Environmental Scanning Equates to Successful Performance - Research Paper Example

Environmental Scanning Equates to Successful Organisational Performance Introduction Organisations nowadays confront extraordinary challenges in sustaining corporate survival, stability, and success. This is a reality for all kinds of organisation, both non-profit and for-profit, for small and large. Success entails a focused strategic knowledge of external factors in order to act in ways that will guarantee the stability and success of organisations. Environmental scanning is a very useful tool in an organisation’s cache that can be exploited to acquire this knowledge. Environmental scanning is basically an ‘internal communication of external information about issues that may potentially influence an organisation’s decision-making process’ (Khosrowpour 2005, 586). Environmental scanning puts emphasis on the identification of surfacing situations, issues, and possible difficulties that may influence the future of an organisation (p. 586). The gathered information, consisting of patterns, relationships, and occurrences that are outside of the organisation, is given to organization’s top-level managers and is employed to direct management in the planning process (Elenkov 1997). It is also exercised to assess the strengths and weaknesses of an organisation in response to external opportunities and threats (Fonseca 2002). Fundamentally, environmental scanning is a process of determining, gathering, and transforming information about external factors into workable plans and actions. This essay will attempt to analyse and discuss the importance or advantage of environmental scanning and tools in an organisational context. Environmental scanning was defined by Hambrick (1982) as an “important process of the strategic management because scanning is the first link in the chain of perceptions and actions that enable an organisation to adapt to its environment” (as cited in Society for Advancement of Management 1995, 3). Similarly, Synder (1981) described environmental scanning as “the monitoring, evaluating, and disseminating of information from the external environment to key managers within their organisations” (as cited in Schwartz 2005, 375). Most management scholars emphasised that before executives create their corporate strategy, they conduct an external environment scanning to determine possible threats and opportunities. The external environment, involving variables that are not normally within the fleeting power of management, involves societal and task environments (Storey 2004).The latter involves groups that strongly influence the organisation and are influenced by it. Cases in point consist of customers, labour unions, employees, competitors, suppliers, creditors, local communities, and governments (Storey 2004). The societal environment, on the other hand, consists of more wide-ranging political-legal, technological, socio-cultural, and economic forces that do not strongly affect the temporary tasks of the organisation but normally affect its permanent decisions (Schwartz 2005). For several years, researchers and analysts have been focused on how organisations’ executives perform their environmental scanning and employ this collected information to acquire competitive advantage (Langton 2005). Even though a number of investigations have been carried on environmental scanning processes, there remains inadequate knowledge about the connection between these processes and organisational strategy (Davidson 2003). Simply put, it is not conclusive whether organisations in the same industry, but with distinctive strategic planning methods, employ the same or dissimilar environmental scanning methods. Environmental scanning focuses on making the most of employee involvement in the very complicated task of presenting first-class management of contemporary global firms with a quite exact and appropriate image of the different external corporate environments across the globe (Choo 1999). Due to the fact that the major objective of ‘going global’ is diversification of risk, such as distributing the risk among several different environments, management should have sufficient know-how of the limitations, opportunities, and threats embed inherent in the corporate environments (Albright 2004). An international organisation uses a vast number of skilled expatriates and locals who are potential source of knowledge about the local external and internal forces (p. 38). However, most international firms rely on unfounded information and accounts of company experts that are regularly sent abroad to obtain some first-hand information (Elofson & Konsynski 2010). Finally several organisations limit themselves only to the public reports of the government (Schwartz 2005). As was aforementioned, environmental scanning views the external environment as a cluster of developing concerns and situations. Emerging challenges are patterns which if they were to persist would have a definite effect on the organisation’s capability of accomplishing its objective (Schwartz 2005). Detection of these patterns is achieved thru a system referred to as ‘issue management’ (Davidson 2003). The following discussion will hence elaborate the importance of performing environmental scanning. The Advantages of Environmental Scanning and Tools There are several major reasons to conduct environmental scanning. Due to