Chapter 2 SOURCES OF STRATEGIC INFORMATION
CHALLENGES IN THE EXTERNAL ● Strategic information consists of the facts and
ENVIRONMENT
SCANNING THE ENVIRONMENT
● Organizational intelligence refers to the
expertise, insight, and wisdom possessed by an
entity. It serves as a valuable guide to its journey
to becoming competitive.
● Thus, organizations need to possess this
capability to be able to accurately audit the
environment and come up with creative and
cutting-edge strategies.
● Environmental scanning is the study and
interpretation of the forces existing in the
external and internal environments.
● Environmental scanning is carefully monitoring
the surroundings with the end goal of
ascertaining early indications of prospects and
challenges that may influence the organization's
present and future plans.
● The external environment includes social,
economic, political, technological, and
environmental forces that may influence an
organization, an industry, or any entity.
● The internal/competitive environment covers
competitors, suppliers, customers, stakeholders,
culture, and the government.
● Conducting environmental scanning is both easy
and difficult.
● For informal scanning, experience and
expertise will help make the process effortless
and straightforward. The competencies, skills,
and intelligence of the individual will allow for
easy scanning of the environment.
● For environmental scanning can be demanding,
in that there is a need for comprehensive, as well
as accurate information. It will be mostly
dependent on the following:
- the speed of the organization to conduct
scanning;
- the presence and availability of
complete information
- the physical and financial capability to
do so.
data used by organizations to assist them in
achieving their vision, mission, and goals.
● Strategic information can be drawn from both
external and competitive environments.
● Both external and internal environments
symbiotically interplay and directly or indirectly
affect organizations.
● Primary data are gathered through personal
experience, observation, and experimentation
while
● Secondary data is data collected from reports,
Internet sources, and other published materials.
MODES OF ENVIRONMENTAL SCANNING
Scanning the environment involves two processes:
➢ looking at or simply viewing information,
➢ looking for or searching for information.
According to Aguilar (1967), there are four ways of
environmental scanning:
1. Undirected Viewing
● The individual is exposed to information
with no specific informational need in
mind.
● The individual ends up with general
information that may be helpful for him
in spotting early signals of change.
● It is a significant mode of feeling for the
environment as this increases awareness
in the organization to undertake needed
proactive strategic moves.
● Many times, this process of
environmental scanning can save an
organization from losing out in the
survival game or may be the reason for
organizational success.
2. Conditioned Viewing
● The individual directs viewing of
information to specific facts and data to
be able to assess their general impact on
the organization.
● It is not an active search but a mere
viewing of information.
● It provides a cue or hint that more
purposive scanning should be instituted
 if the effect is assessed to be sufficiently
significant.
3. Informal Search
● The individual actively looks for
information to increase knowledge of a
particular issue.
● It essentially involves a relatively
unstructured effort where the objective
is to gather information to expound on
the issue, thus, determining whether a
strategic move is needed by the
organization.
4. Formal Search
● The effort exerted by the individual is
deliberate and planned.
● The search is both focused and
structured and the research methodology
is clearly enumerated and followed.
● Results of the formal search normally
provide organizations bases for
decision-making and courses of action.
THE SWOT MATRIX ANALYSIS
● The SWOT matrix is a structured assessment
tool used to evaluate an organization, industry, a
place or even a person in terms of set parameters
like strengths, weaknesses, opportunities, and
threats. Credited to Albert
● Humprey’s 2x2 matrix model (2005) suggests
actions for issue arising from the SWOT
analysis
● Albert Humprey(1960), the SWOT matrix
classifies strengths and weaknesses as internal
dynamics characterizing an organization and
threats and opportunities as external influences
to the organization. Specifically:
- Strengths are features that an
organization possess, thus, giving it a
significant advantage over others.
- Weaknesses are characteristics that
place organizations at a disadvantage
relative to others and may just be
limitations or vulnerabilities of
organizations.
- Opportunities are possibilities in the
external environment that organizations
can exploit to their advantage.
- Threats are challenges in the external
environment that can cause problems to
organizations.
THE EXTERNAL ENVIRONMENT
● highly complex
● nations possess different levels of growth and
development
● presents varying forces that influence
organizational direction and strategic
decision-making
● Analysis of the external environment is referred
to as PEST (Political, Economic, Social and
Technological) Analysis
SOCIAL FORCES
➢ Social forces refer to important issues that are
characteristic of global and local societies.
1. Changing Social Structures
- Social structure refers to the network of
social institutions that includes the
family and the community.
- The family is one of the basic
institutions of a social organization.
2. Aging Population/Demand for Health
Services
- There are more maturing and aging
individuals today. Like an inverted
triangle, the baby boomers are greater in
number. Baby boomers are individuals
born in the 1940s. Today, they are
precisely the people who need more
medicine and health services.
