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environmental analysis if managers do

not understand how the environment

affects the organization's or cannot

identify opportunities and trends that

are likely to be important their ability

to make decisions and execute claims

will be severely limited

for example if little is known about

customer likes and dislikes

organizations will have a difficult time

designing new products scheduling

production or developing marketing plans

but information about the environment is

not always readily available managers

find it difficult to forecast how well

your own products will sell let alone

how a competitor might respond in other

words managers often operate under

conditions of uncertainty environmental

uncertainty means that managers do not

have enough information about the

environment to understand or predict the

future uncertainty rises from two

related factors firstly complexity and

secondly dynamism environmental

complexity refers to the number of

issues to which a manager must attend as

well as their interconnectedness

industries that have many firms that

compete in vastly different ways tend to

be more complex and uncertain then

industries with only a few key

competitors similarly environmental

dynamism refers to the degree of

discontinuous change that occurs within

the industry high-growth industries with

products and technologies that change

rapidly tend to be more uncertain then

stable industries where change is less

dramatic and more predictable the first

approach in dealing with environmental

uncertainty is environmental scanning

this is the process of searching the

environment for information oftentimes

information that is not commonly

available and sorting through the

information to analyze organize and

produce competitive

intelligence intelligence is a refined

useful form of information that helps

managers navigate through uncertain

environments to address what is

important managers ask questions such as

who are our current competitors are

there few or many barriers to the entry

to our industry

what substitutes exist for our product

or service is the company too dependent

on powerful suppliers is the company too

dependent on powerful buyers the second

approach is scenario development

scenarios are possible outcomes of the

future they are based on alternative

combinations of factors this range from

best-case possibilities to worst-case

possibilities for all factors when

reality usually falls between the two

these scenarios allow managers to think

through contingency plans for different

outcomes scenarios must be updated for

new and relevant information forecasting

is used to more precisely predict the

impact certain factors have on future

outcomes firms will often attempt to

predict financial performance under

different conditions using information

provided by such industry bodies as

Bloomberg business week's business

outlook forecasts are predictions of

future trends using past data and this

may not be appropriate in all settings

for instance path data cannot account

for a new technology or

macro-environment policy it is important

to use multiple forecasts to predict

short-term models accuracy is only as

good as the data used to construct the

model and drops the further in the

future a model predicts simpler

forecasts are preferable when possible

but no focus accounts for surprise

events benchmarking is a way to check a

business practices against other firms

usually this is done in comparison to

best-in-class performance or an industry

leader benchmarking is usually done by

teams that collect information on the

operations of the two firms and draw

meaningful comparisons to determine gaps

these gaps would help identify ways to

improve performance great leads equal

death of the industry leader