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Business Enviroment - Essay Example

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Businesses today operate in very complex environments. For firms to succeed in these complex environments, they need to understand the differences forces that operate within their environment so as to devise strategies to deal with these forces in a manner that will enable them to remain profitable…
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Business Enviroment
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Business Enviroment

Environmental scanning drives an organization's strategic planning process-the quality of the planning depends on the quality of the scan.
The scanning manager faces a lot of challenges because the external environment is changing rapidly in complex ways; there are numerous sources of information and this information is often ambiguous. (Auster and Choo, 1994). The organisation has to use this information to make consequential decisions or long-term commitments by the organisation.
Scanning involves several modes of information seeking. Aguilar (1967) usefully differentiates between searching for information about a specific question, and viewing information or being exposed to information without a specific information need in mind. According to Auster and Choo (1994). Scanning could range from a casual conversation at the lunch table or a chance observation of an angry customer dumping a product, to an extensive market research programme to identify business opportunities. At a conceptual level then, environmental scanning may be seen as an extended case of information seeking, in that scanning not only includes searching for particular information, but also simply being exposed to information that could impact the firm. (Auster and Choo, 1994).
Duncan (1972) defines the environment as "the totality of physical and social factors that are taken directly into consideration in the decision-making behavior of individuals in the organization" (p. 314). Draft et al. (1988) suggest that a firm's external environment can be divided into six environmental sectors including:
1. Customer sector refers to those companies or individuals that purchase the products made by the respondent's firm, and includes companies that acquire the products for resale, as well as final customers.
2. Competition sector includes the companies, products, and competitive tactics: companies that make substitute products; products that compete with the respondent firm's products; and competitive actions between the respondent's firm and other companies in the same industry.
3. Technological sector includes the development of new production techniques and methods, innovation in materials and products, and general trends in research and science relevant to the respondent's firm.
4. Regulatory sector includes federal and provincial legislation and regulations, city or community policies, and political developments at all levels of government.
5. Economic sector includes economic factors such as stock markets, rate of inflation, foreign trade balance, federal and provincial budgets, interest rates, unemployment,and economic growth rate.
6. Socio-cultural sector comprises social values in the general population, the work ethic, and demographic trends such as an increasing number of women in the work force (Daft et al., 1988, pp. 137-38).
By understanding the above environmental sector a company can better understand how to deal with the requirements of each sector. There is a general model proposed by Mintzberg (1973) which deals with managerial use of information acquired from the external environment. According to this framework, a manager's interpersonal roles provide access and exposure to ... Read More
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