9.1 Techniques for Assessing the Environment

Environmental Scanning

Managers in both small and large organizations use environmental scanning, which is the screening of large amounts of information to anticipate and interpret changes in the environment.

Extensive environmental scanning is likely to reveal issues and concerns that could affect an organization's current or planned activities.

Based on the scanned environment and the information gathered an organization can plan well and strategically.

Competitor Scanning

One of the fastest-growing areas of environmental scanning is competitor intelligence.

It is a process by which organizations gather information about their competitors and get answers to questions such as: Who are they?, What are they doing? How will what they are doing affect us?

Competitor intelligence experts suggest that 80 percent of what managers need to know about competitors can be found from their own employees, suppliers, and customers.

Advertisements, promotional materials, press release, reports filed with government agencies, annual reports, want ads, newspaper reports, and industry studies are examples of readily accessible sources of information.

9.1 Techniques for Assessing the Environment

Global Scanning

Another type of environmental scanning that is particularly important is global scanning.

Because world markets are complex and dynamic, managers have expanded the scope of their scanning efforts to gain vital information on global forces that might affect their organizations.

The value of global scanning to managers is largely dependent on the extent of the organization's global activities.

The sources that managers use for scanning the domestic environment are too limited for global scanning.

Managers need to globalize their perspectives and information sources.

The current era of information revolution enables managers to access information on global business environment.

Different agencies nowadays publish important reports for doing business across the globe, extent of competitions, legal and economic environment.

9.1 Techniques for Assessing the Environment

Forecasting

The second technique managers can use to assess the environment is forecasting.

Forecasting is an important part of planning and managers need forecasts that will allow them to predict future events effectively and in a timely manner.

The goal of forecasting is to provide managers with information that will facilitate decision making.

Managers can make their forecasting more effective by:

Understanding that forecasting techniques are most accurate when the environment is not rapidly changing

Using simple forecasting techniques as managers tend to do this well and often better than complex methods

Looking at involving more people in the process as this can improve the reliability of the outcomes

Using rolling forecasts that look 12 to 18 months ahead, instead of using a single, static forecast, to help managers spot trends better and help their organizations be more adaptive in changing environments

Not assuming that they can accurately identify turning points in a trend which often turns out to be simply a random event

To remember that forecasting is a managerial skill and as such can be practised and improved

9.1 Techniques for Assessing the Environment

Forecasting techniques fall into two categories:

Quantitative Forecasting

It applies a set of mathematical rules to a series of past data to predict outcomes.

These techniques are preferred when managers have sufficient hard data that can be used.

Examples are regression models and econometric models.

However, the result of forecasting may vary depending on the data quality and the techniques employed.

Usually office of statistics of various countries and international agencies are the main sources of data.

In a situation of lack of data, a survey could be conducted by the institution that is interested in certain information.

9.1 Techniques for Assessing the Environment

Qualitative Forecasting

It is used when precise data are limited or hard to obtain.

Examples are sales force composition and customer evaluation.

It is usually sourced through interview or feedback of customers.

Expert interview is conducted on certain phenomenon to evaluate and forecast the future.

Benchmarking

Benchmarking is the search for the best practices among competitors or non-competitors that lead to their superior performances.

The basic idea is that managers can improve performance by analyzing and then copying the methods of the leaders in various fields.