Environmental scanning

Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships within an organizations internal and external environment.

It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment. While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another. Internal analysis of the environment is the first step of environment scanning. Organizations should observe the internal organizational environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with shareholders, access to natural resources, brand awareness, organizational structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal environment helps in identifying strengths and weaknesses of an organization. As business becomes more competitive, and there are rapid changes in the external environment, information from external environment adds crucial elements to the effectiveness of long-term plans. As environment is dynamic, it becomes essential to identify competitors moves and actions. Organizations have also to update the core competencies and internal environment as per external environment. Environmental factors are infinite, hence, organization should be agile and vigile to accept and adjust to the environmental changes. For instance - Monitoring might indicate that an original forecast of the prices of the raw materials that are involved in the product are no more credible, which could imply the requirement for more focused scanning, forecasting and analysis to create a more trustworthy prediction about the input costs. In a similar manner, there can be changes in factors such as competitors activities, technology, market tastes and preferences. While in external analysis, three correlated environment should be studied and analyzed

immediate / industry environment national environment broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the organizations industry, including the competitive position of a particular organization and its main

rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization on competition within the industry. Analyzing the national environment needs an appraisal of whether the national framework helps in achieving competitive advantage in the globalized environment. Analysis of macro-environment includes exploring macro-economic, social, government, legal, technological and international factors that may influence the environment. The analysis of organizations external environment reveals opportunities and threats for an organization. Strategic managers must not only recognize the present state of the environment and their industry but also be able to predict its future positions.

Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness

comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the curren

todays dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final ph management.

The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, d

through control of performance. Strategic Evaluation is significant because of various factors such as - developing inp

strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, ju validity of strategic choice etc. The process of Strategy Evaluation consists of following steps1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative criteria includes determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc. 2. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes

easier. But various factors such as managers contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual basis. 3. Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it. 4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management process. Strategic leadership refers to a managers potential to express a strategic vision for the organization, or a part of the organization, and to motivate and persuade others to acquire that vision. Strategic leadership can also be defined as utilizing strategy in the management of employees. It is the potential to influence organizational members and to execute organizational change. Strategic leaders create organizational structure, allocate resources and express strategic vision. Strategic leaders work in an ambiguous environment on very difficult issues that influence and are influenced by occasions and organizations external to their own. The main objective of strategic leadership is strategic productivity. Another aim of strategic leadership is to develop an environment in which employees forecast the organizations needs in context of their own job. Strategic leaders encourage the employees in an organization to follow

their own ideas. Strategic leaders make greater use of reward and incentive system for encouraging productive and quality employees to show much better performance for their organization. Functional strategic leadership is about inventiveness, perception, and planning to assist an individual in realizing his objectives and goals. Strategic leadership requires the potential to foresee and comprehend the work environment. It requires objectivity and potential to look at the broader picture. A few main traits / characteristics / features / qualities of effective strategic leaders that do lead to superior performance are as follows: Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words and actions.

Keeping them updated- Efficient and effective leaders keep themselves updated about what is happening within their organization. They have various formal and informal sources of information in the organization.

Judicious use of power- Strategic leaders makes a very wise use of their power. They must play the power game skillfully and try to develop consent for their ideas rather than forcing their ideas upon others. They must push their ideas gradually.

Have wider perspective/outlook- Strategic leaders just dont have skills in their narrow specialty but they have a little knowledge about a lot of things.

Motivation- Strategic leaders must have a zeal for work that goes beyond money and power and also they should have an inclination to achieve goals with energy and determination.

Compassion- Strategic leaders must understand the views and feelings of their subordinates, and make decisions after considering them.

Self-control- Strategic leaders must have the potential to control distracting/disturbing moods and desires, i.e., they must think before acting.

Social skills- Strategic leaders must be friendly and social.

Self-awareness- Strategic leaders must have the potential to understand their own moods and emotions, as well as their impact on others.

Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are well aware of the fact that delegation will avoid overloading of responsibilities on the leaders. They also recognize the fact that authorizing the subordinates to make decisions will motivate them a lot.

Articulacy- Strong leaders are articulate enough to communicate the vision(vision of where the organization should head) to the organizational members in terms that boost those members.

Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes a component of organizational culture.

