Techniques of Environmental Scanning

Different techniques of environmental scanning are described below:

1. Environmental Threat and Opportunity Profile Analysis (ETOP)

ETOP is considered as a useful device that facilitates an assessment of information related to the environment and also in determining the relative significance of external environment threats and opportunities to systematically evaluate environmental scanning. By dividing the environment into different sections, the ETOP analysis helps in analyzing its impact on the organization. The analysis is based on threats and opportunities in the environment.

2. Quick Environmental Scanning Technique Analysis (QUEST)

QUEST is an environmental scanning technique that is designed to assist with organizational strategies by keeping adheres to change and its implications.  Different steps involved in this technique are as follows:

• The process of environmental scanning starts with the observation of the organization’s events and trends by strategists.

• After observation, important issues that may impact the organization are considered using environment appraisal.

• A report is created by making a summary of these issues and their impact.

• In the final step, planners who are responsible for deciding the feasibility of the proposed strategy, review reports.

3. SWOT Analysis

SWOT analysis stands for strengths, weaknesses, opportunities and threats analysis of a business environment. Strengths and weaknesses are an organization’s internal factor while threats and opportunities are considered as external factors. So, the process of SWOT analysis includes the systematic analysis of these factors to determine an effective marketing strategy. It is a tool that is used by the organization for auditing purposes to find its different key problems and issues.

These are identified through internal and external environmental analysis.

Internal environment analysis/ scanning

Different factors are considered while analyzing the internal environment of an organization like the structure of the organization, physical location, the operational capacity and efficiency of the organization, market share, financial resources, skills and expertise of employees, etc.

Strengths: The strength of any organization is related to its core competencies i.e. efficient resources or technology or skills or advantages over its competitors. For example, the marketing expertise of a firm can be its strength. Apart from this, an organization’s strength can be:

• Strong customer relations

• Market leader in its product or services

• Sound market image and reputation

• Smooth cash-flows

Weaknesses: A weakness or limitation of an organization is related to the scarcity of its resources or skill-set of staff or capabilities that creates an adverse effect on its performance. For example, limited cash-flow and high cost are considered as a financial weakness of the organization. Similarly, other weaknesses can be:

• Poor product quality

• Low productivity

• Unrecognized brand name or poor brand image

External environment analysis/scanning

Different factors that are considered while scanning the external environment of the organization like Competitors, customers, suppliers, technology, social and economic factors, political and legal issues, market trends, etc.

Opportunities: An opportunity of the organization’s environment is considered as its most favorable situation. These are the circumstances that are external to the business and can become an advantage to the organization. For example, different opportunities for a firm can be:

• Social media marketing

• Mergers & acquisitions

• Tapping new markets

• Expansion in International market

• New product development

Threats: Threats of an organization are current or future unfavorable situations that may occur in its external environment. For example, below are a few major threats for a firm:

• A new competitor in the market

• The slow growth of the market

• Changing customer preferences

• Increase in the bargaining power of consumers

• Change in regulations or major technical changes

4. PEST Analysis

PEST technique for a firm’s environmental scanning includes analysis of political, economic, social, and technical factors of the environment.

a) Political/ Legal factors: Different factors like changes in tax policy, availability of raw material, etc. creates a direct effect on a business. So organizations are required to constantly monitor tax-related policy changes as an increase in tax may increase the heavy financial burden on them. Similarly, different laws like “Consumer protection act” also play an important role in an organization’s operation activities as it is important to abide by the act.

More examples can be foreign trade policy, political changes, regulations in competition, trade restrictions, etc. also considered as different political/ legal factors that exist in the external business environment.

b) Economic factors: Different economical Factors like the unemployment rate, inflation, cost of labor, economic trends, disposable income of consumers, monetary policies, etc. play an important role in environmental scanning.

For example, in the case of high unemployment, a company may decrease the prices of its products or services and in opposite situation i.e. when the unemployment rate is low then prices can be high. This happens because if more customers are unemployed then by lowering the prices, an organization can attract them.

c) Social / Cultural factors: Attitude, trends, and behavioral aspects of society also create an impact on the functioning of the organization. Studying and understanding the lifestyle of consumers is very much required to target the right audience and to offer the right product or services based on their preferences.

For example, Issues and policies related to the environment like pollution control are also being considered by organizations to ensure that it operates in an environment-friendly atmosphere. Taking care of the cultural aspect of different countries while doing business at the international level, is also an important factor.

d) Technological Factors: Technological factors affect the way firms produce products and services as well as market them. Like, “processes based on new technologies” is one of the important factors of a technological environment. To maximize profits, production should be handled most cost-effectively and this, technology has an important contribution.

For example, an increase in computer and internet-based technology is playing a major role in the way organizations are distributing and marketing their products and services. Also, different advancements in technologies like automation of the manual process and use of machinery based on more advanced and latest technologies, more investment in research & development by organizations have increased their efficiency by increasing production in less time, cost-reduction and better investment in the long run.