those concepts included the personal sense of responsibility for envi
ronmental scanning and the communication pattern developed by the individual. Al
l the interviewees agreed about the vital role of information in business. Top m
anagers of large and medium-size companies operating in different sub-sectors de
scribed their role, as far as environmental scanning is concerned, as a mix of p
ersonal monitoring and dissemination of information among direct collaborators.
Communication among managers was made up of a mix of oral information and writte
n information; the nature of this mix and the reasons that determine the choice
of either of the forms of communication was not entirely clarified. However, som
e interviewees associated the choice of oral communication with the generic scop
e of the information or its potential for starting action.
Exposure to information means the frequency of opportunities of contact with wel
l- informed people and information-rich contexts. The emergence of this category
was based on the analysis of the information networks developed by managers. Al
l the interviewees played a very similar role, since they were all managers, eit
her chief executives or entrepreneurs, or functional directors, mainly marketing
and commercial directors. They were therefore in a privileged position concerni
ng the degree of exposure to information.
Exposure to information is strongly influenced by the outwardness of the organ
ization: some organizations provide more opportunities of contact with well-info
rmed people or information-rich contexts. It is also influenced by the role play
ed by the individual within the organization: marketing and commercial directors
have a much greater exposure to information than financial or administrative di
rectors. But exposure to information is also influenced by the information clima
te of the organizations, which differ in the range of conditions of access to an
d use of information by their staff.
ORGANIZATIONAL FACTORS
The organizational factors identified as influencing the environmental scanning
activity were information climate and outwardness.
The information climate means the setting of conditions that determine access to
and use of information in an organization. It was assessed through the informat
ion infrastructure implemented, i.e., the processes, technologies and people use
d in information acquisition and handling (collecting, organizing and making inf
ormation available, and disseminating it). But it was the emergence of evidence
relating to the role of organizational culture in shaping the information infras
tructure that led to the creation of the construct "information climate".
Organizational culture emerged as an important factor in the analysis of informa
tion issues within these organizations. The type of information culture that pre
vails in the pharmaceutical companies analyzed is a formal information culture,
meaning cultures "which exhibit extensive formalization and systematization of i
nformation channels", as defined by Brown (1990).
Two other companies in two different sub-sectors were identified as having, resp
ectively, an oral culture, meaning cultures "which support a high degree of word
-of-mouth communication", according to Brown (op. cit.) and an information consc
ious culture (cultures "which demonstrate considerable awareness of the value of
information and sophistication in their information behavior and systems", stil
l according to Brown, 1990). No kind of information culture had developed in the
remaining companies, where there was little sensitiveness to information matter
s, and little investment was made in the information infrastructure.

Besides those two main relationships or connections, represented in the figure a

bove by thick arrows, there are indications (represented by broken arrows) that
managers with a strong information consciousness tend to foster their organizati
ons outwardness; on the other hand, where a stimulating information climate is
created, the individual exposure to information increases.
As a result of the qualitative analysis of evidence from companies in the chemic
al industries sector in Portugal, we have evolved four theoretical concepts and
have proposed relationships among them. The concepts relate to both organization
al and individual behaviour. We suggest that, in terms of information-seeking to
support organizational functions, both sets of factors must be taken into accou
nt. Further, we propose that the more open the organization is to its environmen
t, particularly in terms of openness to information flows, the more likely it is
that individuals in the organization will experience exposure to relevant infor
mation and develop an information consciousness. Similarly, to the extent that t
his occurs, the organization is more likely to develop an information climate th
at supports the individual.

THE ALGORITHM OF THE ENVIRONMENTAL SCANNING

STEP 1: IDENTIFY POTENTIALLY RELEVANT ENVIRONMENTAL CHANGES

The process of identifying potentially relevant changes can be organized in vari
ous ways:
• One of the basic approaches to it is to begin with significant macro environment
al changes in society and then to assess their potential future relevance to the
organization. This is the “external to internal” (EX ® IN) approach
• The second and more common approach starts with internal parameters of the compa
ny and its possible environmental influence. Here, marketers are trying to analy
ze real or possible environmental changes that can influence upon these paramete
rs. This is the “internal to external (IN ® EX) approach”
• Advanced companies use the extensive approach for identifying change forces; it
is called the Systematic Procedure for Identifying the Relevant Environment, or
SPIRE. This approach centers on a matrix with likely external changes on one ax
is and possible strategic decisions on the other axis. The cells of this matrix
are studied, screened, and clustered
STEP 2: MONITOR CHANGE
Once potentially relevant changes have been identified, an organization must dec
ide how to monitor them; this is done by learning more about the changes’ nature a
nd direction rather than by learning more about their current rate of the change
.
Valuable information for monitoring is readily available from government and tra
de sources, business and non-business magazines. Some corporations have their ow
n information monitoring systems for analyzing and predicting changes. Most envi
ronmental information, however, is gathered from the aforementioned, readily ava
ilable data sources.
Effective monitoring provides a good basis for forecasting.
STEP 3: FORECAST IMPACT, TIMING, AND CONSEQUENCES
Any forecast relies on seeking past and present relationships that help predict
the future. The process of forecasting includes one or more of the following:
• Projecting historical trends
• Forecasting the future from related current events
• Basing forecasts on variables that are thought to cause future events
The relative complexity of forecasting varies by environmental sector. Environme
ntal forecasting for social, political, and technological environments is intuit
ive and judgmental. The level of complexity depends on the degree to which the p
rocesses of change are understood.
The methods of forecasting can be divided to two groups:
• Extrapolation methods: Use of past information to predict the future; the assump
tion that past trends will continue in the future
• Subjective/ judgmental methods: Use of expert opinion for predicting the future
Typically used methods for estimation of timing of environmental changes and the
likelihood of their impact are considered below:
• Individual judgments: “Best guess” of experts
• The Delphi method: The independent questioning of a panel of experts concerning
some future event or trend without group discussion
• Trends extrapolation: Projects historical trends on the assumption that the fact
ors causing change in the future will be similar to those that caused them in th
e past
• Cross-impact matrices: Forecasts derived by different methods may be combined in
tables to ensure consistency
• Scenarios: Verbal picture of the future. Multiple scenarios are usually develope
d. Alternative strategic directions are evaluated in terms of each scenario
• Modeling: Trends are specified in equation form
STEP 4: DEVELOP STRATEGIC RESPONSES
Important environmental changes have been identified and monitored, and their fu
ture states have been forecasted. At this point, the marketing management should
be ready to cope with these changes. Marketing managers must decide what to do
in the new environmental situation. Strategic marketing decisions rely on two re
lated assumptions:
• The objective is to effectively match changing markets with a company’s strengths
(its special resources)
• The firm’s strengths and resources are difficult to change in the short term
• There are usually only defined periods during which a “strategic window” exists for
a given company. The “strategic window” is a period of time in which a company can r
eact to the environmental change. Out of the “strategic window,” it is too late (or
too early) to react

BIBLIOGRAPHY