drastic changes in the current marketplace and emerging organisational traditions, it is easy for businesses to lag behind by failing to cope with factors such as regulations, technology, and a range of emerging patterns. Environmental scanning lessens the risk of being blindsided and leads to bigger preventive management (Ghoshal 2010). The connection among strategic planning, markets, and the external business environment is what determines the survival and success of organisations (Rouibah 2003). As external factors are recognised, organisations have the chance to assess their alternatives in response to the issues and situations and take into account their internal strengths and weaknesses to act in response to these issues. As pointed out by John D. Stoffel, environmental scanning gives an organisation the opportunity to deal with external economic, social, technical, and competitive issues that may be difficult to determine and are unrelenting (Albright 2004). In particular, its objective is not simply collecting of information; instead, its objective is to put emphasis on future effects on the organisation instead of those focused on the current condition. Environmental scanning aids an organisation in gaining knowledge of the possible effects of external environments and how it can act in a strategic way (Albright 2004). By gaining awareness of these two components external factors and the internal practices of an organisation- the organisation can act in a more prompt and successful way. The emphasis of environmental scanning is strategic planning and evaluation (Myers 1999). Its usefulness is rooted in the detection and understanding of difficult challenges confronting the organisation. Environmental scanning aids an organisation in developing a strategic status from which it can deal with outside influences over which it has weak control (Wagner 2000). Through regular assessment of outside influences, organisations can build their own internal mechanisms to reveal needed and useful responses. The way of identifying the relationship between outside factors and internal responses helps in modifying strategic plans and organisational structure that are intended to be more flexible and responsive to evolving market forces (Roy & Therin 2007). Hence, the flourishing organisation gives importance to learning, responsiveness, and flexibility. Environmental scanning is not a passive tool. It should be continuous and regular in order to sustain a preparative position as environmental forces emerge. This process of organisational learning is a major element of organisational survival and success (Roy & Therin 2007). Through continuous assessment of the environment, top-level management has the capability of making needed modifications in the organisation’s practices that can build the disparity between failure and success. Environmental scanning is widely perceived by scholars of strategic management as a condition for creating productive organisational strategies (Capps & Hazen 2002). Furthermore, effective environmental scanning is viewed as essential to the effective harmonisation of competitive strategies with the conditions of the environment and the realisation of exceptional performance (Choo 1999). Outstanding organisational performance is the primary goal of all stakeholders of an organisation. Scholar and practitioners of strategic management commonly agree that small and large organisations that harmonise their competitive strategies with the conditions of their environment surpass organisations that fail to accomplish this alignment (Choo 1999). Environmental scanning is generally perceived as the preliminary method in the process relating environment and strategy (Elenkov 1997). The core principle is the scanning the societal and task environment facilitates an organisation in gaining knowledge of the (1) situations or occurrences that threaten its survival and (2) opportunities that it could exploit to gain competitive advantage (Langton 2005), hence allowing the organisation to build a competitive strategy parallel to important environmental forces. The External Environment There are a number of external environments that could influence a firm. These can be classified as industry, economic, political, technological, regulatory, and social (Albright 2004). Implications of each can damagingly influence an organisation, leading to weak performance or total failure. As stated by Chun Wei Choo (1999) in his work Information Management for the Intelligent Organisation: The Art of Scanning the Environment, of these environments the industry’s is the most important, with its emphasis in competitors, suppliers, customers, and their complex relationships. It is ever more essential to the sustained growth and superior performance of a firm to examine these external environments so as to make important adjustments to these forces. Environmental scanning provides a way by which the performance of a firm may be sustained or improved even in the presence of extremely complicated challenges (Subramanian, Fernandes & Harper 1993). Environmental scanning aids in concentrating the organisation’s premeditated plans on those outside factors that may endanger its survival and translate those possible problems to its benefit (Xu & Kaye 1995). A firm manages this procedure by determining and monitoring those outside conditions that may otherwise be unmanageable