QUESTION: BUSINESS ENVIRONMENTAL SCANNING AS A PRECURSOR

TO STRATEGY FORMULATION IS AN EXCERCISE IN FUTILITY .

Strategic management is the set of managerial decisions and actions that determine the
long-run performance of a corporation. Strategic management is a chain that links the
following processes. That is environmental scanning, strategy formulation, strategy
implementation and evaluation and control. This chain of process starts from
environmental scanning, ends at evaluation and control and also back to any of the
stages or process of the strategic management depending on the feedback loop from the
evaluation and control stage.

This makes each stage vital to the strategic management process. Therefore in
undertaking business environmental scanning as a precursor to strategy formulation is
not an exercise in futility. Business environmental scanning is the monitoring,
evaluation and dissemination of information in both the external and internal
environment of a business. Business environmental scanning is done first in strategic
management and before strategy formulation because it enable organisation to create
an appropriate fit or match between the organisations environment and its strategy
,structure and processes. Researches have shown that organisations that are able to
monitor and adapt to its environmental changes always outperformed companies that
did not change. As business environmental scanning ensures long term health or
stability of business and plan a head based on its anticipated eventualities.

Business environmental scanning is done to identify strategic factors, which are

external and internal factors that determine the future of a corporation.

External strategic factors can be classified into societal and task environment. The
societal factors are forces that do not directly touch on the short term activities of the
firm. Examples are economic forces, technological forces, political-legal forces and
socio-cultural forces. The task environments are elements or groups that directly affect
a firm and in turn affected by it. Examples are the forces within the industry like
customers, suppliers, competitors, government and many more.
Scanning the external environment can be done by using the issue priorities matrix
which identifies the number of trends emerging in societal and task environment and
asses the probability of the trend occurring and its likely impact on the firm when it
occurs. Issue priority matrix identifies external strategic factors as the
environmental trends that are judged to have both a medium to high probability
of occurrences and a medium to high probability of impact on the firm. These
external environmental trends are further categorised into opportunities and threats.
There are other methods of scanning the environment; that is porters approach to
industry analysis, industry evolution, competitive intelligence and forecasting.

The relevance of this external environment scanning is to understand current trends

and be able to forecast whether these trends will continue or whether other trends will
take their place. We then use theses information about societal and task environment to
make certain assumptions about the future by formulating strategic plan. Also
understanding the degree of change of complexity and the degree of change existing in
an organisations external environment (environmental uncertainty) is important as
both as a threat and opportunity.

Scanning and analysing the external environment for opportunities and threats alone is
not enough to provide an organisation a competitive advantage in undertaking business
scanning but also business need to look within the corporation itself to identify strategic
factors. Internal strategic factors are the critical strength and weaknesses that are likely
to determine to determine whether a firm will be able to take advantage of
opportunities while avoiding threats.

Scanning the internal environment is done by analysing the business structures, culture
and resources which can be classified as key strength that form the business set of core
and distinctive competences. One of the methods of analysing a business to evaluate the
firm’s competencies is the Barney’s VRIO framework which borders on value,
rareness, imitability and organisation.

The relevance of internal scanning is to allow business realise its key resources in
taking advantage of the opportunities while avoiding threats. This is done by
formulating strategies that are supported by key corporate and functional capabilities.
From the ongoing discussion, we have seen how business environmental scanning is
done and its relevance to strategy formulation and strategic management as a whole.
Also without taking into account relevant environmental influences, a company cannot
expect to develop its strategy. That is the environment is ever changing, business must
adapt to the changing environment and importantly businesses that do not adopt do not
survive.

Environmental scanning is generally viewed by strategic management scholars as a

prerequisite for formulating effective business strategies. Moreover, effective scanning
of the environment is seen as necessary to the successful alignment of competitive
strategies with environmental requirements and the achievement of outstanding
performance.

Strategy formulation (strategic planning) is concerned with developing a corporation’s

mission, objectives, strategies and policies. It begins with situational analysis which is
the process of finding a strategic fit between external opportunities and internal
strength while working around external threats and internal weakness.

Once environmental scanning is completed, then strategy formulation begins with

situational analysis. This proves the relevance of environmental scanning to strategy
formulation. In fact, no environmental scanning, no strategy formulation and I
personally object to the view that business environmental scanning as precursor to
strategy formulation is an exercise in futility.