WHAT IS ENVIRONMENTAL SCANNING?
WHAT IS ENVIRONMENTAL SCANNING?
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Every organization has an internal and external environment. In order for the organization to be successful, it is important that it scans its environment regularly to assess its developments and understand factors that can contribute to its success. Environmental scanning is a process used by organizations to monitor their external and internal environments.
The purpose of the scan is the identification of opportunities and threats affecting the business for making strategic business decisions. As a part of the environmental scanning process, the organization collects information regarding its environment and analyzes it to forecast the impact of changes in the environment. This eventually helps the management team to make informed decisions.
Important Factors for Environmental Scanning
Before scanning the environment, an organization must consider the following actors:
Events – These are specific occurrences which take place in different environmental sectors of a business. These are important for the functioning and/or success of the business. Events can occur either in the internal or the external environment. Organizations can observe and track them.
Trends – As the name suggests, trends are general courses of action or tendencies along which the events occur. They are groups of similar or related events which tend to move in a specific direction. Further, trends can be positive or negative. By observing trends, an organization can identify any change in the strength or frequency of the events suggesting a change in the respective area.
Issues – In wake of the events and trends, some concerns can arise. These are Issues. Organizations try to identify emerging issues so that they can take corrective measures to nip them in the bud. However, identifying emerging issues is a difficult task. Usually, emerging issues start with a shift in values or a change in which the concern is viewed.
Expectations – Some interested groups have demands based on their concern for issues. These demands are Expectations.
WHAT IS SWOT ANALYSIS?
WHAT IS SWOT ANALYSIS?
In order to analyze and understand the external and internal business environments, organizations turn to SWOT analysis – an acronym for strengths, weaknesses, opportunities, and threats. The idea is simple, the strengths and weaknesses of an organization are matched with the threats and opportunities of the environment to formulate an effective strategy. In order to create an effective strategy, it is important that the organization capitalizes on the opportunities by using its strengths. Also, it must avoid the threats by reducing the impact of the weaknesses.
Strengths – are the aspects of an organization that make it better than its competitors. For example, the strength of a company can be having one of the best technological tools in the market. A thorough analysis can help the company use it to improve its business.
Weaknesses – areas where the organization needs to improve to remain competitive in the industry. Some examples of weaknesses are high debts, lack of capital, inadequate supply chain, etc.
Opportunities – are external factors that can help an organization in gaining competitive advantage. For example, if a country changes its import laws, then a car exporter can increase his sales by taking advantage of this opportunity.
Threats – are factors which have the potential to cause harm to an organization. For example, a drought is a threat to a crop-producing company as it can destroy the crop.
Executing a SWOT Analysis
Before an organization starts a SWOT analysis, it is important to create a company profile. This is primarily a description of what the business does and who its customers are. In the case of large organizations, creating a profile for each segment is equally important. Also, outline the perceived strengths, weaknesses, opportunities, and threats. Once the basics are in place, a management team can get together and start populating the four elements as specified above. As the list gets populated, the team can brainstorm and find ways to increase the opportunities and improve on its strengths. In a nutshell, a SWOT analysis gives you a bird’s eye view of the current situation of an organization. The most important factor in a SWOT analysis is the quality of data. Hence, it is important to capture the strengths, weaknesses, opportunities, and threats accurately. Remember, the analysis is merely the beginning of change and improvement.
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