Chapter-2

Environmental scanning
 Environmental Scanning
• Environmental scanning is the process of continually acquiring
information on events occurring outside the organization to identify
and interpret potential trends.

• Environmental scanning is a process of gathering, analysing, and

dispensing information for tactical or strategic purposes. The
environmental scanning process entails obtaining both factual and
subjective information on the business environments in which a
company is operating or consider entering.
 Definitions
• In the field of environmental scanning, the first notable study was
carried out by Aguilar (1967). Aguilar define environmental scanning
as acquiring information about events and relationships in a
company’s outside environment, the knowledge of which would assist
top management in its task of charting the company’s future course of
action.

• Daft and Weick (1984), the way an organisation deciphers its

environment in order to learn from it may be divided into three phases:
scanning (information seeking), interpretation (giving meaning to the
collected data) and learning (taking action based on the data).
 Definition
• Lester and Waters (1989) define environmental scanning as a
management process of using information from the environment to
aid decision-making.

Hough and White (2004) view environment scanning as a process

of identifying, collecting, processing and translating information
about external influences into useful plans and decisions.
Environmental Scanning
strategic planning process
 Objectives of Environmental Scanning
• Coates (1985) identified the following objectives of an environmental
scanning system:
(1)Detecting scientific, technical, economic, social, and political
trends and events important to the institution,
(2) Defining the potential threats, opportunities, or changes for
the institution implied by those trends and events,
(3) Promoting a future orientation in the thinking of management
and staff, and
(4) Alerting management and staff to trends that are converging,
diverging, speeding up, slowing down, or interacting.
 Importance of Environmental Scanning
• Oladele (2006) stated some importance to environmental scanning as
follows:
a)The environment is dynamic in nature, therefore scanning is
necessary to keep abreast of change.
b) It reveals the elements or factors that constitute threats and
opportunity to the overall objectives of the organization.
c) Competitor’s activities can be monitored and appropriate
strategies put in place to check market incursion.
d) It gives necessary inputs to the formulation and
implementation of potent marketing strategies.
 Methods of Environmental Scanning
• This aspect of environmental scanning has caused much debate
among the scholars in the field of Management. However, the following
are therefore suggested:
• Secondary data collection approach such as articles, textbooks, magazines
and ready-made information etc…
• Primary data collection approach, using research instruments such as
questionnaire,
• Personal interview, personal observation etc.
• Establish a unit within the organization which will responsible to scan wide
range of environmental factors and makes forecast about specific variables
through qualitative and quantitative means.
 Kinds of environmental scanning
1.Ad-hoc scanning - Short term, infrequent
examinations usually initiated by a crisis
2.Regular scanning - Studies done on a regular
schedule (e.g. once a year)
3.Continuous scanning (also called continuous
learning) - continuous structured data collection
and processing on a broad range of environmental
factors
 Ad Hoc Periodic Continuous

 Usually performed in response to  Tied to planning cycle (e.g.,  Also called Continuous Learning
General crisis every 3 years)  Structured, in-depth data collection
Character-
 Not as in-depth  In-depth and analyses by dedicated staff
istics
 Forecasts are more short-term  Forecasts 5 to 10 years  Data gathered is more comprehensive

 Dedication of time by researchers

 Predictable frequency allows
for appropriate budget planning
 Allows for quicker turn-around of scan results
 Frequency provides timely
 Lower commitment of resources
Pros information gathering for planning
over time
 Planning is proactive…
allows incorporation of data from more sources
 Provides planners with more
comprehensive information
 Informs planners of critical changes sooner
 Plans can be adjusted or adopted more proactively

 Data can be more superficial  Reaction to unforeseen changes in

 Results may address immediate issues, but
are less generalizable
Cons  If only conducted in response to crises,
indicates lack of organized institutional
planning efforts
 Planning response is reactive
environment (e.g., onset of recession)
may require Ad Hoc scan to  Requires ongoing institutional commitment of
supplement information. resources (funding, personnel, and time)
 Planning response is then more
reactive
 Environmental scanning
• Environmental scanning
Environmental
scanning

External Internal
analysis analysis

Macro Micro
environment environment

Five force
PEST analysis analysis