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Environmental scanning assesses the internal strengths and weaknesses of an organization in relation to the external opportunities and threats it faces.
Why Is Environmental Scanning Important?
All organizations need to monitor at some level what goes on in their environments and recognize their strengths and weaknesses in relation to it. The importance of environmental information depends on the degree to which the success of the organization itself depends on its environment. In the business literature, this dependency of the organization on its environment is referred to as perceived environmental uncertainty (PEU). Gordon and Narayanan (1984) identified factors that determine PEU. These factors include the nature of the society, economic stability, legal stability, political constraints, the nature of the industry, the customer base and the nature of the organization.
While PEU varies from industry to industry, the level of recognition of the importance of the environment also varies from company to company, as does the reaction of companies to their environment. Khandwalla (1977) identifies three possible relationships between organizations and their environments:
Dominant organization/dominated environment
Dominant environment/dominated organization
Symbiotic relationship - neither the environment nor the company dominates.
The relationship between an organization and its environment depends upon the internal strengths and weaknesses of the company, which means that an opportunity for one company will be viewed as a threat to another company, depending on how well each is positioned to deal with the specific trend or issue.
How Is an Environmental Scan Conducted?
Bryson (1989) outlines general steps for conducting an environmental scan:
Identify the purpose, participants and time commitments.
Carry out the scanning activities.
Analyze and interpret the strategic importance of issues and trends.
Select issues and trends for further action.
Report and disseminate the results.