Chapter 2

Challenges in the
External Environment
 Scanning the Environment
- Environmental Scanning is the study and the
interpretation of the forces existing in the external and
internal environments. The external environment includes,
social, economic, political, technological and environmental
forces that may influence an organization, an industry, or
an entity.
 Sources of Strategic Information
- Strategic Information consists of the facts and 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.
Modes of Environmental Scanning
1. Undirected Viewing- The individual is exposed to information with no
specific informational need in mind. The sources of information are wide-
ranging and large chunks of information are quickly dropped from the
individual’s attention.

2. Conditioned Viewing- The individual directs viewing of information to

specified 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.
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 Speech- 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.
 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 strength, weaknesses, opportunities, and threats.
Strengths are features that organizations possess, thus, giving it 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
organization.
 The External Environment
- The external environment presents varying forces that
influence organizational direction and strategic decision-
making. These forces are social, political, technological,
economic, environmental, and legal in perspective. The
confluence of these forces can present themselves as
threats and challenges to organizations.
 Social Forces
• Changing Social Structures – the social environment can be better
understood and analyzed in terms of broad social structures.
Social structures refers to the network of social institutions that
includes the family and the community.
• Aging Population/Demand for Health Services – There are more
maturing and Aging individuals today. Like and inverted triangle,
the baby boomers are greater in number. Baby boomers are
individuals born in the 1940s.
• 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.
• Cross-Cultural Diversity- the global community is getting figuratively
smaller. Workplaces are shifting and people in the global community
are either working or migrating to every part of the world.
 Political Forces
• Political Independence/Changing Governments- political
sustainability has become the focus and concentration of
developed and power-driven countries.
• 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.
• Chemical and Nuclear Threats- some countries go on developing
and producing weapons with the intention of blackmailing and/or
intimidating other countries.
• Global Alliances- politically, nations are aligning themselves for
self-preservation and more so, for global stability and strength.
 Economic Forces
• Globalization- one of the major determinant of competition. It
can be viewed from four perspectives: products, people, ideas, and
money.
• Competitors and Suppliers- aggressive competitors and creative
suppliers compete to get a larger slice of the market.
• 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 CEO.
• Increasing Oil Prices- the never-ending increases in oil prices have
been creating economic instability in global communities.
• Economic Trade Agreements- bilateral and multilateral economic
treaties between and among economic global partners provide
trade priorities and privileges, allowing local products to reach
other markets.
• Emerging Markets- closely interrelated to the political, social, and
economic growth and development of a country is the emergence
of different markets.
• Rise of China- one of the most potent economic markets in the
world today is China. 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,
 Technological Forces
• Communication Technology- saw the proliferation of mobile
phones, popularity of text messaging, convenience of sending fax
messages, usefulness of CCTV cameras for surveillance and
simple monitoring, and benefits of video conferencing, among
others.
• Computer-Integrated Business- enterprise resource planning
(ERP) integrates business operations in marketing, accounting,
production, operations, and management.
• E-banking- banking transactions like deposits, withdrawals, and
payments can be done online nowadays. Intra-banking operations
are more efficient while international banking transactions are
operated with accuracy and expediency.
• E-learning- one of the most recent developments in education is
distance or online learning. It is learning from home, the office,
while on vacation, or form any place outside the four walls of a
classroom.
• Digital Medicine- another surprising and most welcome
development in the field of medicine is the use of technology.
• E-security- security is another vital global issue. The use of
information technology is inevitable in manufacturing missiles
and other forms of ammunitions, coding military, secrets,
safeguarding fortified installations, monitoring enemies, securing
soldiers, and planning counterattacks.
 Environmental Forces
• Climate Change/Use of Biodegradable Materials- the effects of
environmental degradation, malpractices, neglect, and indifference
are critical and serious.
• Environmental Waste Management- in many underdeveloped
countries, noise, air, and water pollution levels are high. Smog,
fumes, and contaminants continue to cause increasing incidents
of disease.
• Preservation of Rainforest and Marine Life- continuous depletion
and denudation of forests explain why torrential rains are more
destructive and intense nowadays. They result in damage to
properties and danger to human lives.
 QUIZ
1 . What is Environmental Scanning ?
2-5 . What are the Modes of Environmental Scanning ?
6. Are features that organizations possess, thus, giving it significant advantage
over others.
7. Are challenges in the external environment that can cause problems to
organizations.
 For items 8-10
a. Social Forces d. Political Forces
b. Economic Forces e. Environmental Forces
c. Technological Forces

8. Is the urgent call of the global neighborhood.

9. Refer to important issues that are characteristic of global and local societies.
10. These advances are observed in the fields of communication, business,
banking, education, medicine, security, and in all facets of everyday living.
11-15. Explain the SWOT Matrix Analysis