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Q-1Environment scanning is an important part of international business .

Explain your
views on this statement and discuss what factors need to be scanned?
ANS-1
ENIRONMENT SCANNING-Meaning
Environmental scanning refers to possession and utilization of information about
occasions, patterns, trends, and relationships within an organizations internal and
external environment
Definition-According to Keith Devis
Business Environment is the aggregate of all the conditions, events, and influences that
surround and affect it.
ENVIRONMENTAL SCANNING
Environmental Scanning is the data collection practice.
It is aimed at collecting information about an environment such as an office or institution
that can be used in planning, development, and ongoing monitoring by managers and
supervisors.
Need to SCAN the Business Environment
1 Identification of Strengths
2 Identification of Weakness
3 Identification of Opportunities
4 Identification of Threats
5 Optimum use of Resources
6 Survival and Growth
7 To plan long term Business Strategy
8 Environmental Scanning aids Decision Making

Benefits of environmental scanning
The major advantage of environmental scanning is that it prepares the Organization for
any crises or problem. An environmental scanning is to detect changes in the
environment which is extremely important if an organization is to avoid crises
management. A change in the external environment of the organization's can suddenly
alter an organization's opportunities or resources.
One of the fastest growing areas of environmental scanning is competitor's intelligence
which can be described as a process by which today organizations gather information
about their competitor's future plans, strategies, and ideas.
Competitors can be monitored by collecting data about them. Today most of the data is
available by different sources like websites of companies etc. on current and developing
products, prices, bargains and deals. These materials help in establishing the basis of a
competitor's strong and weak points, future plans and policies.
Pest analysis provides whole information about political ,economic,social and
technological environment which help in studying the prevailing condition in a particular
country to start a business globally.
SWOT helps in getting our strengths,weaknesses, opportunities and threats in order to
fulfill our objectives competitively.

Techniques/factors of environment scanning need to be scanned











Techni
ques
SWOT
QUES
T
Comp
etitor
Analys
is
Indust
ry
Analys
is
PEST
SWOT Analysis

HELPFUL
To achieving the
objectives
HARMFUL
To achieving
the objectives
INTERNAL
(attributes of the
Organization)
STRENGTHS WEAKNESSES
EXTERNAL
(Attributes of the
Environment)
OPPORTUNITIES THREATS


A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to
evaluate the strengths, weaknesses, opportunities, andthreats involved in a project or in
a business venture. A SWOT analysis can be carried out for a product, place, industry or person.
It involves specifying the objective of the business venture or project and identifying the internal
and external factors that are favorable and unfavorable to achieve that objective. The technique is
credited to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI
International) in the 1960s and 1970s using data from Fortune 500 companies.
[1][2]
The degree to
which the internal environment of the firm matches with the external environment is expressed
by the concept of strategic fit.
Setting the objective should be done after the SWOT analysis has been performed. This would
allow achievable goals or objectives to be set for the organization.
Strengths: characteristics of the business or project that give it an advantage over
others.
Weaknesses: characteristics that place the business or project at a disadvantage
relative to others
Opportunities: elements that the project could exploit to its advantage
Threats: elements in the environment that could cause trouble for the business or
project
Identification of SWOTs is important because they can inform later steps in planning to
achieve the objective.


