Environmental Scanning

The environment of a business is extremely dynamic in nature. It is always in a flux, i.e.

constantly changing. Which means that the future of the business is also ever changing. And the
organization must keep a close at its environment via environmental scanning. Let us learn the
environmental scanning meaning.
In any business organization, there is an internal and external environment. They comprise all
the factors that can affect the business of a company in any way. And they also present
opportunities for the business to grow and threats that may harm the business. So these
environments need constant monitoring. This is where environmental scanning comes into the
picture.
Environmental scanning meaning is the gathering of information from an organizations internal
and external environments, and careful monitoring of these environments to identify future
threats and opportunities. It is the analyses of all factors that may affect the future of the
organization.
The purpose of this process of environmental scanning is to provide the entrepreneur with a
roadmap to the changes likely to happen in the future. So this way they can adapt the business to
overcome the threats and capitalize on the opportunities coming their way.

Characteristics of Environmental Scanning

The characteristics of environmental scanning are as follows:
1) Continuous Process- The analysis of the environment is a continuous process rather
than being sporadic. The rapidly changing environment has to be captured
continuously to be on track.
2) Exploratory Process- Scanning is an exploratory process that keeps monitoring the
environment to bring out the possibilities and unknown dimensions of the future. It
stresses the fact that “What could happen” and not ”What will happen”.
3) Dynamic Process- Environmental scanning is not static. It is a dynamic process and
depends on changing situations.
4) Holistic View- Environmental Scanning focuses on the complete view of the
environment rather than viewing it partially.

Components of Environmental Scanning

1. Internal Environmental Components- The components that lie within the
organization are internal components and changes in these affect the general
performance of the organization. Human resources, capital resources and
technological resources are some of the internal environmental components.
2. External Environmental Components: The components that fall outside the
business organization are called external environmental components. Although the
components lie outside the organization, they still affect the organizational activities.
The external components can be divided into microenvironmental components, and
macro environmental components.

Micro environmental components include competitors, consumers, markets, suppliers,

organizations, etc. Macro environmental components include political, legal, economical,
cultural, demographic, and technological factors.

Importance of Environmental Scanning

1) SWOT Analysis
As we saw previously in the environmental scanning meaning, it is a complex process. The
close study of the internal and external environment of an organization will reveal some very
valuable information, i.e. the strengths, weaknesses, opportunities, and threats of a company. Let
us take a brief look.
 Strength: After analysis of the internal environment of a company, we will be able to
identify the strengths that give the company a competitive advantage. The entrepreneur
can use this information to maximise these strengths and earn more profits.
 Weakness: Study of the internal environment also point out the weaknesses of the
company. For the growth and stability of the company, these identified weaknesses must
be corrected without delay.
 Opportunity: Analysis of the external environment helps with the identification of
possible opportunities. The entrepreneur can prepare to capitalize on these.
 Threats: Analysis of the external environment will also help in the identification of any
business threats from competitors or any other factors. The company can come up with a
strategy to diffuse such threats or minimize its impact.
2) Best Use of Resources
Environmental scanning helps us conduct a thorough analysis and hence leads to the optimum
utilization of resources for the business. Whether it is capital resources, human resources or
other factors of production, their best use and utilization is very important for any business.
Environmental scanning will help us avoid any wastages and allow for the most effective and
economical use of these resources.
3) Survival and Growth of the Business
It is a very competitive world and for any business to survive and thrive it is a difficult task. But
if the business employs all the techniques of environmental scanning it can gain a significant
advantage. It will allow the firm to prepare for future threats and opportunities while at the same
time eliminating their weaknesses and improving on their strengths.
4) Planning for Long Term
A business must have a plan for both short term and long term. The planning of long-term
objectives can only occur after proper analysis and environmental scanning meaning. This will
help the entrepreneur plan the necessary business strategy.
5) Helps in Decision Making
Decision making is the choice of the best alternative done by management. Environmental
scanning allows the firm to make the best decision keeping in mind the success and growth of
the business. They point out all the threats and weaknesses. And they also identify the strengths
of the firm.
6) Goal Accomplishment
The objectives of an organization cannot be fulfilled unless it adapts itself to environmental
changes. One has to adjust the strategies to fit in the changing demands of the environment.
7) Future Forecast
Environmental changes are often unpredictable. An organization cannot anticipate all the
future events but based on the analysis, it can make better strategic decisions in the future.
Hence, environmental analysis helps to forecast the prospects of the business.
8) Market Knowledge
Every organization must be aware of the ongoing changes in the market. If it fails to
incorporate strategic changes due to changing demands, it will not be able to achieve its
objectives.
9) Focus on the Customer
Environmental scanning and analysis make an organization sensitive to the changing needs
and expectations of the customer