1.

Environmental scanning
2. Environmental scanning is a process of gathering, analyzing, and dispensing information for
tactical or strategic purposes. The environmental scanning process entails obtaining both
factual and subjective information on the business environments in which a company is
operating or considering entering
3. Kinds of environmental scanning
4. Ad-hoc scanning - Short term, infrequent examinations usually initiated by a crisis
5. Regular scanning - Studies done on a regular schedule (e.g. once a year)
6. Continuous scanning (also called continuous learning) - continuous structured data collection
and processing on a broad range of environmental factors
7. Environmental scanning usually refers just to the macro environment, but it can also include
industry, competitor analysis, marketing research (consumer analysis), new product
development (product innovations) or the company's internal environment.
8. Environmental scanning
9. External analysis
10. Internal analysis
11. Macro environment
12. Micro environment
13. PEST analysis
14. Five force analysis
15. A scan of the external macro-environment in which the firm operates can be expressed in
terms of the following factors:
16. Political
17. Economic
18. Social
19. Technological
20. The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework
for the analysis of these macro environmental factors.
21. Political Factors:-Political factors include government regulations and legal issues and define
both formal and informal rules under which the firm must operate. Some examples include
:tax policy
22. employment laws
23. environmental regulations
24. trade restrictions and tariffs
25. political stability
26. Economic Factors :-Economic factors affect the purchasing power of potential customers
and the firm's cost of capital. The following are examples of factors in the macro
economy:economic growth
27. interest rates
28. exchange rates
29. inflation rate:Social Factors
30. Social factors include the demographic and cultural aspects of the external
macroenvironment. These factors affect customer needs and the size of potential markets.
Some social factors include:health consciousness
31. population growth rate
32. age distribution
33. emphasis on safety:Technological Factors:-Technological factors can lower barriers to entry,
reduce minimum efficient production levels, and influence outsourcing decisions. Some
technological factors include:R&D activity
34. Automation
35. technology incentives
36. rate of technological change:Five force analysis
37. Threat Of New Entrants
38. Threat Of Substitutes
39. Bargaining Power Of Buyers
40. Bargaining Power Of Suppliers
41. Rivalry Among Existing Firms
42. Why ????????? Macro environmental and industry scanning are useful as they reveal
current conditions of market.it help managers to predict the future characteristics of the
organizational environment and hence make decisions today that will help the firm deal with
the environment of tomorrow

1. EXTERNAL ENVIRONMENT
2. It refers to the environment that has an indirect influence on the business. The factors are
uncontrollable by the business. There are two types of external environment:
3. Micro Environment:The micro environment is also known as the task environment and
operating environment because the micro environmental forces have a direct bearing on the
operations of the firm.
4. a)Suppliers:An important force in the micro environment of a company is the suppliers, i.e.,
those who supply the inputs like raw materials and components to the company.
5. Customer:The major task of a business is to create and sustain customers. A business exists
only because of its customers.
6. Marketing Intermediaries:The marketing intermediaries include middlemen such as agents
and merchants that help the company find customers or close sales with them.
7. Financers: The financers are also important factors of internal environment.
8. Public: Public can be said as any group that has an actual or potential interest in or on an
organization’s ability to achieve its interest. Public include media and citizens.
9. Macro Environment : Macro environment is also known as General environment and remote
environment. Macro factors are generally more uncontrollable than micro environment
factors. When the macro factors become uncontrollable , the success of company depends
upon its adaptability to the environment.
10. Economic Environment : Economic environment refers to the aggregate of the nature of
economic system of the country, business cycles, the socio-economic infrastructure etc.
11. Social Environment : The social dimension or environment of a nation determines the value
system of the society which, in turn affects the functioning of the business. Sociological
factors such as costs structure, customs and conventions, mobility of labor etc. have far-
reaching impact on the business.
12. Political Environment: The political environment of a country is influenced by the political
organizations such as philosophy of political parties, ideology of government or party in
power, nature and extent of bureaucracy influence of primary groups etc.
13. Legal Environment: Legal environment includes flexibility and adaptability of law and other
legal rules governing the business. It may include the exact rulings and decision of the
courts.
14. Technical Environment: The business in a country is greatly influenced by the technological
development. The technology adopted by the industries determines the type and quality of
goods and services to be produced and the type and quality of plant and equipment to be
used.
Environmental scanning

1. Environmental scanning- the monitoring, evaluation and dissemination of information from

the external and internal environments to key people within the corporation
2. Identifying External Environmental Variables • Natural environment • Societal environment •
Task environment
3. Natural environment • Physical resources • Wildlife • Climate
4. Societal environment- social systems that influence long-term decisions • Economic forces •
Technological forces • Political-legal forces • Sociocultural forces
5. Task environment- groups that directly affect a corporation and are affected by the
corporation • Government • Local communities • Suppliers • Competitors • Customers •
Creditors • Unions • Special interest groups/trade associations
6. Industry analysis- an in-depth examination of key factors within a corporation’s task
environment
7. STEEP Analysis- monitoring trends in the societal and natural environments – Sociocultural-
– Technological- – Economic- – Ecological- – Political-legal forces
8. Trends in Economic Forces: • Interest rates • Home sales • Oil prices • Emerging markets •
BRIC countries • Eastern Europe
9. Trends in Technological Forces: – Portable information devices and electronic networking –
Alternative energy sources – Precision farming – Virtual personal assistants – Genetically
altered organisms – Smart, mobile robots
10. Trends in Political-Legal Forces: – Enforcement of U.S. antitrust laws – Taxation and labor
laws – Government bureaucracy – World Trade Organization
11. Trends in Sociocultural Forces: – Demographics – Increasing environmental awareness –
Growing health consciousness – Expanding seniors market – Impact of Gen Y – Declining
mass market – Changing pace and location of life – Changing household composition –
Increasing diversity of workforce and markets

