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Unit 1 Introduction To Business Environment
Unit 1 Introduction To Business Environment
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Environmental Scanning
Environmental scanning is X-ray of the environment. It is defined as the process of
understanding the dynamism and trends of environment. In other words, it is the
process that seeks information about events and relationships in a firm’s
environment, the knowledge of which help top management chart the firm’s future.
Furthermore‚ Environmental scanning is a process that systematically surveys and
interprets relevant data to identify external opportunities and threats. An
organization gathers information about the external world, its competitors and
itself. The company should then respond to the information gathered by changing
its strategies and plans when the need arises.
Environmental scanning entails partitioning the external environment into sectors,
namely, cultural, economic, political, technological, and so on. This helps establish
a firm’s information needs within those sectors. Data are usually collected by
monitoring and forecasting changes in important variables identified in each sector.
That data are then transformed into consolidated information, which is integrated
into the firm’s strategic planning process (Georgantzas and Acar 1995).
Environmental scanning is used to gather information from the environment. This
information is used to craft a strategic plan that will help an organization achieve
and maintain a competitive advantage. In order to be successful, the organization
must align its strategies and plans with the information gathered from the
environmental scanning.
Types of environmental Scanning:
i. Concentric scanning: If only one factor of the environment is being analyzed
to identify its cause and effect along with its cost and benefit, then it is called
concentric scanning. For example: examining only economic environment to
know the possible future profit prospects.
ii. Comprehensive scanning: If all the factors of the environment are being
analyzed to identify their cause and effect along with their cost and benefit,
then it is called comprehensive scanning.
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Environmental Analysis
It is a process of identifying the relevant factors that have direct or indirect impact
on effective and efficient functioning of business.
In other words, Environmental analysis is a strategic tool. It is a process to identify
all the external and internal elements, which can affect the organization’s
performance. The analysis entails assessing the level of threat or opportunity the
factors might present. These evaluations are later translated into the decision-
making process. The analysis helps align strategies with the firm’s environment.
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Environment-Business Relations: