Explain the concept and process of Environmental Scanning

 Explain the concept and process of Environmental Scanning

The concept and process of Environmental Scanning Business environment may be defined as the total surroundings which have a direct or indirect bearing on the business activities. In this sense, the business environment refers to all the external factors which may influence the functioning of the business. But some experts have used the term business environment in a very broader sense.

They are of the opinion that business activities are influenced not only by the external environmental forces but also by the internal environment existing in a business organisation such as the resources at the command of business, the value system, the mission and objectives, etc. that its management 'has. The concept and process of Environmental Scanning.

The external environment such as economic, socio-cultural, political, technological, ecological, legal and regulatory, etc. in which the business operates gives various kinds of opportunities to the business or may pose threats or challenges to the business.

On the other hand, the intemal environment in terms of its physical and psychological resources helps the management to cope and adapt to the external environment. Thus, the survival and success of any business depends upon both intemal and external environmental factors. However, the term 'business environment' usually refers to the external factors and forces which are outside the control of the firm and vary from country to country. Business Environment can also be classified as economic and non-economic.

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The , economic environment consists of factors like the fiscal policy, the monetary policy, the industrial policy, the nature of economic system, the pace of economic development, etc. The non-economic environment, on the other hand, refers to socio-cultural, politico-legal, technological and natural factors. Explain the concept and process of Environmental Scanning , It may be noted that' economic and non-economic environment can neither be separated nor identified exclusively.

Both interact with each other and their treatment in isolation is neither feasible nor of any significance. The economic environment determines the noneconomic environment and, at the same time, it is determined by the non-economic environment.

For example, the economic condition is affected by sociological factors and the social norms, and values are influenced by the income level of the people. Thus, each critical element of ecqnomic environment interacts with each critical element of non-economic environment. The success of any business depends on a proper understanding and its ability to foresee the nature, extent and dimensions' of changes likely to occur in both sets of environmental factors and the extent to which tha Business adapts itself to the likely changes by effecting necessary changes in its strategies.



The business environment encompasses a variety of factors like economic, socio-cultural, political, legal, natural, international, technological and many others operating at micro as well as macro levels. But the immediate concern of business is to identify that part of the environment which is of strategic relevance to it.

Every organisation must closely and thoroughly monitor its relevant environment. The process by which the organisations monitor their relevant environment to identify the opportunities that could benefit them and the threats that should be avoided is known as environmental scanning, analysis or appraisal.

The whole process consists of tracing the source of any opportunity or threat and break the whole into parts so as to examine its nature and inter- relationship. It is from such analysis that the management is in a position to (decide whether to react to, ignore, or try to influence, or anticipate future s opportunities and threats discovered.

Need for Environmental Scanning

'We know that the environment is dynamic, complex, multifaceted, and has far reaching impact on the business. It is precisely for this reason that the environment lias to be monitored and scanned continuously.

The organisations must be able to anticipate the unknown and uncertain environmental changes so that they are able to utilize the opportunities to grow and respond to the challenges and threats. Their future depends upon how innovative they are and how well they manage the change.

'The business scenario is highly competitive and no organisation can afford to miss opportunities which environmental changes are providing for the simple reason that the organisations which are efficient will grab such business opportunities and drive the inefficient and non-performing business organisations out of competition.


Environmental scanning is aimed at identifying key variables that offer actionable responses. The organisations should be able to respond either offensively or defensively to these key factors by formulating strategies that take advantage of external opportunities or that minimize the inipact of potential threats.

Environmental scanning is thus the fundamental step in the Strategic Management Process. The main advantage of the environmental scanning is that the strategic decision makers are in a better position to narrow down the range of available alternatives and eliminate those options which are inconsistent with the forecasted opportunities. It may not be very easy to identify the best strategy. But environmental scanning helps in eliminating all those options which are not promising alternatives.

The process of environmental scanning thus should achieve following three goals:

·       The scanning should provide a complete understanding of current and potential changes taking place in the environment. It should provide inputs for strategic decision making.

·       Mere collection of information or data is not enough. The information collected must be used for strategic decision making.

·       It should facilitate and foster strategic thinking in the organisation. It should challenge the current wisdom by bringing fresh viewpoints into the organisation.

Characteristics of Environmental Scanning

 Its scanning comprises information processing and forecasting of social, economic, political and even international conditions, besides technological and market conditions. This provides a broader perspective to corporate planners in formulating plans and strategies.

The process of environmental scanning, therefore, must have the following characteristics. Environmental scanning being a holistic exercise, must take a total view of the environment rather than making piecemeal analysis of various trends and components of the environment. Environmental scanning must be a continuous process because the nature of business environment itself is dynamic. Any intermittent scanning system will not yield desired results.

Environmental scanning is a heuristic or exploratory process. It seeks to explore the unknown and uncertain terrain and various dimensions of what could possibly happen in future. Your predictions of what can happen are not necessarily going to be translated into what will happen. Therefore, the emphasis must be on alternative futures, seeking classifications on the assumptions about the future, speculating systematically about alternative courses of action, assessing probabilities and drawing more rational conclusions.

Approaches to Environmental Scanning

The approaches to the environmental scanning may range from informal assessment of environmental factors which may be adopted as a reactive measure to a crisis or ad-hoc studies undertaken occasionally to a highly systematic and formal procedure used as a proactive measure for anticipation of changes in factors on continuing basis.

As such, there are three approaches which could be adopted for the purpose of environmental scanning : (1) Systematic approach, (2) Adhoc approach, and (3) . Processed form approach. These are discussed hereunder.

Process of Environmental Scanning

The process of environmental scanning involves performance of the following steps in a sequential manner.

Idenntification of key environmental variables : The first step in environmental scanning involves identification of key environmental variables which have an impact on the organisation's business and industry. These environmental variables comprises both micro and macro environment of business. The organisation requires to identify those variables which are relevant and also the variables which are general in nature. The key environmental variables can be customer related, competition or market related, technology related, regulatory framework related etc.

Identification of sources of information for environmental Scanning : Environmental scanning requires information input which can be derived from different sources. These could be formal and informal sources. These could be written as well as verbal sources. The origin of the sources of data could be internal as well as external.

Some of the important types of sources of information are:

·       Internal sources such as company files and documents, data base generated by management information systems, company employees, and so on.

·       Secondary sources of information such as government publications, newspapers, journals, magazines, trade and industry associations newsletters, annual reports of competing firms, etc.

·       Mass media such as radio, television, internet.

·       Formal studies conducted by external agencies such as marketing research agencies, consultants and educational institutions.

·       Spying and surveillance through industrial espionage agencies or through ex- employees of the competitors or by planting own persons in the rival companies.


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