Environment Scanning

ENVIRONMENT SCANNING
LOVELY PROFESSIONAL UNIVERSITY LOVELY INSTITUTE OF MANAGEMENT (LIM)
ARUN GULERIA | arun_guleria@ymail.com
INDEX
S.N o. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Introduction. Acknowledgement Introduction Method of Environment Scanning Environmental Scanning Cycle Particular PAGE NO. 2 3 4 6 8 9 10 14 20 23 REMAR KS
Structure of Environment Scanning

Importance of environment Scanning How companies Handling Environment Scanning Literature Review Factor Affecting Environment Scanning
ACKNOWLEDGEMENT
I take this opportunity to offer my deep gratitude to all those who have extended their valued support and advice to complete this term paper. I cannot in full measure, reciprocate the kindness showed and contribution made by various persons in this endeavor.
I acknowledge my sincere thanks to Miss. NAVNEET KAUR (Faculty Member) who stood by me as a pillar of strength throughout the course of work and under whose mature guidance the term paper arrives out successfully. I am grateful to his valuable suggestions.
ENVIRONMENTAL SCANNING
Environmental scanning is a process of gathering, analyzing, 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 considering entering. Environmental scanning is the process in which a firm continually collects and evaluates information about its external environment. There are six main categories of environmental data to consider when evaluating marketing decisions. These are social forces, demographic forces, economic forces, technological forces, political and legal forces, and competitive forces. SOCIAL FORCES: Potential customers in the automobile detailing business include both car dealerships and private customers such as families. DEMOGRAPHIC FORCES: The most important demographic force affecting the detailing business is the location of people. There is a better chance for business in a commercialized area with dealerships, than in a residential area with families. ECONOMIC FORCES: The automobile industry needs to be analyzed for the high and low points of buying during the year. For example, around December people do not tend to purchase new cars, therefore causing a slow period in the industry. This affects the amount of customers in the detailing business as well. POLITICAL AND LEGAL FORCES: The automobile detailing business should be aware of environmental and zoning laws that may vary from state to state. COMPETITIVE FORCES: There is relatively low concern for competition from foreign-based firms since the automobile detailing business is a service provided on a personal level. However, there may be competition from other businesses in the area. There are several marketing procedures to consider when increasing customers in the automobile detailing business. It is especially hard for smaller businesses to get started. One of the most important marketing tools used is personal selling. Sending a person from one car dealership to the next with fliers is a good way to promote the company. Word of mouth can also attract customers such as families who may need their car cleaned, but not a daily basis. Another example of a marketing procedure is to identify loyal customers and offer them special discounts.
The outside environment affects marketing in the automobile detailing business, because automobile detailers are dependent on the car dealerships. If business is slow for the dealerships it will hurt the detailing business. If there is a lot of competition in the area, then the business will have to concentrate on marketing their business over the others. The size and reputation of a company can also affect the business. There are many factors of marketing that can affect the way that the automobile industry operates.
METHODS OF ENVIRONMENT SCANNING

There are three ways of scanning the business environment: Ad-hoc scanning - Short term, infrequent examinations usually initiated by a crisis Regular scanning - Studies done on a regular schedule (once a year) Continuous scanning - (also called continuous learning) - continuous structured data collection and processing on a broad range of environmental factors -Most commentators feel that in today's turbulent business environment the best scanning method available is continuous scanning. This allows the firm to act quickly, take advantage of opportunities before competitors do, and respond to environmental threats before significant damage is done. Scanning these macro environmental variables for threats and opportunities requires that each issue be rated on two dimensions. It must be rated on its potential impact on the company, and rated on its likeliness of occurrence. Multiplying the potential impact parameter by the likeliness of occurrence parameter gives us a good indication of its importance to the firm. When an issue is detected, there are generally six ways of responding to them: 1. OPPOSITION STRATEGY - Try to influence the environmental forces so as to negate their impact this is only successful where you have some control over the environmental variable in question
2.
ADAPTATION STRATEGY - Adapt your marketing plan to the new environmental conditions.
3.
OFFENSIVE STRATEGY - Try to turn the new influence into an advantage - quick response can give you a competitive advantage REDEPLOYMENT STRATEGY - Redeploy your assets into another industry. CONTINGENCY STRATEGIES - Determine a broad range of possible reactions - find substitutes. PASSIVE STRATEGY - No response - study the situation further.
4.
5.
6.
ENVIRONMENTAL SCANNING CYCLE
ENVIRONMENT SCANNING STRUCTURE

