The Concept of Environmental Scanning - Literature review Example

THE ENVIRONMENTAL SCANNING THE ENVIRONMENTAL SCANNING Insert name Insert grade course Insert instructor’s name September 17, 2011. Introduction Environmental scanning is the attainment and utilization of information concerning proceedings, developments, as well as relationships in an organization’s external environment, the knowledge of which would help the executive in planning the organization’s future course of action (Aguilar, 1967). In reference to the organization’s beliefs concerning environmental analyzability and the scope to which it intrudes into the environment to identify with it, scanning ca be done through four different modes: undirected viewing, conditioned viewing, enacting as well as searching. Organizations scan the environment so as to comprehend the external forces of change in order to develop efficient responses which secure or improve their position in the future. They scan so as to avoid surprises, identify threats and opportunities, gain competitive advantage, and enhance long-term as well as short term planning. Since an organization’s ability to know and interpret the external changes that are taking place influences the extent to which the organization adapts to its outside environment, environmental scanning comprises of a fundamental mode of organizational learning. Environmental scanning involves both looking at information (viewing) and looking for information (searching) and thus may take various forms such as casual conversation, observation or conducting a formal market research program (Choo, and Auster, 1993). This paper will discuss the concept of environmental scanning and the factors that undermine the value of environmental scanning. It will also discuss how environmental scanning assists managers in enhancing organizational planning and performance. The concept of environmental scanning Organization as an opens system gathers and processes strategic information concerning its outside surroundings on which to establish organizational performance (Daft & Weick, 1984). This calls for the organization to be actively involved in environmental scanning. This notion requires both internal and external diagnosis of the organization so as to assess the strengths and weaknesses, opportunities and threats in the internal and external firm’s environment. Environmental scanning involves acquiring knowledge or information concerning events, trends and relationships in an organization’s environment, which is helpful in decision making process as well as indentifying and comprehending the strategic threats and opportunities (EL Sawy, 2005). Environmental scanning is plainly the starting point and crucial phase in the strategic management process. Strategic management process can be subdivided into two phases: the first phase involves scanning information from the external and internal environment, as well as the interpretation of such information, the second phase involves the strategic decision-making and implementation if the intelligence from phase one. The second phase involves four major actions: strategic formulation, corporate capability planning that tries to support novel strategies, real-time strategic response to different surprises in the environment, and the implementation of strategies (Wang & Turban, 1991). Scanning or browsing behaviour is inspired by outside factors such as environmental turbulence and resource dependency, organizational factors like the nature of the business and the strategy pursued, information factors such as the availability and quality of information, and personal factors such as the scanner’s knowledge or cognitive style. Several studies have shown that environmental scanning improves organizational performance. The study of Miller & Friesen (1977), done by analyzing eighty-one successful and failing companies, found out that intelligence-rationality factor, which includes environmental scanning, controls, communication, adaptiveness, analysis, incorporation, complexity, as well as industry experience, was by far the most significant factor in differentiating between successful companies and the unsuccessful, accounting for more than half of the observed variance. Newgren et al. (1994) compared the financial performance of twenty-eight US companies that practised environmental scanning with twenty-two companies that did not practise scanning. They measured the performance for five years, (between 1975 and 1980) using the firm’s share price/ earning ratio, normalised by industry. After analyzing the data, it was noted that scanning companies considerably outperformed non-scanning firms. The average annual performance of the scanning companies was as well consistently better than the non-scanning companies throughout the period. Thus, according to this study, environmental scanning and evaluation was found to have a positive influence on corporate performance. Environmental scanning has also great benefit to the small and medium enterprises. Most of the small firms that have superior economic performance have been found to be practising environmental scanning (Correia, and Wilson, 2001). There are other benefits of environmental scanning other than economic. Murphy (1987) conducted a detailed study of environmental scanning at the Georgia Centre for Continuing Education and found out that scanning is a significant element of organization’s strategic planning process, improving the Centre’s capability to respond to and execute change in response to external factors. Moreover, scanning has as well contributed to increased communication among the line manager and staff personnel of the organization, in addition to greater employee involvement in the decision making process. Other studies have shown that environmental scanning has positive impact on several areas such as communication, shared vision, strategic planning and management, as well as future orientation. Of greater importance is that scanning provides a structured