and erratic. The process supposes that possible effects on the organisation may stem from unforeseen sources (Xu & Kaye 1995). Hence, environmental scanning is basically connected to strategic and organisational planning and prepares for unforeseen changes that will influence the firm. Environmental scanning procedures should be carried out on a continuous basis so as to successfully examine outside influences that are prone to affect an organisation (Albright 2004). Concerns for each of the outside environments must be examined. A wide-ranging environmental scanning procedure will consistently monitor possible effects of the following distinct external environments (Albright 2004): (1) Industry: Due to the fact that the industry environment normally appears to be the most important, it is helpful to assess industrial structure and determine the major competition in the industry. Recognising the position of competitors in the industry and their links with each other, their suppliers, and their customers will offer valuable information on patterns and possible challengers for competing firms (p. 38). (2) Technology: The appearance of emerging technologies can affect the general business and production practices of organisations. Thus, it is valuable to examine technological changes, especially those that affect business productivities, emergence of new products and services, current systems, and adjustments in production (p. 38). (3) Regulatory: Amendments in regulatory strategies and laws may also have a substantial influence on the firm. For instance, ownership of communications media can have substantial impacts on the number of positions one proprietor may occupy, hence possible influencing the general market share and structure. Laws concerning business taxes and minimum wage can have strong influence on hiring guidelines within a firm (pp. 38-39). Regulatory policies on intellectual property, employment procedures, and those that are specific to an industry are crucial to take account of. (4) Economic: International, national, regional, and local economies can influence a firm depending on its industry, scope, and size. Inflation and unemployment rates can hamper or aid growth if the firm is unprepared. Economic information can aid the firm in planning for changes in these and other similar concerns, such as gross national product of capable countries and exchange rates (p. 39). (5) Social: Changes in the market are at times triggered by societal changes. Demographic changes in the population may bring about a decline or an escalation in demand for a particular product of service. Facts about the demography should be examined for changes in components such as income, education, age, population distribution, and size. Other qualitative indices such as consumer behaviour are also vital and should be examined (p. 39). (6) Political: International, national and local politics can affect a firm in either direct or indirect ways. Definitely, terrorist acts strongly affected a large number of international and national business processes. Tariffs can affect a firm by either limiting exchanges of products and services or by promoting them; depending on the manner they are established. It is valuable for a firm to have a decisive knowledge of the political environment in which it functions so that it can be equipped for unforeseen changes that stem from elections or amendments in current laws or guidelines (p. 39). The Function of Environmental Scanning CEO’s and top-level managers within a firm should not invest a great portion of their time assessing the environment. The function of environmental scanning can be established as a separate component, monitoring progress based upon a cluster of measures developed alongside the major decision-makers in a firm, giving primary importance to those patterns and occurrences with the potential for the greatest effect (Elofson & Konsynski 2010). Environmental scanning detects possible opportunities and threats for a firm; an internal evaluation of an organisation pinpoints its weaknesses and strengths. Informal sources and the facts they generate, surfacing concerns, as well as the limitations and strong points of a current system, can be recognised (Elofson & Konsynski 2010). A more appropriate scanning procedure can be employed to remedy the weaknesses. A proper environmental scanning procedure has five major tasks that are essentially correlated (Albright 2004): (1) Determine the environmental scanning requirements of the firm. The general objective of the scanning, allocation of resources, and participants in the undertaking, should be identified before the start of the scanning procedure. This implies that top-level management has to understand the need for environmental scanning in order for it to be productive. It is useful to have members convene to first discuss possible adjustments that may affect the firm based upon their implicit experiences and knowledge (p. 39). (2) Information gathering. The needs of an organisation should then be transformed into particular components of information that will be needed. A record of issues and preferred sources should be organised beforehand in order to make the processes of environmental scanning more focused and successful (p. 39). (3) Information analysis. If all the needed information has been gathered, it should be assessed for patterns and issues that may