The structure of the scanning system does not need to be elaborate. The chair of the scanning committee is responsible for assigning information sources to each scanner and for collecting and filing copies of articles and scanning abstracts. Assigning scanners specific materials for regular monitoring provides a measure of confidence that most "blips" on the radar screen will be spotted. In making this assignment, ascertain first what sources are reviewed regularly by the scanners. This list should be compared to the list of important information resources identified by the scanning committee. Assign scanners material they already regularly review. Also ask for volunteers to review material not regularly read by committee members. If there is an abundance of scanners, build in redundancy by having two or more scanners review the same information resource. Periodically the planning committee should meet to sort, sift, and evaluate the significance of the abstracts the scanners write. At the conclusion, the planners should summarize by sector (i.e., social, technological, economic, environmental, and political) all abstracts for use in the institution's strategic planning process. The most important criterion for literature selection is diversity. To ensure that you adequately scan the task environment, industry environment, and macro environment, identifies information resources in each of the STEEP sectors. If your institution does not have the human resources to implement a continuous scanning system, you may wish to employ a scanning service.
IMPORTANCE OF ENVIRONMENTAL SCANNING

Without taking into account relevant environmental influences, a company cannot expect to develop its strategy. It was the environmental influences emerging out of the energy crisis that were responsible for the popularity of smaller, more fuelefficient automobiles and that brought about the demise of less efficient rotary engines. It was the environmental influence of a coffee bean shortage and geometric price increases that spawned the coffee-saver modification in Mr. Coffee automatic drip coffee makers. Shopper and merchant complaints from an earlier era contributed to the virtual elimination of deposit bottles; recent pressures from environmental groups, however, have forced their return and have prompted companies to develop low-cost, recyclable plastic bottles. Another environmental trend, Americans insatiable appetite for eating out (in 1990, restaurant sales
accounted for $0.44 of every $1 spent on food; this number is expected to reach $0.63 by the year 2000), worries food companies such as Kraft. In response, Kraft is trying to make cooking as convenient as eating out (e.g., by providing highquality convenience foods) to win back food dollars. The sad tales of companies that seemingly did everything right and yet lost competitive leadership as a result of technological change abound. Du Pont was beaten by Celanese when bias-ply tire cords changed from nylon to polyester. B.F. Goodrich was beaten by Michelin when the radial overtook the bias-ply tire. NCR wrote off $139 million in electromechanical inventory and the equipment to make it when solid-state point-of-sale terminals entered the market. Xerox let Canon create the small-copier market. Bucyrus-Erie allowed Caterpillar and Deere to take over the mechanical excavator market. These companies lost even though they were low-cost producers. They lost even though they were close to their customers. They lost even though they were market leaders. They lost because they failed to make an effective transition from old to new technology. In brief, business derives its existence from the environment. Thus, it should monitor its environment constructively. Business should scan the environment and incorporate the impact of environmental trends on the organization by continually reviewing the corporate strategy. The underlying importance of environmental scanning is captured in Darwinian laws: (a) the environment is ever-changing, (b) organisms have the ability to adapt to a changing environment, and (c) organisms that do not adapt do not survive. We are indeed living in a rapidly changing world. Many things that we take for granted today were not even imagined in the 1960s. As we enter the next century, many more wonders will come to exist. To survive and prosper in the midst of a changing environment, companies must stay at the forefront of changes affecting their industries. First, it must be recognized that all products and processes have performance limits and that the closer one comes to these limits the more expensive it becomes to squeeze out the next generation of performance improvements. Second, one must take all competition seriously.
Normally, competitor analyses seem to implicitly assume that the most serious competitors are the ones with the largest resources. But in the context of taking advantage of environmental shifts, this assumption is frequently not adequate. Texas Instruments was a $5- to $10-million company in 1955 when it took on the mighty vacuum tube manufacturers RCA, GE, Sylvania, and Westinghouse and beat them with its semiconductor technology. Boeing was nearly bankrupt when it successfully introduced the commercial jet plane, vanquishing larger and more financially secure Lockheed, McDonnell, and Douglas corporations. Third, if the environmental change promises potential advantage, one must attack to win and attack even to play the game. Attack means gaining access to new technology, training people in its use, investing in capacity to use it, devising strategies to protect the position, and holding off on investments in mature lines. For example, IBM capitalized on the emerging personal computer market created by its competitor, Apple Computer. By becoming the low-cost producer, distributor, seller, and servicer of personal computers for business use, IBM took command of the marketplace in less than two years. Fourth, the attack must begin early. The substitution of one product or process for another proceeds slowly and then predictably explodes. One cannot wait for the explosion to occur to react. There is simply not enough time. B.F. Goodrich lost 25 percentage points of market share to Michelin in four years. Texas Instruments passed RCA in sales of active electronic devices in five to six years. Fifth, a close tie is needed between the CEO
and the operating managers. Facing change means incorporating the environmental shifts in all aspects of the companys strategy.
Scanning improves an organizations abilities to deal with a rapidly changing environment in a number of ways:
1. It helps an organization capitalize on early opportunities rather than lose these to competitors. 2. It provides an early signal of impending problems, which can be defused if recognized well in advance. 3. It sensitizes an organization to the changing needs and wishes of its customers. 4. It provides a base of objective qualitative information about the environment that strategists can utilize. 5. It provides intellectual stimulation to strategists in their decision making. 6. It improves the image of the organization with its publics by showing that it is sensitive to its environment and responsive to it. 7. It is a means of continuing broad-based education for executives, especially for strategy developers.
STATE OF THE ART