PEST

The basic PEST analysis includes four factors:
Political factors are basically to what degree the government intervenes in the economy.
Specifically, political factors include areas such as tax policy, labor law, environmental
law, trade restrictions, tariffs, and political stability. Political factors may also include goods
and services which the government wants to provide or be provided (merit goods) and those
that the government does not want to be provided (demerit goods or merit bads).
POLITICA
L
ECONOMI
C
SOCIAL
TECHNOLO
GICAL
PE
ST
Furthermore, governments have great influence on the health, education,
and infrastructure of a nation.
Economic factors include economic growth, interest rates, exchange rates and the inflation
rate. These factors have major impacts on how businesses operate and make decisions. For
example, interest rates affect a firm's cost of capital and therefore to what extent a business
grows and expands. Exchange rates affect the costs of exporting goods and the supply and
price of imported goods in an economy.
Social factors include the cultural aspects and include health consciousness, population
growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors
affect the demand for a company's products and how that company operates. For example, an
aging population may imply a smaller and less-willing workforce (thus increasing the cost of
labor). Furthermore, companies may change various management strategies to adapt to these
social trends (such as recruiting older workers).
Technological factors include technological aspects such as R&D activity, automation,
technology incentives and the rate of technological change. They can determine barriers to
entry, minimum efficient production level and influence outsourcing decisions. Furthermore,
technological shifts can affect costs, quality, and lead to innovation.
Expanding the analysis to PESTLE or PESTEL adds:
Legal factors include discrimination law, consumer law, antitrust law, employment law,
and health and safety law. These factors can affect how a company operates, its costs, and
the demand for its products.
Environmental factors include ecological and environmental aspects such as weather,
climate, and climate change, which may especially affect industries such as tourism, farming,
and insurance. Furthermore, growing awareness of the potential impacts of climate change is
affecting how companies operate and the products they offer, both creating new markets and
diminishing or destroying existing ones.
Other factors for the various offshoots include:
Demographic factors include gender, age, ethnicity, knowledge of languages, disabilities,
mobility, home ownership, employment status, religious belief or practice, culture and
tradition, living standards and income level.
Regulatory factors include acts of parliament and associated regulations, international and
national standards, local government by-laws, and mechanisms to monitor and ensure
compliance with these.

Industry analysis
It is a market assessment tool designed to provide a business with an Idea of the
Complexity of a particular Industry.
It involves reviewing the economic, political and market factors that influence the way the
Industry develops.
QUEST
The Quick Environmental Scanning Technique, is a scanning procedure design to assist,
executers and planners to keep side by side of change and its implications for the
organizational strategies and plans.
QUEST produces a broad and comparative analysis of the external environment.
Competitor Analysis
According to the Michael. E. Porter
The state of Competition in an Industry depends on five basic competitive forces, these are

Methods of the global environmental analysis[edit]
Rivalry among existing firms
Threat of new entrants
Threats of substitute
Bargaining power of Suppliers
Bargaining power of Buyers
The segmentation according to the six presented factors of the PESTLE analysis is the starting
point of the global environmental analysis. The analysis can be done with the help of a checklist
that evaluates every criteria of a segment. In this manner, the status of the global environment
shall be defined. In general, every segment needs to be worked on systematically to recognize
changes. Then, the factors and its impacts can be interpreted right. After the segmentation, the
analysis consists of four further steps:
1. Environmental Scanning
2. Environmental Monitoring
3. Environmental Forecasting
4. Environmental Assessment
Environmental scanning[edit]
The first step is called scanning. Through environmental scanning, every segment is analyzed to
find trend indicators. Thus, after having examined the segment, indicators for its development
are defined.
[8]
According to Fahey and Narayanan, scanning reveals actual or imminent change
because it explicitly focuses on areas that the organisation may have previously
neglected.
[9]
Scanning is also used to detect weak signals in the environment, before these have
conflated into a recognizable pattern, which might affect the organizations competitive
environment.
Scanning can include every material published in the media such as television, newspapers and
periodicals.
[10]
This method of scanning is called media-scanning. Product-scanning includes
scanning of products which announce re-emerging consumer behaviour. Looking for global
trends on the internet can be defined as online-scanning.
[11]

