Environmental Scanning and Corporate Strategies in the Company - Coursework Example

Name: University: Course: Tutor: Date: Due to the myriads of exceptional challenges organizations are facing today in their effort at maintaining their business survival and success, organizations are increasingly finding it appropriate to have a strategic understanding of their external influences so that they can respond to such challenges in a way that ensures not just their survival but their success as well. It is also important to note that analyzing in strategic management, which is an extremely important factor of organization management, involves both self appraisal, which is also known as strategic audit, and external appraisal, which also goes by the name environmental scanning (Papulova & Papulova 2006). From this analysis it is proper to look at environmental scanning as the monitoring, assessment and distribution of information from internal and external environment to corporate strategists in the company. In today’s business managers have to contend with changing and uncertain environments which mostly drives them to seek awareness of these changes in course of their strategy formulation. They also have to keep an eye on the changes in their competitive environment, not to mention the opportunities that they might use to exploit their abilities. It is only from this knowledge that they can seek and adapt improvements in each area of the business together with building on their responsiveness and understanding of their present strategies and success (Albright 2004). Environmental scanning is one of the most effective tools at the disposal of an organization that it can use to gain an understanding of its external influences (Papulova & Papulova 2006). In this regard, environmental scanning can be looked on as the acquirement and application of information on trends, relationships, events in the external environment, the knowledge of which helps the manager in planning the organization’s future course of action. This information can also enable an organization in devising effective responses that enhance its position in future. To the extent that the ability of an organization to adjust to its outside environment depend solely on knowing and understanding the external changes that are taking place, environmental scanning comprise of a primary method of organizational learning (Carral & Kajanto 2008). A number of researches have been conducted to investigate the relationship between various environmental conditions and the usage of various forms of information sources by management in devising a competitive strategy all of which have suggested that environmental conditions have an effect on the forms of sources that the management uses in choosing a competitive strategy (Parker 2008). These studies also suggested that the types of information that the management utilizes varies according to the organization’s competitive strategies. This therefore implies that the strategy can not only determine the scanning behavior but can be affected by the scanning behavior as well. The scan normally describes how demographic, economic, political, legal, cultural, technological and economic trend affect organization. In this regard, environmental scanning is the first step in the process of connecting strategy and environment. It is therefore appropriate for managers to look at environmental scanning as a very important factor in the formulation of policy and its implementation, and specifically, in the effective alignment of environmental requirements with competitive strategies and the realization of exceptional performance in organizations (Karami 2008). The environmental scan enables an organization to understand external and internal forces, informs decision-makers, and especially managers, of the changing environment within which an organization operates, and highlight issues that might require addressing both in the short and long-term (Karami 2008). Through environmental scanning managers can identify and critically examine the external environment of their organization thereby giving them an opportunity to evaluate their alternatives in reaction to the challenges and reflect on their internal weaknesses and strengths to react to these challenges. It also allows managers to address external social, competitive, technical, and economic issues which may collectively be hard to recognize, and which are also persistent and almost out of their control. Once the collection of activities forming environmental scanning have been presented, managers of organizations can thereafter take appropriate steps that positions the organization in a way that is most responsive to the threats and opportunities that have already been identified. By providing a picture of the entire picture of the current environment in which the organization is operating in, together with setting the stage for the main issues that might require addressing in the planning and budgeting process, environmental scanning assist managers in detecting new opportunities and demand and incorporating them in their strategic planning process(Albright 2004). This is because strategic thinking requires an understanding of alternative strategic objectives and purposes and the ability to identify critically various environments. According to Carral & Kajanto (2008), Nokia’s position as a market leader in the communication sector is largely informed by its ability to understand the industry dynamics. They assert that gathering, evaluating and acting on data was an important factor in its capitalizing of inflection points and the growth potential of the time. Parker (2008) points Nokia’s vice president forecasting that, the year 2008 would be the first of its kind because for the first time replacement handsets would outsell first-time sell in the developing market category, information that enabled Nokia to design products with more features and then yield high margin after introducing the same in the replacement market(Strategic Direction 2005). By making a concerted effort at working through the strategic concerns entrenched in the strategic management model, managers increase tremendously their chances of success (Carral & Kajanto 2008). In this regard almost all managers focus primarily on a number of managerial decisions that establishes their long-term performance. There is a variety of models that have been recommended to managers for