Scanning serves as an early warning system for the environmental forces that may impact a companys products and markets in the future. Environmental scanning is a comparatively new development. Traditionally, corporations evaluated themselves mainly on the basis of financial performance. In general, the environment was studied only for the purpose of making economic forecasts. Other environmental factors were brought in haphazardly, if at all, and intuitively. In recent years, however, most large corporations have started doing systematic work in this area. A pioneering study on environmental scanning was done by Francis Aguilar. In his investigation of selected chemical companies in the United States and Europe, he found no systematic approach to environmental scanning. Aguilars different types of information about the environment that the companies found
interesting have been consolidated into five groups: market tidings (market potential, structural change, competitors and industry, pricing, sales negotiations, customers); acquisition leads (leads for mergers, joint ventures); technical tidings (new products, processes, and technology; product problems; costs; licensing and patents); broad issues (general conditions relative to political, demographic, national issues; government actions and policies); other tidings (suppliers and raw materials, resources available, other). Among these groups, market tidings was found to be the dominant category and was of most interest to managers across the board. Aguilar also identified four patterns for viewing information: undirected viewing (exposure without a specific purpose), conditioned viewing (directed exposure but without undertaking an active search), informal search (collection of purpose oriented information in an informal manner), and formal search (a structured process for collection of specific information for a designated purpose). Both internal and external sources were used in seeking this information. The external comprised both personal sources (customers, suppliers, bankers, consultants, and other knowledgeable individuals) and impersonal sources (various publications, conferences, trade shows, exhibitions, and so on). The internal personal sources included peers, superiors, and subordinates. The internal impersonal sources included regular and general reports and scheduled meetings. Aguilars study concluded that while the process is not simple, a company can systematize its environmental scanning activities for strategy development. Aguilars framework may be illustrated with reference to the Coca-Cola Company. The company looks at its environment through a series of analyses. At the corporate level, considerable information is gathered on economic, social, and political factors affecting the business and on competition both in the United States and overseas. The corporate office also becomes involved in special studies when it feels that some aspect of the environment requires special attention. For example, in the 1980s, to address itself to a top management concern about Pepsis claim that the taste of its cola was superior to Cokes, the company undertook a study to understand what was going on in the minds of their consumers and what they were looking for. How was the consumption of Coca-Cola related to their consumers lifestyle, to their set of values, to their needs? This study spearheaded the work toward the introduction of New Coke. In the mid1980s, the corporate office also made a study of the impact of antipollution trends on government regulations concerning packaging. At the corporate level, environment was scanned rather broadly. Mostly market tidings, technical tidings, and broad issues were dealt with. Whenever necessary, in-depth studies were done
on a particular area of concern, and corporate information was made available to different divisions of the company. At the division level (e.g., Coca-Cola, USA), considerable attention is given to the market situation, acquisition leads, and new business ventures. The division also studies general economic conditions (trends in GNP, consumption, income), government regulation (especially antitrust actions), social factors, and even the political situation. Part of this division-level scanning duplicates the efforts of the corporate office, but the divisional planning staff felt that it was in a position to do a better job for its own purpose than could the corporate office, which had to serve the needs of other divisions as well. The division also undertakes special studies. For example, in the early 1980s, it wondered whether a caffeine-free drink should be introduced and, if so, when. The information received from the corporate office and that which the division had collected itself was analyzed for events and happenings that could affect the companys current and potential business. Analysis was done mostly through meetings and discussions rather than through the use of any statistical model. At the Coca-Cola Company, environmental analysis is a sort of forum. There is relatively little cohesion among managers; the meetings, therefore, respond to a need for exchange of information between people. A recent study of environmental scanning identifies four evolutionary phases of activity, from primitive to proactive. The scanning activities in most corporations can be characterized by one of these four phases. Some of the scanned information may never be looked into; some is analyzed, understood, and stored. As soon as the leading firm in the industry makes a strategic move in a particular matter, presumably in response to an environmental shift, the company in Phase 3 is quick to react, following the footsteps of the leader. For example, if the use of cardboard bottles for soft drinks appears uncertain, the Phase 3 company will understand the problem on the horizon but hesitate to take a strategic lead. If the leading firm decides to experiment with cardboard bottles, the Phase 3 firm will quickly respond in kind. In other words, the Phase 3 firm understands the problems and opportunities that the future holds, but its management is unwilling to be the first to take steps to avoid problems or to capitalize on opportunities. A Phase 3 company waits for a leading competitor to pave the way. The firm in Phase 4, the proactive phase, practices environmental scanning with vigor and zeal, employing a structured effort. Careful screening focuses the scanning effort on specified areas considered crucial. Time is taken to establish proper methodology, disseminate scanned information, and incorporate it into strategy. A hallmark of scanning in Phase 4 is the distinction between macro and micro scanning.
Micro scanning is often practiced at the product/market or SBU level. A corporatewide scanning system is created to ensure that macro and micros scanning complement each other. The system is designed to provide open communication between different micro scanners to avoid duplication of effort and information. A multinational study on the subject concluded that environmental scanning is on its way to becoming a full-fledged formalized step in the strategic planning process. This commitment to environmental scanning has been triggered in part by the recognition of environmental turbulence and a willingness to confront relevant changes within the planning process. Commitment aside, there is yet no accepted, effective methodology for environmental scanning.
How companies scanning?
Handling
the
environment
Methodology and research design