process which encourages people to repeatedly contribute in face-to-face discussions on planning matters. Consequently, the organization can be able to develop several strategic options that can be used proactively to cope with external change. Even though environmental scanning is linked with enhanced organizational performance, the practise of scanning by itself is not adequate to guarantee performance – scanning ought to be supported with strategy, and scanning information ought to be effectively used in the strategic planning process. A significant result of scanning is to increase and improve communication as well as discussion concerning future-oriented matters by individuals in the company. Combined with the accessibility of information on external change, scanning may encourage tactical, generative managerial learning (Murphy, 1987). Factors that undermine the value of environmental scanning Although we have seen tat environmental scanning an be of great importance to the organization, there are several factors that may influence or hinder environmental scanning in an organization. These factors that influence environmental scanning can be categorized into two major groups: individual factors and organizational factors. Individual factors The individual factors that influence the environmental scanning activity are mainly information consciousness and exposure to information. Lack of Information consciousness: Information consciousness refers to the attitude that an organization has towards information-related activities, signifying the value attached to information. There are two main concepts that are involved in the information consciousness; the personal sense of responsibility for environmental scanning and the communication pattern developed by the individual. Information plays a great role in business and if it is ignored, it would greatly undermine the aspect of environmental scanning. In regard to environmental scanning, top managers of large and medium-size organizations operating in various sub-sectors play the role of personal monitoring and dissemination of information among direct collaborators. Failure to do so, the top managers would greatly hinder the environmental scanning activity in the organization. It is the role of the manager as a monitor to scan his or her environment, interrogate liaison contacts and subordinates, and receive unsolicited information by forming a network of personal contacts. They are then required to share and distribute much of this information to enhance environmental scanning activity. If this is not done, then the scanning activity is greatly undermined and the result would be poor organizational performance (Weick, 2000). Communication should be intensified between the top manager and the functional directors, and also among functional directors. Lack of this form of communication may significantly hinder the scanning activity especially when the information of strategic importance is at stake. Marketing is one such area where more information should be passed since the personnel involved depend on this information to adopt a marketing strategy. If the aspect of sharing information is not enhanced in man organization, a lot of important information may not be shared or may not reach the concerned people and as a result the performance of the organization may go down. Scanning activity involves sharing information with relevant people and if the information is not shared through effective communication, then scanning activity is undermined (Chun, 2001). Lack of Exposure to information: Exposure to information refers to the frequency of chances of contact with well-informed and information-rich contexts. For a better exposure to information, managers ought to develop information networks so as to obtain as much information as possible. Poor exposure to information can considerably hinder the scanning activity in organizations. To avoid this, access to significant sources of information can be attained through the appointment to fundamental places within the sectoral and industrial relations as well as global relations, where managers’ exposure to information is taken to the full. Formal networks can be built as a natural outcome of performing this role and may pave way for the development of informal networks that are more difficult to detect. Poor exposure to information is mainly contributed by poor out-wardness of the organization, where the organizations do not offer chances of contact with well-informed people or information-rich contexts. The role played by the individual within the organization significantly influences the exposure to information. Marketing and commercial directors have a much greater exposure to information than financial or administrative directors, and if they do not share the information, they may greatly hinder the scanning activity (Brown, 1990). Organizational factors There are other non-personal factors that influence the environmental scanning and if not well managed may hinder the scanning activity. The information climate and out-wardness are the factors which affect environmental scanning activity. Poor Information climate: Information climate refers to the setting of conditions that determine access to and use of information in an organization. These set of conditions involves the information infrastructure implemented such as the processes, technologies, as well as people used in information acquisition and handling. The organizational culture greatly influences information infrastructure in an organization and hence the information climate. If the organizational culture does not provide a conducive environment where information climate can thrive, then the scanning activity is greatly deprived. Narrow understanding of the methods of acquiring, collecting and gathering information affects the information climate and in the long run undermines the scanning activity. The pervasiveness of information can be a great hindrance to accounting for costs involved