strategic management the bases of which are related in their employed theories. Before an organization can initiate any strategy formulation, its management must scan both its external environment in order to identify possible threat and opportunities together with its internal environment for weaknesses and strengths. For managers to achieve effective strategic management, they must not only think strategically but also develop the capacity to see things moving, not to mention making sense out of a vague and uncertain future by identifying interdependency of major factors. The importance of thinking strategically in management emanates from the fact that managers doing so have the ability to picture their organizations in the perspective of the global trends and events and identify thereof significant interdependencies. That way they can also focus on how best their organizations should act and respond to emerging threats and opportunities. It is however important to understand that this ability calls for more than a general awareness of important political social, economic, technological, and legal trends (Porter 2004). For some organizations it might be certain environmental influences like competition that have the greatest influence while to others, and especially service and manufacturing businesses, it might be customers, all of which require proper analysis of appropriate strategy to employ. A competitive environment might be affected by the structure or the profitability of the market; growth of the market; level of differentiation; strength of competitive rivalry; incidence of new product launches; stage in product or service life; economies of scale; and capital intensity (Ministry of Finance 2010). It is however important to note that the more unstable an environment is, the more aggressive managers should be in terms of entrepreneurialism, change orientation and competitive strategies if they are to be successful (Ministry of Finance 2010). Through environmental scanning managers of companies can manage to keep their organization updated on the new and emerging business practices, regulation, technologies and different rising trends, thereby avoiding falling behind especially in the context of the rapid changing business environment (Porter 2004). It also diminishes the probability of being blinded-sided while resulting to superior anticipatory management. Just as I have mentioned, the awareness of the changing environment was at the center of Nokia taking advantage of increased growth where it precisely predicted and planned for a slowdown in growth while their competitors were responding to a 30-40% forecasted growth. Due to inaccurate forecasting, Sonny Ericsson on the other hand was issuing profit warning due to the less-than-forecasted demand for replacement handsets in European and Asian market (Strategic Direction 2005). Additionally, it indicated lost opportunity to development of products that could have been more appropriate to the environmental conditions and market demands. Predicting demand changes normally assist in shifting emerging opportunities from red herrings and ensuring proper and effective use of resources. Environmental scanning has a number of challenges that normally affects negatively its value. Environmental scanning per see might not make much sense. Vast amount of data has to be analyzed in the framework of the strategic objectives that for some reason might as well be in their infancy. Good referencing and indexing is particularly extremely important in drawing value from this vast data. Use of statistical techniques is also extremely important which combined with the other requirement and their complexity shows the high probability of environmental scanning being rendered a waste of time and an exercise in futility. In fact this high probability of missing the point is at the center of lethargy that managers have been exhibiting as far as environmental scanning is concerned (Saxby et al 2002). Secondly, the high number of tools used in the environmental scanning that include, Porters Five Forces Model, PEST analysis, and the value chain analysis, all of which require specialized skills in their application demonstrates the slim chance of getting its right in majority of cases. Another bottleneck that has rendered environmental scanning irrelevant to a larger extent is leadership of an organization. Environmental scanning depends to a great extent on the leadership of a firm. For it to succeed the leader must drive and lead the scanning efforts with passion and vigor, while creating excitement in order to create and maintain interest always. In fact, a visionary leader inspires and energizes the team and provides it with direction to the scanning effort, from where synergy is created from the shared vision. Any lack of such leadership therefore renders any environmental scanning effort a waste of time and resources. In a nutshell, environmental scanning is normally a main ingredient in an organization planning processes and offers the foundation for the development of financial, strategic, work force, and performance. References Albright, S., K, 2004, “Environmental Scanning: Radar for Success”, Information Management Journal, May/June. Carral, R, & Kajanto, M, 2008, “Nokia: A Case Study in Managing Industry Downturn”, Strategic Direction, Vol. 29, Iss. 1. Pp. 25-33. Karami, A, 2008, “An Investigation on Environmental Scanning and Growth Strategy in High Tech Small and Medium Sized Enterprises”. High Technology Small Firms Conference, May 21-23 2008, University of Twente. Ministry of Finance, 2010, “Environmental Scan Guidelines”, Performance management Branch. Papulova, E, & Papulova, Z, 2006, “Competitive Strategic and Competitive Advantages of Small and Midsized Manufacturing Enterprises in Slovakia”, E-Leader, Slovakia. Parker, A, 2008, “Nokia Reaps Benefits of Emerging Markets”, Financial Times, available at http://www.ft.com/intl/cms/s/0/b308b23c-008f-11dd-a0c5- 000077b07658.html#axzz1XWzbBChh Porter, M, 2004, Competitive Advantage: Creating and Sustaining Superior Performance, Free press, New York. Saxby, C, Parker, K, Nitse, P, Dishman, P, 2002, “Environmental Scanning and Organizational Culture”, Marketing Intelligence & Planning. Vol. 20, Iss. 1, pp. 28-34. Strategic Direction, 2005, “Nokia Feels Heat As It Tries To Be Cool: How A World Leader Plays Catch-Up In A Fickle Market”, Strategic Direction. Vol. 21, No. 5, pp. 21-23. Read More