What is Corporate Governance? Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders desires. It is actually conducted by the board of Directors and the concerned committees for the companys stakeholders benefit. It is all about balancing individual and societal goals, as well as, economic and social goals. Corporate Governance is the interaction between various participants (shareholders, board of directors, and companys management) in shaping corporations performance and the way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two. The owners must see that individuals actual performance is according to the standard performance. These dimensions of corporate governance should not be overlooked. Corporate Governance deals with the manner the providers of finance guarantee themselves of getting a fair return on their investment. Corporate Governance clearly distinguishes between the owners and the managers. The managers are the deciding authority. In modern corporations, the functions/ tasks of owners and managers should be clearly defined, rather, harmonizing. Corporate Governance deals with determining ways to take effective strategic decisions. It gives ultimate authority and complete responsibility to the Board of Directors. In todays market- oriented economy, the need for corporate governance arises. Also, efficiency as well as globalization are

significant factors urging corporate governance. Corporate Governance is essential to develop added value to the stakeholders. Corporate Governance ensures transparency which ensures strong and balanced economic development. This also ensures that the interests of all shareholders (majority as well as minority shareholders) are safeguarded. It ensures that all shareholders fully exercise their rights and that the organization fully recognizes their rights. Corporate Governance has a broad scope. It includes both social and institutional aspects. Corporate Governance encourages a trustworthy, moral, as well as ethical environment. Benefits of Corporate Governance 1. Good corporate governance ensures corporate success and economic growth. 2. Strong corporate governance maintains investors confidence, as a result of which, company can raise capital efficiently and effectively. 3. It lowers the capital cost. 4. There is a positive impact on the share price. 5. It provides proper inducement to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization. 6. Good corporate governance also minimizes wastages, corruption, risks and mismanagement. 7. It helps in brand formation and development. 8. It ensures organization in managed in a manner that fits the best interests of all.

The Factors That Shape Strategy

Organizations do not exist in a vacuum. Many factors enter into the forming of a company's strategy. Each exists within a complex network of environmental forces. These forces, conditions, situations, events, and relationships over which the organization has little control are referred to collectively as the organization's environment. In general terms, environment can be broken down into three areas: 1. the macroenvironment, or general environment (remote environment) - that is, economic, social, political and legal systems in the country;

2. operating environment - that is, competitors, markets, customers, regulatory agencies, and stakeholders; and 3. the internal environment - that is, employees, managers, union, and board directors.

In formulating a strategy, the strategic decision makers must analyze conditions internal to the organization as well as conditions in the external environment, which are described in the following sections. FACTORS SHAPING THE CHOICE OF STRATEGY Competitive Conditions and Overall Industry Attractiveness An industry's competitive conditions and overall attractiveness are big strategy-determining factors. A company's strategy has to be tailored to the nature and mix of competitive factors in play : price, product quality, performance features, service, warranties, and so on. When competitive conditions intensify significantly, a company must respond with strategic actions to protect its position. The Company's Market Opportunities and External Threats The particular business opportunities open to a company and the threatening external developments that it faces are key influences on strategy. Both point to the need for strategic action. A company's strategy needs to be deliberately aimed at capturing its best growth opportunities, especially the ones that hold the most promise for building sustainable competitive advantage and enhancing profitability. Likewise, strategy should provide a defense against external threats to the company's well-being and future performance. Company Resource Strengths, Competencies, and Competitive Capabilities One of the most pivotal strategy-shaping internal considerations is whether a company has or can acquire the resources, competencies, and capabilities needed to execute a strategy proficiently. These are the factors that can enable an enterprise to capitalize on a particular opportunity, give the firm a competitive edge in the marketplace, and become a cornerstone of the enterprise's strategy. The Personal Ambitions, Business Philosophies, and Ethical Beliefs of Managers Managers do not dispassionately assess what strategic course to steer. Their choices are typically influenced by their own vision of how to compete and how to position the enterprise and by what image and standing they want the company to have. Both casual observation and formal studies indicate that managers' ambitions, values, business philosophies, attitudes toward risk, and ethical beliefs have important influences on strategy. The Influence of Shared Values and Company Culture on Strategy An organization's policies, practices, traditions, philosophical beliefs, and ways of doing things combine to create a distinctive culture. Typically, the stronger a company's culture, the more that

culture is likely to shape the company's strategic actions, sometimes even dominating the choice of strategic moves. This is because culture-related values and beliefs are so embedded in management's strategic thinking and actions that they condition how the enterprise does business and responds to external events.