In the context of this research, the case study was considered appropriate for providing a holistic approach to the study of environmental scanning in industrial organizations operating in the chemical industry. In creating the case study, several types of data and information were collected, including general data about the industry and specific information about the companies that agreed to participate.
The data about the companies included:

formal data concerning the character of the company (official designation, address, telephone and fax number, name of the managing director, SIC code of the main industry, sales volume, number of workers, social capital and distribution, type of ownership) obtained through the two business databases consulted, Dun & Bradstreet and MOPE publicly available data provided by the annual reports of the companies, promotional material and newsletters; historical and cultural information provided by the managers interviewed, either orally - as an introductory part of the interview - or in printed form, when available, as well as organizational charts. All this information was of great importance to contextualize and illuminate the core data regarding the environmental scanning phenomenon in the companies analyzed. Not all cases, however, provided equally rich frameworks.
The usefulness of the case study approach when used with grounded theory. Grounded theory seeks to generate theoretical statements and, ultimately, complex theories based on empirical evidence, although it can be used in different ways and reach various degrees of complexity. The research design framework adopted in this study can be described as a multiple case study, composed according to the theory building structure, as described by Yin (1989), i.e., where the sequence of chapters follow a theory-building logic, and using the grounded theory method of qualitative data analysis.
Research design
The main tool used for collecting the core data for this research was the semistructured interview, a tool flexible enough to favoring adaptation to each context, organization and individual, and also to pursuing unexpected paths and cues suggested by the theoretical sensitivity developed by the researcher throughout the research process. Observation played a minor, but non-negligible role. Visits to the premises, including the factory plants in some cases, meals in the canteens of some of the organizations, attention paid to the way-of-doing-things in the several companies - how visitors were announced, how meetings were scheduled and cancelled, absence or frequency and type of interruptions in the course of the interviews, degree of formality or informality in interpersonal relations contributed to consolidate impressions or confirm information based on documentary evidence or on the interviews.
Conceptual framework: the categories and the model

