2.1 Identifying external environmental variables

In undertaking environmental scanning, strategic managers must first be aware of the many variables within a corporation's societal and task environments. The societal environment includes general forces that do not directly touch on the short-run activities of the organization but that can, and often does, influence its long-run decisions.
These are as follows:

	Economic forces that regulate the exchange of materials, money, energy, and information.
	Technological forces that generate problem-solving inventions.
	Political-legal forces that allocate power and provide constraining and protecting laws and regulations.

The task environment includes those elements or groups that directly affect a corporation and, in turn, are affected by it. These are governments, local communities, suppliers, competitors, customers, creditors, employees/labor unions, special-interest groups, and trade associations. A corporation's task environment is typically the industry within which the firm operates. Industry analysis refers to an in-depth examination of key factors within a corporation's task environment. Both the societal and task environments must be monitored to detect the strategic factors that are likely to have a strong impact on corporate success or failure.

2.1 Identifying external environmental variables

Research indicates that high-performing chief executives vary their environmental scanning emphasis according to the level of dynamism they perceive in their external environment. In dynamic environments, successful CEOs pay more attention to task environment, whereas in stable environments, CEOs focus on forces in the societal environment.

1.1 Scanning the Societal Environment
The number of possible strategic factors in the societal environment is very high. The number becomes enormous when we realize that, generally speaking, each country in the world can be represented by its own unique set of societal forces-some of which are very similar to those of neighboring countries and some of which are very different.

2.1 Identifying external environmental variables

Table 1: Some important variables in the societal environment

2.1 Identifying external environmental variables

As shown in table 1, large corporations categorize the societal environment in any one geographic region into four areas and focus their scanning in each area on trends that have corporate wide relevance. Obviously, trends in any one area may be very important to the firms in any one industry but of lesser importance to firms in other industries.

Trends in the economic part of the societal environment can have an obvious impact on business activity. For example, an increase in interest rates means fewer sales of major home appliances. Why? A rising interest rate tends to be reflected in higher mortgage rates. Because higher mortgage rates increase the cost of buying a house, the demand for new and used houses tends to fall. Because most major home appliances are sold when people change houses, a reduction in house sales soon translates into a decline in sales of refrigerators, stoves, and dishwashers and reduced profits for everyone in appliance industry.

The economic development of China and India is having a major impact on the rest of the world. By 2012, China had become the third-largest industrial producer in the world after the United States and Japan.