3. Sophisticated Lifestyles of People
- Compared to the past, the lifestyles of
people today have dramatically changed,
too. Their way of looking at themselves,
the people around them, their lives and
careers, their values, attitudes,
philosophies, and expectations have
taken a deeper and wider perspective.
4. Cross-cultural Diversity
- Cross-cultural diversity has become an
important organizational issue; culture
 being a basic component of the global
environment.
POLITICAL FORCES
➢ Geopolitical issues have become the focus of
major political powers.
1. Political Independence/Changing Gov’t
- Political sustainability has become the
focus and concentration of developed
and power-driven countries.
- Global ideologies are the main
determinants of global support while
global power is the main ingredient of
global leadership.
- Nations today are undergoing changes in
government: from communism to
socialism to capitalism, and from
dictatorship to democracy.
2. Terrorism/Suicide Bombings
- The bloody and painful transition
toward equality of basic human rights
and the right to a better life have
brought about critical security problems
like terrorism, kidnappings, suicide
bombings, and hijackings.
3. Chemical and Nuclear Threats
- Some countries go on developing and
producing weapons with the intention of
blackmailing and/or intimidating other
countries.
- Political survival and power are the
great determinants of political decision-
making and peaceful coexistence.
4. Global Alliances
- Politically, nations are aligning
themselves for self-preservation and
more so, for global stability and
strength.
- No nation attempts to stand alone
because global relationships are
essential to national survival. European
nations have bonded themselves as the
European Union. The same is true with
ASEAN countries
ECONOMIC FORCES
➢ Economic issues greatly affect the growth and
development of a nation.
1. Globalization
- This is one major determinant of
competition.
- Globalization can be viewed from four
perspectives: products, people, ideas,
and money.
2. Competitors and Suppliers
- Pricing, quality, differentiation, and
innovation are the usual criteria for
business success with consumers more
likely patronizing less expensive but
quality products.
3. Fall of Financially Stable Organizations
- The last few years saw the downfall of a
number of financially successful
organizations that were managed by
respectable and competent presidents
and chief executive officers.
4. Increasing Oil Prices
- The never-ending increases in oil prices
have been creating economic instability
in global communities.
- Changes in oil prices are detrimental to
the survival and success of many
organizations.
5. Economic Trade Agreements.
- Economic trade agreements among
nations have likewise become a vital
bargaining power in a country's
economy.
- Bilateral and multilateral economic
treaties between and among economic
global partners provide trade priorities
and privileges, allowing local products
to reach other markets.
6. Emerging Markets
- Closely interrelated to the political,
social, and economic growth and
development of a country is the
emergence of different markets.
7. Rise of China
- One of the most potent economic
markets in the world today is China.
- China is the major economic player in
the world.
 - It is seen both as a supplier and a big
market. Constituting one-third of the
world's population, China is a market for
other countries' products and services.
transactions are operated with accuracy
and expediency.
4. E-learning.
- One of the most recent developments in
education is distance or online learning.

TECHNOLOGICAL FORCES
➢ An important catalyst of competition is 5. Digital Medicine.
technology. In the 1980's, information - Another surprising and most welcome
technology began its journey toward radical development in the field of medicine is
communication and technology growth. the use of technology.
1. Communication Technology 6. E-security.
- Communication technology saw the - Security is another vital global issue.
proliferation of mobile phones, The use of information technology is
popularity of text messaging, inevitable in manufacturing missiles and
convenience of sending fax messages, other forms of ammunition, coding
usefulness of CCTV cameras for military secrets, safeguarding fortified
surveillance and simple monitoring, and installations, monitoring enemies,
benefits of video conferencing, among securing soldiers, and planning
others. counterattacks.
2. Computer-integrated Business.
- Enterprise resource planning (ERP) ENVIRONMENTAL FORCES
integrates business operations in ➢ Environmental responsibility is the urgent call of
marketing, accounting, production, the global neighborhood. Ecological damage is
operations, and management. happening everywhere.
- Computer-aided manufacturing makes 1. Climate Change/Use of Biodegradable
production more efficient, Materials.
computer-aided design results in concise 2. Environmental Waste Management.
outputs while telecommunication 3. Preservation of Rainforests and Marine Life.
technology makes physical distances
immaterial.
- Product innovation is easier to create,
product development is relatively
shorter, less cumbersome but more
challenging, and fewer employees
perform tasks due to technology.
- In addition, enterprise resource planning
is popularly applied in supply chain
activities like purchasing, inventory
management, scheduling and
dispatching deliveries, distribution
logistics, documentation and
management of accounts receivables
and payables, and preparation of income
statements and balance sheets.
3. E-banking.
- Intra-banking operations are more
efficient while international banking