The information that emerged out of the data provides an empirical basis for the articulation of a grounded theory of environmental scanning. The articulation of the theory implies the identification and description of a set of categories and relationships, which explain a significant part of the phenomenon under study. Those categories and relationships must be clearly defined and easily measurable, and the theory itself should be meaningful for both organizational theorists and information scientists. The grounded theory proposed comprises three main components: the categories (the core category and the subsidiary categories), the principal relationships among them, and the contextual factors that shape the categories and relationships. From an internal perspective, these factors include corporate history and culture. From an external perspective, these contextual
factors include the overall economic, social, cultural and political conditions that characterize modern Portugal and shape, at least to a certain extent, the organizations operating in that reality. The model of organization implied by the theory is that of an open system. The components that make up the grounded theory are shown in Figure 1. The core category identified was that of environmental scanning, to which a set of subsidiary categories was related. Environmental scanning refers to the exposure to and acquisition of "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. This interrelated set of categories contributes to understanding how contextual factors - external and internal to the organization, influence the scanning activity, and also how perceived environmental change affects strategic change. The task of explaining variance among companies resides with a few key relationships among those categories. External factors perceived as causing change in the environment were identified as pertaining to two main categories: the regulatory framework and the business structure. The changes of a regulatory nature were linked to joining the EC and to government intervention, while the changes of a business nature were linked to the trend for concentration in the chemical industry and the crisis of client industries. The analysis of the data regarding managers' perceptions of environmental change, showed that the impact of joining the EC was evaluated mainly in terms of the changes in the regulatory framework, bringing in new rules and procedures to follow, such as regulations concerning the registration of drugs, the adoption of the patent regime in force in Europe and the demand for higher standards regarding product quality. It was also evaluated in terms of the progressive elimination of customs tariffs and its consequences upon the fragile competitiveness of the national companies, and the fear that customs barriers would be replaced by technical barriers. The growth of the market was a positive issue associated with joining the EC. The government was accused of excessive intervention in the regulation of the market, especially in the health sector, by approving or rejecting the production of new medicines and by establishing prices of the medicines; the policy of high interest rates practiced by the banking system was another negative issue, which was blamed upon the government, as most of the banks were nationalized when the
field-work was carried out and high interest rates were in fact part of the government policy to keep inflation down. The government was also accused of failing to defend the national interests within the EC and of the mismanagement of development programmers such as PEDIP (Strategic Programmed for the Dynamization and Modernization of the Portuguese Industry). Changes in the business structure were described as multifold, due to the acquisitions and mergers taking place, and also to the disappearance of smaller companies that sank under the pressure of competition, as a result of the trend for concentration that prevails in the chemical industries at large, especially in the pharmaceutical and cosmetics sub-sectors, and also in the segments of resinderived products and synthetic fibre products. An important factor of instability was said to be the crisis of some of the client industries, such as the shoe industry and the textile industry. Factors of a cultural nature were invoked to explain the reticence of the Portuguese entrepreneurs to engage in strategic alliances. The assessment of the environmental attributes showed that the environment had become extremely hostile and rather complex, even though turbulence was thought to stay relatively low. The comparative analysis of results regarding environmental change, obtained through the assessment of environmental attributes and through the analysis of perceptions of environmental change, evidenced compatible results. On the other hand, the advent of the Single Market was seen as inevitable and was faced predominantly with a moderate degree of optimism, as it was widely believed that the worst had passed, meaning that the adaptation process to the Common Market had been hard enough and that something positive could still be expected from the Single Market, like keeping market shares or conquering a niche market or realizing a successful alliance. Plans of internationalization did not go further than Spain in most of the cases. The peripheral position of Portugal in Europe was seen as a hindrance for penetration in other regions as well as a protection against competitors from central Europe, especially for industries producing low-value-added products with high costs of transportation. Strategic change More than any other factor, the changeability of the environment proved to be determinant in the rejection of tight planning schemes, while the size of the company influences the adoption of planning (larger companies tend to engage in planning) but other factors interfere with that tendency, such as the form of the organization and the management style or the dominant culture. There emerged no evidence that industrial segments or sub-sectors might influence the adoption of
planning as a management tool. On the other hand, planning offices are rare and their main role is to collect the hard data needed to support top managers' decision making. Strategic change in the companies analyzed revolved mainly around increasing product quality, which involved in some cases the improvement of the conditions of production and was associated, in specific cases of highly pollutant industries, with measures of environment protection. Other important changes of strategic nature were internationalization and diversification, pursued by dynamic companies enjoying a steady growth trend. Growth through acquisitions was pursued by companies targeting internationalization, and strategic alliances were embraced mainly by companies oriented to the internal market, needing to secure a position threatened by strong competitors. Specialization was adopted by companies with little scope for growth. Increasing product quality was a generalized target. However, some companies made clear that they had always pursued quality, while others admitted that they had to improve the quality of their products and the conditions of production in order to satisfy EC regulations. This concern was particularly acute among the companies of the plastics sub-sector and the large manufacturers in declining industries, such as the chlorine producer and the synthetic fibre manufacturer. In this last case, fear was expressed that technical barriers would replace customs barriers. The companies that engaged in improving product quality as part of an adaptive process to cope with EC regulations denote, generally speaking, poor operating conditions to face the Single Market, and present a typical reactive behavior. The companies that opted to specialize were in the paints and in the pharmaceutical sub-sectors, where multi-national companies have dominated for decades, hence the need to seek product and market niches not covered by the giant corporations. An option made in these conditions may be regarded as an adaptive behavior, but is not necessarily a reactive behavior. Growth, diversification and internationalization involve complex, risky and slow processes and are, therefore, more clearly associated with proactive behaviors. Internal factors influencing the scanning activity were identified as being of an individual nature - information consciousness and individual exposure to information - and of an organizational nature outwardness and information climate.
Information consciousness was assessed through the attitude of top managers towards environmental scanning and through the communication pattern established among managers within each organization. All the interviewees agreed about the vital role of information in business. Top managers of large and mediumsize companies operating in different sub-sectors described their role, as far as environmental scanning is concerned, as a mix of personal monitoring and dissemination of information among direct collaborators. A significant difference was detected between managers of larger companies and managers of smaller companies. In larger companies, managers tend to minimize their role as monitors and emphasize their role as disseminators; dissemination of information becomes an important issue in larger organizations, where more complex structures and functional diversification are dominant features. On the other hand, managers of smaller companies assume environmental scanning as a personal responsibility and attribute great importance to that activity, while the dissemination factor is irrelevant, because in most of the cases there is nobody else to pass the information to. Communication is generally intense between the top manager and the functional directors, and among functional directors. Communication among managers is made up of a mix of oral information and written information; the nature of this mix and the reasons that determine the choice of either of the forms of communication was not entirely clarified. However, some evidence associates the choice of oral communication with the generic scope of the information or its potential for starting action.