Modes of scanning
Four modes of scanning can be distinguished. Francis Joseph Aguilar (1967) differentiates
between undirected viewing, conditioned viewing, informal search and formal search.
'Undirected viewing' means reading a variety of publications for no specific purpose with the
possible exception of exploration. This mode is the most cost-efficient one but it also offers
the most benefits. There are a lot of varied sources and information which means that the
potential data are unlimited. Data are imprecise and vague and there are no guidelines which
determine where the search should be focused.
Applying 'conditioned viewing' the viewer pays attention to the particular kinds of data and
assesses their significance for the organization. The field of information is more or less
clearly identified.
'Informal searching' can be defined as actively seeking specific information in a relatively
unstructured way.
The contrast of informal searching is called 'formal searching'. This proactive mode of
scanning contains methodologies for obtaining information for specific purposes.
[12]

Environmental monitoring[edit]
Environmental scanning is only one component of global environmental analysis. After having
identified critical trends and potential events they have to be monitored. The next step in global
environmental analysis is called environmental monitoring. It can be defined as 'the process of
repetitive observing for defined purposes, of one or more elements or indicators of the
environment according to pre-arranged schedules in space and time, and using comparable
methodologies for environmental sensing and data collection'.
[13]
Through environmental
monitoring, data about environmental developments are recorded, followed and interpreted. Out
of this, historical development changes that are important for the company can be recognized and
evaluated. Additionally, the relevance and the reliability of the data sources are tested.
Furthermore it is checked, where prognoses are required.
Environmental forecasting[edit]
The direction, intensity and speed of environmental trends are explored through
environmental forecasting. Especially the search for possible threats is of importance.
A prognosis of trends is necessary to get a picture of the future. This is done by adequate
methods, like strategic foresight or scenario analysis.
[8]
Several other methods of forecasting are
the following: guessing,rule of thumb, expert judgement, extrapolation, leading indicators,
surveys, time-series models and econometric systems.
[14]

'Guessing' and related methods totally rely on luck. Consequently it is not generally a useful
method. In addition, it is almost impossible to evaluate the uncertainty of a guess in advance.
'Expert judgement' lacks validation being the only component of forecasting. It is hardly to
predict which oracle is successful.
'Extrapolation' is effective when tendencies exist. Forecasts are most effective when changes
are predicted in tendencies. Prediction in changes in tendencies is likely to miss concerning
extrapolative methods.
'Forecasting based on leading indicators' needs a stable relationship between the variables
that lead and the variables that are led. If the reasons for the lead are not clear the indicators
may give misleading information.
'Surveys' of businesses can give information about the future. They rely on planning which
needs to be realized. Changes in business implicate changes in planning.
'Time-series models' are popular forecasting methods. They describe historical patterns of
data and they focus on measurable uncertainty.
'Econometric systems' of equations are the main tool of economic forecasting. They consist
of equations which attempt to model the behaviour of economic groups such as consumers,
producers, workers, investors etc. moderated by historical experience. There are several
advantages of using formal econometric systems: Economists are able 'to consolidate
existing empirical and theoretical knowledge..., provide a framework for a progressive
research strategy..., help to explain their own failures, as well as provide forecasts and policy
advice.'
[15]

Environmental assessment[edit]
In the last step of the global environmental analysis, the results of the previous three steps
(Scanning, Monitoring, Forecasting) are assessed. The discovered environmental trends are
reviewed to estimate the probability of their occurrence. Furthermore, they need to be analyzed
to evaluate whether they represent a chance or a risk for the company. The dimension of the
chances or risks is also of importance. Moreover, a reaction strategy to the occurring risks or
chances needs to be defined. This is done with the help of the Issue-Impact-Matrix, an adequate
instrument to evaluate and prioritize trends. The forecasted environmental factors are here
classified with respect to their probability of occurrence and their impact on the company.
According to their classification, they demonstrate a high, medium or low priority for the
company. The factors with a high occurrence probability and a high, significant impact on the
company have the highest priority. The higher the priority, the faster need to be reacted to avoid
risks and to benefit from chances.
[16]
The environmental assessment represents the last step of the
global environmental analysis.

CONCLUSION
In rapidly changing environment, one rule of thumb applies: if you dont adapt, you dont
endure. Thats the core idea behind Environmental Scanning.

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