Events are important and specific occurrences taking place in different environmental sectors. Trends are the general tendencies of the courses of action along which events take place. Issues are the current concerns that arise in response to events and trends. Expectations are the demands made by interested groups in the light of their concern for issues. Take the example of the first public issue of shares of Reliance Industries in 1977. That was a specific event. The trend that started was of wider participation of public in equity investment in private sector companies.
Note that earlier to that event, equity participation in India was limited to an exclusive class of investors and the general public was not aware or interested in investing money in shares. The issue that emerged was of the development of equity culture in India. The expectations by the general public that resulted was that the fruits of the economic development in the corporate sector would be shared by all and sundry.
An allied expectation that ensued was of protection of small or minority shareholders from rapacious private business persons through legislation and governmental action.
Environmental influences are a complex amalgam of the events, trends, issues and expectations that continually shape the business environment of an organization. There is some research evidence to suggest that Indian organizations conduct environmental scanning for strategic planning. By monitoring the environment through environmental scanning, an organization can consider the impact of the different events, trends, issues and expectations on its strategic management process.
Since the environment facing any organization is complex and scanning it is absolutely essential, strategists have to deal cautiously with the process of environmental scanning. Approaches to Environmental Scanning Sub has suggested three approaches which could be adopted for sorting out information for environmental scanning. We could call these approaches as systematic, ad hoc and processed-form approaches:
Since environmental scan inning is absolutely necessary for strategy formulation, organizations use different practical combinations or approaches to monitor their relevant environments. These approaches may range from an informal assessment of the environmental factors to a highly systematic and formal procedure. Informal assessment may be adopted as a reactive measure to a crisis and ad hoc studies may be undertaken occasionally. A highly systematic and formal procedure may be used as a proactive measure in anticipation of changes in environmental factors and structured data collection and processing system may be used continuously.
The range of methods and techniques available for environmental scanning is wide. There are formal and systematic techniques as well as intuitive methods available. Strategists may choose from among these methods and cuisines, those which suit their needs in terms of the quantity, quality, availability, timeliness, relevance and cost of environmental information. Various authors have mentioned the methods and techniques used for environmental scanning.
Label and Crasser outline nine groups of techniques:
Fay, King and Maryanne have included ten techniques in their survey of environmental scanning and forecasting in strategic planning. These are: scenario-writing, simulation, morphological analysis, PBS, game theory, cross-impact analysis, field anomaly-relation, multimillion coordination and other forecasting techniques.
TOP ( Environmental Threat and Opportunity Profile) There are many techniques available to structure the environmental appraisal. One such technique, suggested by Cluck, is that of preparing an environmental threat and opportunity profile (TOP) for an organization. The preparation of an TOP involves dividing the environment into different sectors and then analyzing the impact of each sector on the organization. A comprehensive TOP requires subdividing each environmental sector into cofactors and then the impact of each subtracts on the organization is described in the form of the statement.
A summary TOP may only show the major factors for the sake of simplicity. The preparation of TOP provides a clear picture to the strategies about which sectors and the different factors in each sector, have a favorable impact on the organization. By the means of an TOP, the organization knows where it stands with respect to its environment. Obviously, such an understanding can be of a great help to an organization in formulating appropriate strategies to take advantage of the opportunities and counter the threats in its environment.
Opportunities are the situations in which the firm can improve its strategic position. The first Step in the planning process is to be aware Of opportunities. For small businesses, environmental scanning through which the firm can effectively determine its core competencies and opportunities acts as a major factor in the realization of strategic management for the firm. Suppose our hypothetical firm is operating in a hi-tech industry. Any technological change in the industry which can generate new sales, opportunities or potential customers could be considered as an opportunity.
If a firm is involved in either long or medium run planning, they have to have clear vision of the future and potential opportunities available. It is difficult to prepare an effective business plan without considering the opportunities. Therefore, small businesses usually succeed or fail based on how accurately they can identify the opportunity and benefit from these advantages. Since in the competitive environment the needs of the customer are changing, the rims need to analyze the environment as often as possible.
While as, Threats are the main obstacles and issues in the external environment of the organization. Any changes in the external environment of the Seems that have the potential to disrupt the firm’s wellbeing could be considered as threats. For example, we recently witnessed rapid changes in technology and, as a result, in the business environment. Should the SEEM not be capable of adapting to these technological changes it will not be able to survive. In this case the changes in technology could be considered as a threat to the firm. For Seems the environment is littered with threats to their survival.