CHAPTER 3

Environmental Scanning
Identifying Forces Driving Change
 Student Learning Objectives

On completion of this chapter, you will be able to;

 Identify the environmental scanning process and understand the skills necessary.
 Develop and maintain an effective environmental scanning system
 Develop an appreciation to scan the business environment effectively.
 Describe the effective environmental scanning system.
 Identify the unique elements business domain.
 Identify and define the sources of information and give at least 1 hospitality
related example for each of them.
 Identify the timing information.
 Achieve a more practical understanding of forces that drive change in hospitality.
(Case Study)
 Comprehend the feedback and evaluation systems.
 Key Concepts of the Chapter

• Environmental scanning
• The business domain
• Setting up a structure for scanning
• Determining information needs
• Determining information mediums
• Timing information
• Identifying sources of information
• Choosing scanning activities
• Analyzing and synthesizing information
• Information sharing
• Information feedback and evaluation systems
 Strategic Management Model
Domain Definition Long-term Objectives
Geographic Market Area Performance Measure
Segment Action Plan
Primary Competition Resources Needed
Target Market Evaluation Timetable
Responsibility
Accountability
Environmental Events Rational
Competitive Methods
Strengths and
Weakness Analysis
Remote P1 S1
Functional Analysis
Task
Financial Position
Industry P2 S2 Structural Analysis
Physical Assets Short-term Objectives
Firm Labor Force
P3 S3 Risk
Functional Competitiveness

Mission Statement
Nature of Business
Target Customer
Products/Services
Standard Desired Evaluation
Means to Accomplish Above
Scanning the Business Environment
 Identifying the Forces Driving Change

• The goal of any environmental scanning process is to successfully identify the

key forces driving change within the contextual environment of the organization.

• To achieve that goal, managers must set up personal and organizational

scanning systems to be sure that the widest perceptional view of the
environment is achieved. This scanning system should;
 Identify each force, the variables, and their interdependencies with other variables.
 Suggest cause-and-effect relationships.
 Determine the history and timing associated with the development of the forces.
 Assist the manager estimating the impact of forces driving change on the firm.

.
 Identifying Events in the Environment

Industry Structure

All firms in the sector

have invested in the prod

Ideal Scanning Window

Leading firms adopt and
invest in the new prod

Innovator/Entrepreneur
creates a new prod

Fads Innovations Major Trend Fact of Life

Innovation / CM Life Cycle

 Establishing an Environmental Scanning
System
• Establish domain definition
• Organizational structure issues
• Determine information needs – quantitative and qualitative
• Determine information mediums
• Assess timing of information
• Identify sources
• Choose scanning activities – regular and irregular
• Determine analysis and synthesis processes
• Determine information sharing
• Establish information feedback and evaluation systems
 Domain Definition

• The task of domain definition is the first step in

establishing an effective environmental scanning
system.
• The domain of an organization refers to the context
in which it exists and functions.
 Criteria of the Domain Definition

•Geographic market area

•Segment defined by competitive methods made up of the mix of product and
service attributes
•Primary competition
•Major descriptors of target market

•Existing competitors, potential competitors, substitutes, suppliers and buyers

•Relationships with suppliers, competitors

•Relationships among different environmental categories
•Primary and secondary relationships (hierarchical)
 Organizational Structure Issues

• Who participates in the process, what resources

are allocated to this endeavor, and how the
information is processed and used.
• Scanning the environment must fit into that
structure because resources
must be allocated to this
important management activity.

 Please read page 95 in the text book for further information.

 Determining Information Needs

• Determining the information needs of the firm can

begin only after the process of defining the domain
the firm must complete in is completed.

• Once established, the information will generally fall

into four categories;
◦ Quantitative
◦ Qualitative
◦ Personal
◦ Non-personal
Examples of Quantitative Information
 Determining the Information Medium

• Most common medium is face-to-face personal

interaction.
• The written medium, both personal and impersonal,
continues to be an important one.
• The telecommunication revolution will no doubt
bring about rapid changes in the mediums used.
New Communication in the Information
Age

https://www.youtube.com/watch?v=zFaUgSCQ-OA
 Assessing Timing of Information

• The phase timing is everything has a great deal of

validity in the world of strategy.
• Bad timing can be avoided most often when firms
have effective scanning systems and the
organization has structured itself to improve the pro
cessing of information and its timing.
• The timing also reflects how managers study the
emerging forces that are developing.
Body of Knowledge in the Hospitality
Industry
 Identifying Sources of Information

• The primary concern of the manager in selecting

the sources of information are validity and
reliability.
• Validity refers to fact that the information accuratel
y represents and describes the relationships that ar
e necessary to make important strategic decisions.
• Reliability refers to the need for accuracy and
consistency over time.
Common Information Sources Available
to the Hospitality Manager
 Choosing Scanning Activities

• Scanning is an activity that does not lend itself to

neatly defined processes or timetables.
• It cannot be done effectively without strong
cognitive, experimental, and perceptional skills.
 Matrix Analysis

• Today’s manager must be able to understand the

present relationships and regulators.

• To do this, the use of matrices to assess

relationships becomes extremely useful.

• Matrix analysis help to create greater

understanding of the present and emerging body of
knowledge.
Information-Sharing Feedback and
Evaluations Systems

Executive
Level

Functional External
Level Level

Operations
Level
 A Continuous Process of Scanning is
Necessary
• A good scanning system will never be able to
remove all the uncertainty from a decision.

• Scanning should be done on a continuous basis

levels of executives who contribute substantively to
the strategic management process.
 Summary of the Chapter

• The chapter provides an overview of tools

necessary for proper environmental scanning.
• It begins with the importance of identifying forces
that drive change and how to establish a domain for
analysis purposes.
• It then provides insight into the steps in the
effective assessment of key forces and
opportunities.
• Shows the importance of sharing derived
conclusions throughout the organization.