Introduction

Environmental scanning is the monitoring, evaluating and disseminating of the information from the external and internal environments to key people within the corporation. Its purpose is to identify strategic factors- external and internal elements that will determine the future of the corporation. The simplest way to conduct environmental scanning is through SWOT Analysis. SWOT is an acronym used to describe the particular strengths, weaknesses, opportunities, and threats that are strategic factors for a specific company. Before an organization can begin strategy formulation, it must scan the external environment to identify possible opportunities and threats and its internal environment for strengths and weaknesses. A corporation uses this tool to avoid strategic surprise and to ensure its long-term health. Research has found a positive relationship between environmental scanning and profits.

The external environment consists of variables (opportunities and threats) that are outside the organization and not typically within the short-run control of top management. These variables form the context within which the corporation exits. Key environmental variables may be general forces and trends within the overall societal environment or specific factors that operate within an organization's specific task environment- often called its industry.

The internal environment of a corporation consists of variables (strengths and weakness) that are within the organization itself and are not usually within the short-run control of top management. These variables form the context in which work is done. They include the corporation's structure, culture, and resources. Key strengths form a set of core competencies that the corporation can use to gain competitive advantage.