12. Identifying External Strategic Factors: Issues priority matrix- used to identify and analyze
developments in the external environment External strategic factors- key environmental
 trends that are judged to have both a medium to high probability of occurrence and a
medium to high probability of impact on the corporation
13. Industry- a group of firms that produces a similar product or service Porter’s 5 forces: –
Threat of new entrants – Rivalry among existing firms – Threat of substitute products –
Bargaining power of buyers – Bargaining power of suppliers – Relative power of other
stakeholders (added)
14. Threat of new entrants- new entrants to an industry bring new capacity, a desire to gain
market share and substantial resources
15. Entry barrier- an obstruction that makes it difficult for a company to enter an industry •
Economies of scale • Product differentiation • Capital requirements • Switching costs •Access
to distribution channels •Cost disadvantages due to size •Government policies
16. Rivalry Among Existing Firms- new entrants to an industry bring new capacity, a desire to
gain market share and substantial resources • Number of competitors • Rate of industry
growth • Product or service characteristics • Amount of fixed costs • Capacity • Height of exit
barriers • Diversity of rivals
17. Threat of Substitute Products or Services- products that appear different but can satisfy the
same need as another product
18. Bargaining Power of Buyers- ability of buyers to force prices down, bargain for higher quality,
play competitors against each other • Large purchases • Backward integration • Alternative
suppliers • Low cost to change suppliers • Product represents a high percentage of buyer’s
cost • Buyer earns low profits • Product is unimportant to buyer
19. Bargaining Power of Suppliers- ability of suppliers to raise prices or reduce quality • Industry
is dominated by a few companies • Unique product or service • Substitutes are not readily
available • Ability to forward integrate • Unimportance of product or service to the industry
20. Relative Power of Other Stakeholders • Government • Local communities • Creditors • Trade
associations • Special interest groups • Unions • Shareholders • Complementors- products
that work well with a firm’s product
21. Industry Evolution • Fragmented industry- no firm has a large market share and each firm
only serves a small piece of the total market in competition with other firms • Consolidated
industry- domination by a few large firms, each struggles to differentiate products from its
competition
22. Categorizing International Industries • Multi-domestic Industries- specific to each country or
group of countries • Global Industries- operate worldwide with multinational companies
making only small adjustments for country-specific circumstances • Regional industries-
multinational companies primarily coordinate their activities within regions
23. Strategic group- a set of business units or firms that pursue similar strategies with similar
resources
24. Strategic Types • Defenders- focus on improving efficiency • Prospectors- focus on product
innovation and market opportunities • Analyzers- focus on at least two different product
market areas • Reactors- lack a consistent strategy-structure- culture relationship
25. Hypercompetition Creates a condition of disequilibrium and change • Competitive advantage
comes from: – knowledge of environment – willingness to take risks – Cannibalization of own
products
26. Key success factors- variables that can significantly affect the overall competitive positions of
companies within an industry Industry matrix- summarizes the key success factors within a
particular industry
27. Using Key Success Factors to Create an Industry Matrix Competitive intelligence (business
intelligence)- a formal program of gathering information on a company’s competitors Sources
of competitive intelligence: • Information brokers • Internet • Industrial espionage •
Investigatory services
28. Monitoring Competitors for Strategic Planning Primary activity of competitive intelligence is to
monitor competitors Competitors organizations that offer same, similar, or substitute
products or services in the business areas in which a particular company operates
29. 39. Prentice Hall, Inc. ©2009 4-39 • Forecasting is based on a set of assumptions • Faulty
underlying assumptions are the most frequent cause of forecasting errors Useful forecasting
techniques • Extrapolation • Brainstorming • Expert opinion • Industry Scenario •Delphi
technique •Statistical modeling •Prediction markets •Cross impact analysis
30. 40. Prentice Hall, Inc. ©2009 4-40
31. 41. Prentice Hall, Inc. ©2009 4-41
32. 42. Prentice Hall, Inc. ©2009 4-42 1. Discuss how a development in a corporation’s natural
and societal environments can affect the corporation through its task environment 2.
According to Porter, what determines the level of competitive intensity in an industry? 3.
According to Porter’s discussion of industry analysis, is Pepsi Cola a substitute of Coca
Cola? 4. How can a decision maker identify strategic factors in a corporation’s external
international environment? 5. Compare and contrast trend extrapolation with the writing of
scenarios as forecasting techniques
33. 43. Prentice Hall, Inc. ©2009 4-43 PowerPoint created by: Ronald Heimler • Dowling
College- MBA • Georgetown University- BS Business Administration • Adjunct Professor-
LIM College, NY • Adjunct Professor- Long Island University, NY • Lecturer- California State
Polytechnic University, Pomona, CA • President- Walter Heimler, Inc.
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