Why is environmental scanning important to a firm success?

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Environmental scanning is an examination of all external factors to determine the ones that have an effect on a business. Usually, the main objective of environmental scanning is to identify and consult factors outside the business environment. Though most times, these factors are beyond the organization’s control, it is essential to consider them during the decision-making process of the organization.

One known way of environmental scanning is the renowned SWOT analysis. S stands for strength, W stands for weakness, O stands for opportunity while T stands for threat. The strength and opportunities are factors that can be controlled by the organization inwardly, while the weaknesses and threats come from the uncontrolled factors outside the organization.

When firms are directing their resources and manpower towards an environmental scan, they want the feedbacks to be as deep as possible. Most environmental scans entail a thorough check on the economic, technological, social, demographic, and legal factors to make an informed decision.

Example of Environmental Scanning

Microsoft has been able to work crucially to use its research and development to adapt to the changing trends in the software and mobile devices development. Initially, the software giant has a deep root in making software for desktops and mobile PCS until they started making mobile devices like phones and pads to compete well globally and expand their reach.

To achieve their goal of breaking into the leaders of firms making mobile devices, they have partnered with other suppliers of materials. They are continuing their research to leverage their strength, which lies in their ability to create software that will come in handy in their new venture.

Not many software firms have the foresight to diversify and move to more important things happening in their environment.

Scope of Environmental Planning

Environmental scanning is a crucial aspect of the business process as it is the task of any serious organization to keep a close tab on things that can affect the chances of the organizations in satisfying the consumers and making profits.

The staff of the organization source for the prominent internal and external threats which negatively affect the organization.  Big firms have employees that are specially trained and dedicated towards research purposes that continuously learn about market trends, changes and provide information to the senior management, which will aid them in meeting up with industry trends.

Having adequate knowledge about the trends in business and market changes will help management make informed and productive decisions that will help the company profitably.

Components of Environmental Scanning

The environment of a business organization can be split into two types, which are the external environment and the internal environment. There are different dimensions to both the internal and external environments.

Internal environmental components are the ones that lie within the organization, and changes in these components affect the general performance of the organization. There are different internal environmental like human resources, capital resources, technological resources, and a lot more like objectives, Organizational structure, Value system, corporate structure, and labor union, etc.

These components play a crucial role in building the future of an organization; therefore, it is essential to examine these components as a part of environmental scanning thoroughly.

1. External Environmental Components:

External components are the components that are outside the walls of the business organization. Although these components are outside the organization, they still affect the activities of the organization. This external environment can be divided into two categories, like the microenvironmental components and macro environmental components.

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Micro environment components are competitors, suppliers, industry, organization, consumers, and market, etc.

Macro environmental components are made up of things like demography, environment, and economic, political, cultural, and technological factors.

Importance of Environmental Scanning

1. It Helps to Identify The Strengths of the Organization

The strength of the business implies the ability of the firm to have an advantage over its competitors. The analysis of the internal business environment helps to highlight the power of the firm. After identifying the strength, the firm must strive to build on or maximize its advantage by making improvements in its immediate plans, strategies, and resources.

1. It Helps to Identify the Organization’s Weaknesses

Recognizing the weakness of an organization means unearthing the limitations of the firm. Assessing the internal environment helps to highlight not only the strength but also the limitations of the firm. A firm may be firm in specific areas but may be weak in others. For continuous growth and expansion, the weakness should be highlighted and corrected as soon as possible.

1. It helps to Identify Opportunities:

Environmental scanning helps to identify and understand the opportunities in the market. The firm should take every necessary step to take advantage of the opportunity that comes.

1. It Helps to Identify Threats:

Business is open to threats from competitors and several factors. Environmental scanning helps them to discover a threat from the external environment. When risks are detected early, it is good as it helps to eliminate them without much stress.

1. Environmental Scanning Helps Organizations to Optimize Resources

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An ideal environmental scanning helps to make use of an organization’s human, natural, and capital resources. Proper environmental scanning helps to limit wastage and optimize all other available resources.

1. It Ensures Survival and Growth:

Systematic scanning of the business environment helps the firm to optimize its strength, reduce its weakness, take advantage of the opportunity, and diffuse threats. This helps the firm to survive and grow in the eternal competitive business world.

1. It helps to Plan a Long-Term Business Strategy:

Every business organization has short term and long-term objectives. The accurate environmental scanning of environmental factors helps the business organization to make plans and policies that will help in achieving organizational goals.

Without planning an excellent environmental scanning, the firm cannot map out a winning strategy for sustained business success.

1. Environmental Scanning Helps in Making Productive Decision-Making:

Decision-making is a process of choosing the best alternative among several available alternatives. An environmental assessment is an essential tool in making the right decisions in the business world. The success of any organization depends mainly on the decision making capability of senior management. Thus, environmental scanning is highly crucial in shaping the company’s business decisions.

Conclusion

Environmental scanning provides a business with many advantages irrespective of their industry or market environment. This is why companies need to dedicate their resources towards understanding their environment. They need to identify their strengths and weaknesses, bank on opportunities in the environment, and get rid of any potential threats that may affect the business negatively.

Consequently, to grow and succeed in the ever-changing business and dynamic environment, all serious organizations must take adequate measures in understanding their environment to make informed and productive business decisions.

Susanne Morris

August 25, 2021

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