SCIENTIFIC METHOD
1. Define Question 2. Develop Hypothesis 3. Gather Data 4. Filter & Organize Data 5. Analyze Appropriate Data 6. Prepare Findings and Select Best Recommendation 7. Prepare Draft Report 8. Review & Approve 9. Issue Report & Deliver Presentation 10. Seek Feedback from Client
Perceived environmental change refers to the alteration in the pattern of events and relationships occurring in the company's outside environment, as perceived by managers, which may lead the company to adjust to the new conditions. Strategic change refers to the alteration of the company's course of action in order to create new conditions or adapt to new conditions. The perceived environmental changestrategic change connection translates the decisive role of top managers' perceptions of environmental change upon their decisions to change their companies' course of action. Information consciousness means the value attributed to information, and it is a construct that emerged within the individual sphere but in the cross-section of the individual behavior and the organizational way-of-doing things. Information climate emerged within the organizational sphere as a set of conditions that determine access to and use of information. The information consciousnessinformation climate connection translates the strong influence detected between the top manager's attitude towards information-related activities and the type of information climate established in each company. Outwardness means the openness of a company to the outside and permeability to external influences and is rooted in the concept of organizations as open systems. Exposure to information refers to the frequency of opportunities of contact with well-informed people and information-rich contexts. It is rooted in the concept of boundary spanning personnel, as people establishing the connection between their organizations and the environment, as well as in the concept of gate keeping and information stars, and emerged as the individual face of the organizational phenomenon of outwardness. The outwardness - exposure to information connection translates the determinant weight of the organizational capacity to relate to the environment, upon the degree of exposure to information of individual
LITERATURE REVIEW
Auster and Choo (1993) see environmental scanning as the acquisition and use of information about events and trends in an organizations external environment, the knowledge of which would assist management in planning the organizations future courses of action. Also, Lester and Waters remark that environmental scanning is needed to provide the information for top management to make decisions that create strategic advantage for the organization to succeed in a changing environment (Lester and Waters 1998). Daft et al. (1988) and Auster and Choo (1992) looking at the effect of environmental uncertainty found that managers who perceive greater environmental uncertainty tend to do more scanning. However, Jain (1984) and Ghosal and Kim (1986) focus their studies of environmental scanning on market-related environmental sectors. They found that information about customers, competitors, and suppliers is of great importance. Kobrin et al (1980) reported that the information sources most often used by managers and staff within the organization are personal sources, while sources like the company library and online databases were less used. Scanning methods can range from ad hoc informal activities to systematic formalized efforts, depending on the organizations size, its experience, and its perception of the environment (Preble et al. 1988). Taylor (1991) suggests that a more complete picture of information seeking by a group of users may be gained by analyzing their information use environment, which includes sets of people, dimensions of the problems to be solved, the work setting, and the ways problems are considered to be resolved. When an organization places a high priority on external information, its decision-makers access various sources to aid their strategic planning and find solutions to problems confronting the organization. Presently, the effective adaptability of bank business operations to external change (i.e. turns in the business cycle, technological advances, governmental policies and laws, and labour union programmes) can be increased through environmental scanning. The banking industry in a deregulated economy like Nigeria with a high political instability is full of uncertainty. Also, uncertainty arises because the bank managers experience a dearth of information about an external environment that is complex and variable. Furthermore, the more important or strategic that environmental change is perceived to be, the greater the amount of scanning. Therefore, perceived strategic uncertainty is assumed as endogenous variable that would affect the bank managers scanning behaviors. Information searching entails both selection and utilization of sources. Allen (1977) argued that users prefer information sources that are perceived to be more
accessible rather than sources that are perceived to be of higher quality. However, Nilan et al. (1988) and Halpern and Nilan (1988) believed that perceived source quality based on relevance and reliability of the information provided by the source may influence the users environmental scanning. Relevance information could be viewed as information that is needed and useful with respect to the goals and activities of the users banks, while information is reliable when it is authoritative and dependable. Although it is possible to look at other organizational and personal variables that could affect scanning, focusing on environmental uncertainty, source accessibility, and source quality, provides a helpful guide in knowing key informational parameters that influence the amount of scanning and the utilization of information sources to do the scanning. Culman (1983) opined that perceived source accessibility could be operationalised as the amount of effort required to locate a source and then to get the needed information from that source. Effective study of environmental scanning of a specific user group begins with a clear identification of their environmental sectors. The external business environment of a bank is classified into six main environmental sectors from which scanning can be done. These are: i) Customer sector implies those banks or individuals that buy or consume the services offered by the bank. ii) Competition sector includes the banks, services, and competitive strategies banks that offer similar services, substitute services or value added services, competitive actions between banks and other financial institutions in the same industry. iii) Technological sector consists of development of new service techniques and methods, innovation in materials and services, and general trends in research and science and technology especially information technologies relevant to the bank. iv) Regulator sector includes government legislation and regulations, policies, and political developments affecting your banking operations. v) Economic sector comprises of economic factors such as stock markets, rate of exchange, rate of inflation, governmental budgets, external trade balance, unemployment and economic growth rate. vi) Socio-cultural sector encompasses social values in the general population, the work ethic, banking habit, crime rate, and rate of women in the work force.
According to Boyd (1989) the perceived importance of trends in the various environmental sectors has a major effect on scanning activity. The perceived strategic uncertainty, a combination of uncertainty measured by the complexity and variability of an environmental sector, and the importance to the bank of event in the sector are key factors to be considered in the environmental scanning of managers in the banking industry. Also Auster and Choo (1994) posit that to know the amount of scanning, it is necessary to consider how each environmental sector comes to the knowledge of the user and the degree to which the user keeps him informed about developments in each sector. Thus, the level of interest of the user would be affected by his cognitive traits and value system, while the frequency with which information comes to his knowledge would be associated with other factors like the type of information channels in the bank industry and the managers scanning style. Similarly, the use of environmental information in decision making is also a vital aspect of the study of environmental scanning of bank managers. Accessibility to information and positional authority empowers the manager to perform four basic decisional roles (Mintzberg 1973). These are entrepreneurship, resource allocation, disturbance handling and negotiation; they form the basic functions of managers in the banking industry. Areas such as competitive intelligence and environmental scanning are becoming increasingly more important business practices, particularly under the intense competition of the technology industry. However, organizations are reluctant to search for information which they cannot act on immediately and are also reluctant to experiment in the absence of reliable information; conditions leading to organizational inattention. On the other hand, many organizations are spending valuable resources either on projects assessed with insufficient information or on information that they are unable to internalize. This paper provides a framework, based on environmental turbulence and organizational flexibility, to aid organizations in developing the appropriate strategy for effective environmental scanning and analysis.
FACTORS INFLUENCING ENVIRONMENTAL SCANNING INDIVIDUAL FACTORS

