ENVIRONMENT SCANNING

LOVELY PROFESSIONAL UNIVERSITY

LOVELY INSTITUTE OF MANAGEMENT (LIM)

© ARUN GULERIA | arun_guleria@ymail.com

 INDEX
S.N Particular PAGE REMAR
o. NO. KS

1. Introduction. 2

2. Acknowledgement 3

3. Introduction 4

4. Method of Environment Scanning 6

5. Environmental Scanning Cycle 8

6. Structure of Environment Scanning 9

7. Importance of environment 10
Scanning
8. How companies Handling 14
Environment Scanning
9. Literature Review 20

10. Factor Affecting Environment 23

Scanning

© ARUN GULERIA | arun_guleria@ymail.com

 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.

© ARUN GULERIA | arun_guleria@ymail.com

 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.

© ARUN GULERIA | arun_guleria@ymail.com

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.

© ARUN GULERIA | arun_guleria@ymail.com

 3. OFFENSIVE STRATEGY - Try to turn the new influence into an
advantage - quick response can give you a competitive advantage

4. REDEPLOYMENT STRATEGY - Redeploy your assets into another

industry.

5. CONTINGENCY STRATEGIES - Determine a broad range of possible

reactions - find substitutes.

6. PASSIVE STRATEGY - No response - study the situation further.

ENVIRONMENTAL SCANNING CYCLE

© ARUN GULERIA | arun_guleria@ymail.com

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 fuel-
efficient 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

© ARUN GULERIA | arun_guleria@ymail.com

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 high-
quality 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 electro-
mechanical 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.

© ARUN GULERIA | arun_guleria@ymail.com

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

© ARUN GULERIA | arun_guleria@ymail.com

and the operating managers. Facing change means incorporating the environmental
shifts in all aspects of the company’s strategy.

Scanning improves an organization’s 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 company’s 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. Aguilar’s
different types of information about the environment that the companies found

© ARUN GULERIA | arun_guleria@ymail.com

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. Aguilar’s study
concluded that while the process is not simple, a company can systematize its
environmental scanning activities for strategy development. Aguilar’s 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 Pepsi’s claim that the taste of its cola was
superior to Coke’s, 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 mid-
1980s, 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

© ARUN GULERIA | arun_guleria@ymail.com

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
company’s 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.

© ARUN GULERIA | arun_guleria@ymail.com

Micro scanning is often practiced at the product/market or SBU level. A corporate-
wide 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 Handling the environment

scanning?
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.

© ARUN GULERIA | arun_guleria@ymail.com

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 semi-
structured 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

© ARUN GULERIA | arun_guleria@ymail.com

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

© ARUN GULERIA | arun_guleria@ymail.com

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 resin-
derived 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

© ARUN GULERIA | arun_guleria@ymail.com

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.

© ARUN GULERIA | arun_guleria@ymail.com

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 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. 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

© ARUN GULERIA | arun_guleria@ymail.com

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 change-
strategic 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 consciousness-
information 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

© ARUN GULERIA | arun_guleria@ymail.com

 LITERATURE REVIEW
Auster and Choo (1993) see environmental scanning as the acquisition and use of
information about events and trends in an organization’s external environment, the
knowledge of which would assist management in planning the organization’s
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 organization’s 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

© ARUN GULERIA | arun_guleria@ymail.com

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.

© ARUN GULERIA | arun_guleria@ymail.com

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
manager’s 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.

© ARUN GULERIA | arun_guleria@ymail.com

 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

well- informed 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 well-
informed 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

© ARUN GULERIA | arun_guleria@ymail.com

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

© ARUN GULERIA | arun_guleria@ymail.com

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

© ARUN GULERIA | arun_guleria@ymail.com

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.

© ARUN GULERIA | arun_guleria@ymail.com

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

© ARUN GULERIA | arun_guleria@ymail.com

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 company’s

strengths (its special resources)
• The firm’s 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

© ARUN GULERIA | arun_guleria@ymail.com

 BIBLIOGRAPHY

© ARUN GULERIA | arun_guleria@ymail.com