Concept of Environmental Scanning - Coursework Example

Running Head: Environmental Scanning Your name Course name Professors’ name Date Introduction An individual conducts informational search to solve a problem or make a decision. This paper elucidates the concept of environmental scanning which has been defined by Aguilar (1967) as the process of acquiring information from outside environment with a rationale of describing future course of action. Environmental scanning is conceptualised after considering four types of scanning i.e. undirected viewing, conditioned viewing, informal, and formal scanning. The essay further gives a succinct account of how environmental scanning assists managers in planning and improving performance. Lastly, factors that undermine value of environmental scanning will be discussed. Concept of environmental scanning Environmental scanning simply involves an activity by the management to study or rather learn about events and trends within an organizational environment. In a study by Rouibah (2003), organizations are capable of collecting and processing information from external environments which then acts as the basis of organizational decisions or actions. It is therefore vital for an organization to be very active in environmental scanning. Additionally, environmental scanning helps managers, who are the decision makers, to identify and understand strategic threats and opportunities. Apparently, environmental scanning is recognised as a beginning and critical phase in the process of strategic management. The strategic management process is divided into the phase of scanning and interpreting information from both internal and external environment and the phase of strategic decision making. Intelligence is the output from the first phase which is then passed onto the stage of strategic decision making and implementation. This second phase captures four major activities including: strategic formulation, corporate capability planning, real time strategic response to environmental issues and carrying out strategies. Groom (2001) notes that substantial research has been conducted on environmental scanning in western countries as opposed to less developed countries. Briefly, environmental scanning aims at drawing attention of decision makers to potential external changes before they develop or even advance. Managers can then make use of available time to respond to these changes. There are three levels of environments available for scanning. The first one is the task environment which comprises institutional customers. As an example, task environment in a bank comprise of clients i.e. both corporate and personal, investors, and other banking institution. The task environment therefore relates to a specific institution i.e. banking institution. The second level of environment is the industrial environment which comprises of public confidence in a financial institution, government regulation of financial sector. These factors affect all players in a financial industry. The broadest environmental level is macro-environment that seeks to address changes in social, technological, economic, political and environmental. Changes in macro-economic variables have a direct and indirect impact on the organizational environment. An example is global recession which affects interest rates of banks and financial institution. This ultimately trickles down to customers and general public. In order to conceptualize scanning, it is imperative to identify four types of scanning as studied by Aguilar (1967). The first one is undirected viewing which entails an individual reading a publication for the sole purpose of getting informed. Secondly is conditioned viewing where a person responds to information in order to ascertain relevance to an organization. Scanning is also done through informal search of information. Specific information is sought in unstructured manner. Finally, scanning is done in a formal manner, which is a practical search for information to be used for certain purpose. Fahey (1981) viewed scanning as irregular, period or continuous. According to the researcher, irregular systems are crisis initiated and are used on ad hoc basis i.e. when an organization wants information for the purpose of planning, it conducts scanning to meet that goal only. In the context of periodic systems, planners periodically renew a scan as they prepare for a new planning cycle. Finally Fahey emphasises that continuous systems capitalise on active scanning of data with an objective of systematically informing the planning agents of a company. The basis of continuous systems is that important data are limited by personal conception of the environment. Owing to the fact that data from environment are numerous scattered, and imprecise, continuous scanning is vital for the purpose of covering variables that are important to a specific organization. Importance of environmental scanning to a manager It is obvious from the paragraphs above that environmental scanning entails understanding context of an organization in both internal and external environment. This assists managers to shape strategy in order to fit changing conditions. In an article by Moen (2003), American Dietetic Association (ADA) finds it very hard to separate environmental scanning from strategic planning. In the same article, ADA relies on environmental scanning to provide it with framework that guides the organization in the business of improving public health and nutrition. An organization is made sensitive to the changing wishes and needs of customers. Through environmental scanning, a manager can therefore improve planning and performance and eventually take advantage of new situations. Besides, organizations can only understand what goes on in the environment and subsequently identify if they are weak or strong by conducting a scan. The success of a business depends on its dependence on environment, otherwise termed as perceived environmental uncertainty, PEU, by Gordon (1984). Planning and performance in an organization is also improved through environmental scanning since manages can now predict developments to avoid costly mistakes. Changes in events and trends within an environment continuously send signal for an organization to identify and use it to adapt to the new condition. Due to the fact that uncertainty exists in the environment, a manager is obliged to learn from the environment so as to be able to cope with the changes in a timely manner. An intense study done by Dill (1992) elaborates on three step process used to acquire and learn from the environment. At