The individual factors identified as influencing the scanning activity were information consciousness and exposure to information. Information consciousness means the attitude towards information-related activities, denoting the value attributed to information. This category emerged in the course of the analysis process, as a result of grouping together events, and the concepts describing them, which were judged as pertaining to the same category of events. Those concepts included the personal sense of responsibility for environmental scanning and the communication pattern developed by the individual. All the interviewees agreed about the vital role of information in business. Top managers of large and medium-size companies operating in different sub-sectors described their role, as far as environmental scanning is concerned, as a mix of personal monitoring and dissemination of information among direct collaborators. Communication among managers was made up of a mix of oral information and written information; the nature of this mix and the reasons that determine the choice of either of the forms of communication was not entirely clarified. However, some interviewees associated the choice of oral communication with the generic scope of the information or its potential for starting action. Exposure to information means the frequency of opportunities of contact with wellinformed people and information-rich contexts. The emergence of this category was based on the analysis of the information networks developed by managers. All the interviewees played a very similar role, since they were all managers, either chief executives or entrepreneurs, or functional directors, mainly marketing and commercial directors. They were therefore in a privileged position concerning the degree of exposure to information. Exposure to information is strongly influenced by the 'outwardness' of the organization: some organizations provide more opportunities of contact with wellinformed people or information-rich contexts. It is also influenced by the role played by the individual within the organization: marketing and commercial directors have a much greater exposure to information than financial or administrative directors. But exposure to information is also influenced by the
information climate of the organizations, which differ in the range of conditions of access to and use of information by their staff.
ORGANIZATIONAL FACTORS
The organizational factors identified as influencing the environmental scanning activity were information climate and outwardness. The information climate means the setting of conditions that determine access to and use of information in an organization. It was assessed through the information infrastructure implemented, i.e., the processes, technologies and people used in information acquisition and handling (collecting, organizing and making information available, and disseminating it). But it was the emergence of evidence relating to the role of organizational culture in shaping the information infrastructure that led to the creation of the construct "information climate". Organizational culture emerged as an important factor in the analysis of information issues within these organizations. The type of information culture that prevails in the pharmaceutical companies analyzed is a formal information culture, meaning cultures "which exhibit extensive formalization and systematization of information channels", as defined by Brown (1990). Two other companies in two different sub-sectors were identified as having, respectively, an oral culture, meaning cultures "which support a high degree of word-of-mouth communication", according to Brown (op. cit.) and an information conscious culture (cultures "which demonstrate considerable awareness of the value of information and sophistication in their information behavior and systems", still according to Brown, 1990). No kind of information culture had developed in the remaining companies, where there was little sensitiveness to information matters, and little investment was made in the information infrastructure. Besides those two main relationships or connections, represented in the figure above by thick arrows, there are indications (represented by broken arrows) that managers with a strong information consciousness tend to foster their organizations' outwardness; on the other hand, where a stimulating information climate is created, the individual exposure to information increases. As a result of the qualitative analysis of evidence from companies in the chemical industries sector in Portugal, we have evolved four theoretical concepts and have proposed relationships among them. The concepts relate to both organizational and
individual behaviour. We suggest that, in terms of information-seeking to support organizational functions, both sets of factors must be taken into account. Further, we propose that the more open the organization is to its environment, particularly in terms of openness to information flows, the more likely it is that individuals in the organization will experience exposure to relevant information and develop an information consciousness. Similarly, to the extent that this occurs, the organization is more likely to develop an information climate that supports the individual.
THE ALGORITHM OF THE ENVIRONMENTAL SCANNING
STEP 1: IDENTIFY POTENTIALLY RELEVANT ENVIRONMENTAL CHANGES