affect the firm. This procedure may have to be reiterated if there are disparities in the information or if there are emerging issues from the accumulated information (p. 39). (4) Disseminate the outcomes. Information that has been assessed and transformed into possible influences on the firm can afterward be communicated to the involved decision-makers within the organisation. Since managers desire to lessen the amount of time needed to analyse facts and make choices, details should reported in brief format and tailored to satisfy the preferences of managers (p. 39). (5) Informed decision-making process. Once the procedures of environmental scanning have been reported, corporate leadership can initiate needed actions to position the firm in a way that will be most adaptable to the threats or opportunities that have been categorised (p. 39). Sources of Information for Environmental Scanning There are various sources normally employed in environmental scanning procedures. These involve both internal and external facts. Sources of external information can involve a broad array of sources such as authorities in the field and written newspaper articles (Calof 2006). Outside sources do not have to be publicised; indeed, most managers obtain a great deal of their information from hearsay through a private group of sources (Fonseca 2002). Internal information involves information that is specific to the organisation that can be weighed against the results of environmental scanning so as to exploit organisational flexibility (Langton 2005). In general, the planning stage of the targeted factors expected to have an influence on the firm. Choosing sources to draw on will rely on the possible point of influence on the firm (Roy & Therin 2007). Advance warnings will originate from unofficial sources such as specialists or interaction with a customer. Later indices may originate from sources such as media reports (Albright 2004). By the time details have been publicised, its implication will have probably already penetrated the organisation (Albright 2004) and may be extremely difficult to offset. Using Information Corporate executives and managers are accountable for making prompt decisions that may radically transform an organisation. Environmental scanning provides preventive and foretelling information to help managers in choosing actions while trying to determine issues before they arise (Choo 1999). Also, managers are accountable for making several decisions and, hence, do not have a great deal of time to invest to methodically information gathering. Rather, they require timely information that has been refined to the major information that is vital to the organisation (Calof 2006). Managers have particular likings on how to obtain information. Choo (1999) claims that managers favour information that is reported in a clear and straightforward manner, decisive, and in a manner that permits them to scrutinise and take in the information rapidly. Illustrations and case studies are especially valuable because managers usually learn through benchmarking with other organisations’ experiences (Choo 1999). This permits them to analyse other solutions, then formulate appropriate decisions and guidelines. Managers acquire their information from various sources, such as online and written materials (Davidson 2003). However, Choo (1999) argues they usually rely most heavily on a small group of people who function as their resource network. Managers favour obtaining information that is provided personally rather than through written materials. This process facilitates managers in acquiring only the information that they think is needed for decision making, to manage the flow of information, and to ask questions, which is impossible when relying on a written report (Storey 2004). Organisations thinking about the initiation or institutionalisation of an environmental scanning strategy should be able to answer the following questions accurately (Albright 2004): (1) Does the organisation currently capture environmental information? In what ways? Is it formally structured? (2) Is environmental scanning information considered to be important to strategic decision-making and planning? To operations? (3) Is the organisation flexible and open to new ideas? (4) Does the organisation’s senior management support the idea of environmental scanning at the highest levels? (5) Are the organisation’s communications channels open to environmental scanning activities? (6) Is the level of investment allocated to environmental scanning sufficient to benefit the organisation? (7) Where in the organisation should this function be coordinated and located? (p. 39). If the executives or top-level management of an organisation is directly supportive of an environmental scanning strategy, then it is more probable to acquire sufficient investment (Albright 2004). Furthermore, managers who are in favour of the scanning strategy are more probable to incorporate it into the entire strategic planning process of the firm (Storey 2004). This integration will enhance the possibility of achievement in both the entire organisation and environmental scanning strategy. Hindrances to Successful Environmental Scanning There are a number of explanations why environmental scanning may not be successful in a firm. The mere quantity of information could be overpowering, leading to information overload where in vital