the onset of this process, scanning keeps an eye on the organizational environment and thereafter provides data to the manager. This process is seconded by interpretation, which seeks to give meaning to data that has been gathered from the initial stage of scanning. Based on interpretation, a manager gives a new response. It is apparent from this explanation of the process involved during scanning that organizational learning and planning in addition to performance is improved. Daft (1984) argued that environmental scanning is the most important strategy when establishing organizational goals. Successful firms, including Microsoft Inc conducts continuous environmental scan and this has enabled the company outsmart its competitors given that their decisions are based on broader pattern of scanning. Beal (2000) agrees that successful companies executed frequent and broad environmental scans. Minimum or deficient environmental scanning plays a critical role in the success or failure of an organization. Factors that undermine value of environmental scanning Individual factors such as information consciousness and exposure to information influence the value of environmental scanning. Consciousness to information i.e. the attitude towards information-related activities ultimately demonstrates value attached to information. Individuals tend to develop specific communication pattern and personal accountability for environmental scanning. Large and medium size organizations conducting its businesses in different sub-sectors utilize personal monitoring and distribution of information in their environmental scanning. An organization where information consciousness is less has a negative impact on environmental scanning and ultimately undermines its value. The other factor which is intertwined with information consciousness is exposure to information. This measures the proximity of an individual to well-informed people and rich sources. Deficiency of informational networks weakens the value of environmental scanning (Mintzberg, 1989). Information climate of an organization contributes to the nature and value of environmental scanning. Information climate focuses on access to and use of information in an organization. As an example, Pharmaceutical companies can access information from online systems which are managed by professionals. Collection of information in such online database enhances environmental scanning. Costs involved in the process of collecting and compiling information are large and not likely to be met by some companies. In addition to this, outwardness of an institution influences the nature of environmental scanning. Some pharmaceutical companies have their own laboratories and favour doing their individual research. Others collaborate with international companies in the same industry for the purposes of research. This has a net effect on the value of environmental scanning done especially with respect to external environment. Environmental scans consume a lot of time and are expensive. Georgia Centre for Continuing Education makes use of 65 scanners from four different operational divisions. There are also two committees mandated to review all scanning data and subsequently develop policy. The committee further suggests changes that are based on data. Research done by Abebe (2010) indicates that Cardinal Strich College in Milwaukee, Wisconsin has 80 employees conducting scans on 199 different publications for the purpose of giving an excellent external events report. It can be concluded that resources available have the ability to influence the nature and value of environmental scans conducted by an organization. Conclusion The paper gave a clear discussion on environmental scanning which is seen to provide managers with intellectual stimulation given that both internal and external environments are studied. Through scanning strategists are then able to comprehend the present organizational situation with a view of making an informed decision. Furthermore environmental scanning aims at improving public image of an organization by demonstrating that it is aware of the environment and is quick to respond to it. There is no doubt that environmental scanning is indispensable for a company whose interests and objects lies in overall success both in the present and in future. Reference List Abebe, M., Angriawan, A., and Tran, H. 2010. Chief Executive External Network Ties and Environmental Scanning Activities: an Empirical Examination, Strategic Management Review, 4(1), 30-33. Aguilar, F., 1967. Scanning the business environment. New York: Macmillan. Beal, R. M., 2000. Competing Effectively: Environmental Scanning, Competitive Strategy, and Organizational Performance in Small Manufacturing firms. Journal of Small Business Management, 32(12), 27-45. Daft, R.L. & Weick, K.E., 1984. Toward a model of organizations as interpretation systems. Academy of Management Review, 9(2), 284-295. Dill, W. R. (1992). The impact of the environment on organizational development. In M. Sidney and Edwards H. Van Ness (Eds). Concepts and issues in administrative behaviour. Englewoods Cliffs, NJ: Prentice Hall Inc. Fahey, L., King, W.R., and Narayanan, V.K., 1981. Environmental scanning and forecasting in strategic planning: The state of the art. Long Range Planning, 14(1), 32-39. Gordon, L. A. and Narayanan, V.K., 1984. Management Accounting Systems, Perceived Environmental Uncertainty and Organization Structure: An Empirical Investigation. Accounting Organizations and Society, 9(1), 33-47. Groom J.R., and David F.R., 2001. Competitive intelligence activity among small firms. SAM Advanced Management Journal, 66(1), 12-20. Hambrick, D.C.,1984. Environmental Scanning and Organization Strategy. Strategic Management Journal, 11(3), 157-174. Maheran, N., and Muhammad, N., 2009. Capital Investment Decision: Impact from Environmental Scanning. Journal of Management Research, 1(1): E4. Mintzberg, H.,1989. Mintzberg on management: inside our strange world of organizations. New York, NY: McMillan. Moen, R.S., 2003. Environmental scanning makes planning possible: how can you bring emerging issues and trends to the forefront so that you can focus strategic attention on them? Try environmental scanning, Allbusiness.com. Retrieved from: http://www.allbusiness.com/management/benchmarking- strategic-planning/609634-1.html#ixzz1ZJdm9mVU. Accessed on 29 September 2011. Rouibah K., 2003. Environmental Scanning, Anticipatory Information and Associated Problems: Insight from Kuwait. Communications of the International Information Management Association, 3(1), 47-62. Read More