The process of identifying potentially relevant changes can be organized in various ways:
One of the basic approaches to it is to begin with significant macro environmental changes in society and then to assess their potential future relevance to the organization. This is the external to internal (EX IN) approach The second and more common approach starts with internal parameters of the company and its possible environmental influence. Here, marketers are trying to analyze real or possible environmental changes that can influence upon these parameters. This is the internal to external (IN EX) approach Advanced companies use the extensive approach for identifying change forces; it is called the Systematic Procedure for Identifying the Relevant Environment, or SPIRE. This approach centers on a matrix with likely external changes on one axis and possible strategic decisions on the other axis. The cells of this matrix are studied, screened, and clustered
STEP 2: MONITOR CHANGE

Once potentially relevant changes have been identified, an organization must decide how to monitor them; this is done by learning more about the changes nature and direction rather than by learning more about their current rate of the change. Valuable information for monitoring is readily available from government and trade sources, business and non-business magazines. Some corporations have their own information monitoring systems for analyzing and predicting changes. Most environmental information, however, is gathered from the aforementioned, readily available data sources. Effective monitoring provides a good basis for forecasting.
STEP 3: FORECAST IMPACT, TIMING, AND CONSEQUENCES

Any forecast relies on seeking past and present relationships that help predict the future. The process of forecasting includes one or more of the following:

Projecting historical trends Forecasting the future from related current events Basing forecasts on variables that are thought to cause future events
The relative complexity of forecasting varies by environmental sector. Environmental forecasting for social, political, and technological environments is intuitive and judgmental. The level of complexity depends on the degree to which the processes of change are understood. The methods of forecasting can be divided to two groups:

Extrapolation methods: Use of past information to predict the future; the assumption that past trends will continue in the future Subjective/ judgmental methods: Use of expert opinion for predicting the future
Typically used methods for estimation of timing of environmental changes and the likelihood of their impact are considered below:

Individual judgments: Best guess of experts The Delphi method: The independent questioning of a panel of experts concerning some future event or trend without group discussion Trends extrapolation: Projects historical trends on the assumption that the factors causing change in the future will be similar to those that caused them in the past Cross-impact matrices: Forecasts derived by different methods may be combined in tables to ensure consistency Scenarios: Verbal picture of the future. Multiple scenarios are usually developed. Alternative strategic directions are evaluated in terms of each scenario Modeling: Trends are specified in equation form
STEP 4: DEVELOP STRATEGIC RESPONSES

Important environmental changes have been identified and monitored, and their future states have been forecasted. At this point, the marketing management should be ready to cope with these changes. Marketing managers must decide what to do in the new environmental situation. Strategic marketing decisions rely on two related assumptions:

The objective is to effectively match changing markets with a companys strengths (its special resources) The firms strengths and resources are difficult to change in the short term There are usually only defined periods during which a strategic window exists for a given company. The strategic window is a period of time in which a company can react to the environmental change. Out of the strategic window, it is too late (or too early) to react
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ENVIRONMENT SCANNING

LOVELY PROFESSIONAL UNIVERSITY LOVELY INSTITUTE OF MANAGEMENT (LIM)

ARUN GULERIA | arun_guleria@ymail.com

Structure of Environment Scanning

ARUN GULERIA | arun_guleria@ymail.com

ARUN GULERIA | arun_guleria@ymail.com

ARUN GULERIA | arun_guleria@ymail.com

METHODS OF ENVIRONMENT SCANNING

ARUN GULERIA | arun_guleria@ymail.com

ENVIRONMENTAL SCANNING CYCLE

ARUN GULERIA | arun_guleria@ymail.com