in environmental scanning. Most of people who have more contacts with information-rich contexts or well-informed people spend only about 30% of their time collecting information. Lack of finances to invest in information collection may also hinder the scanning activity (Correia, and Wilson, 1996). Poor out-wardness: Out-wardness is the aspect of organizations being open to the external environment, being permeable to external influences, and having the ability to influence the environment. Lack of these three aspects undermines the value of environmental scanning in an organization. The inability of an organization to engage in collaborative actions so as to influence legislative and other regulatory initiatives through their sectoral associations, regional or global bodies undermine the value of environmental scanning (Culnan, 1983). How environmental scanning assists managers in enhancing organizational planning and performance Environmental scanning helps organizations and their managers in several ways. Due to rapid changes in current marketplace and new and emerging business practices, organizations are prone to fall behind if they do not keep up in areas like technology, regulations and other different rising trends. Environmental scanning minimizes the chance of being blindsided and results in greater anticipatory management (Goliath, 2004). Environmental scanning helps managers to identify external forces and examine their options in response to the challenge and consider their organization’s internal strengths and weaknesses to respond to these challenges. It also allows an organization to address external competitive, social, economic as well as technical issues that may be hard to identify and are persistent. Environmental scanning helps a company learn about the potential influences from external environments and how it can respond strategically. When managers understand these two components – external influences and the organization’s internal processes – they can help the organization to respond in a more timely and effective manner. Environmental scanning equips managers with knowledge or information concerning events, trends and relationships in an organization’s environment, which is helpful in decision making process as well as indentifying and comprehending the strategic threats and opportunities (EL Sawy, 2005). Environmental scanning assists an organization form a strategic position from which it can deal with external forces over which it has little, if any, control. Through consistent monitoring of external influences, organizations can shape their own internal processes to reflect necessary and effective responses. The process of comprehending the match between external influences and internal responses helps in adjusting organizational structure and strategic plans that are designed to be more effective and flexible to changing market forces (Correia, and Wilson, 1996). References: Aguilar F. J. 1967. Scanning the business environment. Macmillan, New York. Aguilar, F. J. 1967. Scanning the business environment. New York, NY: Macmillan Co. Brown, A. D. 1990. Information, communication and organizational culture: a grounded theory approach. Sheffield: University of Sheffield. (Ph.D. thesis) Choo, C. W. and Auster, E. 1993. "Environmental scanning: acquisition and use of information by managers", in: Annual Review of Information Science and Technology, edited by M. E. Williams. Medford, NJ: Learned Information, Inc. For the American Society for Information Science. Chun C. W. 2001. Environmental scanning as information seeking and organizational learning. Faculty of Information Studies University of Toronto Toronto, CanadaVol. 7 No. 1. Available from http://informationr.net/ir/7-1/paper112.html (Accessed September 17, 2011) Correia, Z. and Wilson, T. D. 1996. "Scanning the business environment for information". Information Research 2 (4) Available at http://informationr.net/ir/2-4/paper21.html [Accessed September 17, 2011] Correia, Z. and Wilson, T. D. 2001. Factors influencing environmental scanning in the organizational context. Vol. 7 No. 1. Available from http://informationr.net/ir/7-1/paper121.html (Accessed September 17, 2011) Culnan, M. 1983. "Environmental scanning: the effects of task complexity and source accessibility on information gathering behaviour". Decision Sciences, 14 (2), 194-206. Daft R. and Weick K.E. 1984. Toward a model of organization as interpretation systems. Academy of Management Review, 9, 284-296. El Sawy O. A., 2005. Personal information systems for strategic scanning in turbulent environments: can the CEO go on-line? MIS Quarterly, Mars, 53-60. Goliath 2004. Environmental scanning: radar for success: environmental scanning--the internal communication of external information about issues that may influence an organization's decision-making process--can identify emerging issues, situations, and potential pitfalls that may affect an organization's future. Information Management Journal. Available from http://goliath.ecnext.com/coms2/gi_0199-1516/Environmental-scanning-radar-for-success.html (Accessed September 17, 2011) Miller, D., & Friesen, P. H. 1977. Strategy-making in context: ten empirical archetypes. Journal of Management Studies, 14 (3) 253-280. Murphy, M. F. 1987. Environmental scanning: a case study in higher education. Athens, GA: University Of Georgia. (Ed. D. thesis) Newgren, Kenneth E., Rasher, Arthur A. & LaRoe, Margaret E. 1994. An empirical investigation of the relationship between environmental assessment and corporate performance. Paper read at Proceedings of the 44th Annual Meeting of the Academy of Management, August 12-15 1984, at Washington, DC. Wang P. and Turban L. 1991. Filtering strategic environmental information processing using EIS. System Science, 24th Hawaii International Conference on System Sciences, IEEE Computer Society Press, 3, Edited by Nunamaker, 126-134. Weick, Karl E. 2000. Making sense of the organization. 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