parts of information may be missed or disregarded (Schwartz 2005). Also, there are a large number of information sources that environmental scanners may not be conscious of, and hence they could overlook capably essential information (Fonseca 2002). Exploring heaps of current information is also hard because of the occasional absence of unity, fullness, and organisation of that which is reported (Fonseca 2002). Even in the most appropriate conditions, information may not be suitable anymore by the time environmental scanners are able to find it (Albright 2004). This is mostly true of drastically evolving markets that are affected by regulatory or technological changes (Albright 2004). There are also difficulties with environmental scanning linked to translation of information that has been collected. Identification of importance, knowledge of the issue and sources of information, use of language, time constraints, and correctness of details all fulfil a function in the process of assessment (Langton 2005). Furthermore, an excessive emphasis on scanning may have detrimental impacts on a firm. This may be because of the emphasis on a defensive approach towards outside factors rather than maintenance of process enhancements and progress within the firm (Fonseca 2002). Environmental scanning grants numerous advantages for contemporary organisations. It adds to the transformation of an organisation into a learning organisation, or an enterprise that persistently looks for new information that could alter its general stance in the industry (Xu & Kaye 1995). Environmental scanning also helps in the evaluation of new information, formulation of strategic guidelines and plans, and the modification of internal activities to solve new problems as they emerge (Xu & Kaye 1995). It can determine the distinct strengths of an organisation, find its competitors’ limitations, and determine potential customers, new markets, and new technologies (Rouibah 2003). Environmental scanning is similar to a sophisticated warning system, determining possible dangers to the organisation (Langton 2005). By informing the organisation of potential environmental changes, environmental scanning contributes to the adjustments of its approach towards the external environment (Langton 2005). The primary objective of environmental scanning is to aid an organisation in understanding the external environment so as to enhance its flexibility and receptiveness in making decisions. Conclusions Without considering important environmental factors, an organisation cannot look forward to strengthening its strategy. Environmental scanning enhances the capabilities of an organisation to cope with a fast evolving environment in several ways. First, it aids an organisation in maximising timely prospects rather than be beaten by its competitors. Second, it gives an advance warning of approaching issues, which can be resolved if identified beforehand. Third, it alerts the organisation to the changing demands and needs of its market and customers. Fourth, it offers a support of qualitative details about the environment that practitioners of strategic management can employ. Fifth, it offers rational motivation to practitioners of strategic management in their decision making. Sixth, it enhances the position of the organisation with its target market by demonstrating that it is flexible and responsive to its environment. And lastly, it is a way of continuing inclusive training for CEOs, particularly for strategy makers. An organisation is a living thing in a very expansive environment. Its survival and success, challenges, resources, opportunities, and points of view are produced and shaped by the environment. Hence, it is essential for an organisation to identify the important changes occurring in its external and internal environment and develop techniques to respond to these changes. Simply put, in order for an organisation to thrive and be successful, the strategist should become proficient with the challenges of the highly volatile regulatory, social, technological, economic, and political environment. To realise this wide-ranging point of view, the strategist has to formulate and execute a thorough environmental scanning technique. As the speed and scale of change intensify, this scanning task should be strengthened and steered by accurate definitions of vision, mission, and scope. The attempts of organisations to deal with these challenges are contributing to the formulation of strategies for studying alternatives with better flexibility to permanent effects. This new science has the guarantee of presenting an improved system for making the most of opportunities and investing resources in expectation of changes in the environment. This essay had assessed the usefulness of environmental scanning and discussed a broad framework that may be employed by a strategist. In particular, the essay discussed the conditions for identifying the goal and scope of environmental scanning, the process for assessing the importance of environmental changes, the methods for assessing the effect of an environmental pattern on a specific industry or product, and the binding of environmental patterns to the process of strategic planning. References Albright, K.S., 2004. Environmental Scanning: Radar for Success, 38(3) 38+ Calof, J., 2006. Reporting on the State of the Art. 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