Organization and Management Lesson 4: Environmental Scanning

Summary

This script delves into the crucial aspect of environmental analysis for businesses. It outlines the importance of understanding both the external and internal business environments, including factors like economic, social, political, and technological influences. It introduces environmental scanning as a vital process for monitoring these factors, and highlights the significance of SWOT analysis in identifying strengths, weaknesses, opportunities, and threats to formulate effective business strategies. The script urges future business managers to continuously analyze their organization's environment to detect trends, opportunities, and potential threats, ensuring strategic growth and minimizing risks.

Takeaways

• 🌐 The business environment is crucial for determining an organization's structure and success.
• 🔍 Environmental scanning involves seeking and sorting data about both external and internal environments to monitor developments and understand success factors.
• 🏢 External business environment includes general factors like economic, social, cultural, political, legal, demographic, technological, world, and ecological situations, and specific factors directly impacting company operations.
• 🛑 Economic factors affect consumer purchasing power and spending patterns, such as inflation rates and interest rates.
• 🌐 Social and cultural factors are linked to societal values, preferences, and behaviors shaped by cultural groups.
• 🏛 Political and legal factors refer to laws and regulations that can influence organizational management and may require adaptation to new markets.
• 👥 Demographic factors include population size, density, age, gender, and occupation, which can affect market dynamics and workforce availability.
• 💡 Technological advancements can revolutionize business management through the use of computers, robotics, and other electronic gadgets.
• 🌏 World and ecological factors relate to global competition, market conditions, and the state of the natural environment.
• 🤝 The specific business environment focuses on stakeholders, customers, suppliers, pressure groups, investors, owners, and employees.
• 🛠 Internal business environment includes resources, research and development, production, and procurement, which need to be analyzed for organizational planning.
• 💡 Conducting a SWOT analysis helps assess an organization's strengths, weaknesses, opportunities, and threats for strategic planning.
• 🔮 Business forecasting involves making predictions based on past and present data to inform decisions about expansion or downsizing.
• 📊 Benchmarking compares an organization's products, services, and practices with industry leaders to identify areas for improvement.

Q & A

What is the significance of environmental scanning for a business?

Environmental scanning is crucial for a business as it allows the organization to monitor external and internal environments, assess developments, and understand factors that can contribute to its success. It helps in making informed decisions and adapting strategies accordingly.

What are the two types of environments that a business must consider during environmental scanning?

A business must consider both the external and internal environments during environmental scanning. The external environment includes factors outside the business that impact its operations, while the internal environment consists of elements within the organization that can affect or be affected by business decisions.

How is the external business environment categorized?

The external business environment is categorized into two types: the general external business environment and the specific external business environment. The general environment includes factors that a business typically has no control over, while the specific environment includes factors that directly impact the operation of a company.

What factors are considered in the general external business environment?

The general external business environment includes economic, social, cultural, political, legal, demographic, technological, global, and ecological situations. These factors must be considered by managers in their planning, organizing, staffing, leading, and controlling activities.

Why is it important for a business to analyze its internal environment?

Analyzing the internal environment is important because it helps the organization assess its resources, research and development, production, procurement, and other internal factors. Understanding the strengths and weaknesses of these elements is essential for effective organizational planning.

What is the role of a SWOT analysis in business planning?

SWOT analysis is a technique used to assess the strengths, weaknesses, opportunities, and threats of a business. It helps organizations identify what they do well, areas for improvement, potential opportunities, and external threats, which are crucial for strategic planning and decision-making.

How can a business develop a competitive mindset during environmental scanning?

A business can develop a competitive mindset by understanding its present-day competitors, potential barriers to entering the industry, the existence of substitutes for its products or services, and the influence of powerful suppliers and customers. This mindset helps the business anticipate challenges and leverage opportunities.

What is business forecasting, and why is it important?

Business forecasting, also known as business prediction, is the process of making predictions about the future based on past and present data. It is important because it helps businesses make informed decisions regarding offshoring, branching out, expanding, or downsizing, although the accuracy of these predictions is not always guaranteed.

What are the potential threats that a business should anticipate during environmental scanning?

Potential threats include supply chain problems, shifts in market requirements, and shortages of recruits. Anticipating these threats is vital for a business to take proactive measures and avoid being negatively impacted, which could stall its growth.

What is the significance of benchmarking in business management?

Benchmarking is the process of measuring or comparing one's products, services, and practices with those of recognized industry leaders. It is significant because it helps businesses identify areas for improvement, enabling them to enhance their performance and competitiveness in the market.

Outlines

00:00

📊 Understanding the Business Environment

The business environment plays a crucial role in determining an organization's design or structure. This paragraph emphasizes the importance of regularly scanning the environment to identify factors that can contribute to the success of a business. Environmental scanning involves seeking and analyzing data about both external and internal environments. External factors, which the business cannot control, include economic, social, cultural, political, legal, demographic, technological, and ecological aspects. Internal factors are those within the organization that can influence decisions and activities. Understanding these environments is essential for effective organizational management and planning.

05:01

🔍 Environmental Scanning and Competitive Mindset

This section explains the internal and external environments of a business in more detail, stressing the need to analyze them before making strategic decisions. It outlines the steps involved in environmental scanning, which include developing a competitive mindset by understanding competitors, market barriers, substitutes, and supplier/customer power dynamics. Additionally, the importance of considering future business scenarios and making predictions based on past and present data is discussed. The paragraph concludes by introducing benchmarking, a tool used to compare a company's practices with industry leaders, and SWOT analysis, a technique to assess strengths, weaknesses, opportunities, and threats.

Keywords

💡Environmental Scanning

Environmental scanning is the process by which organizations monitor their external and internal environments to gather and analyze data. It is crucial for understanding the factors that can contribute to an organization's success. In the video, it is emphasized that businesses must regularly scan their environment to assess developments and understand these factors, which is central to the theme of strategic business planning.

💡External Business Environment

The external business environment consists of outside factors that impact the operation of a business and over which the business typically has no control. The script discusses how this environment includes economic, social, cultural, political, legal, demographic, technological, world, and ecological situations. It is a key concept in the video as it outlines the broad range of factors that can affect a business's strategy and operations.

💡Internal Business Environment

The internal business environment refers to the elements within an organization that can influence or be influenced by the organization's activities and decisions. The video script mentions that it includes resources, research and development, production, and procurement, which are essential for understanding the organization's capabilities and limitations in relation to its strategic planning.

💡General External Business Environment

This term from the script refers to the broad factors that affect all businesses in a general sense, such as economic conditions, social trends, and political regulations. It is distinguished from the specific external business environment and is part of the larger context in which businesses operate, as highlighted in the video's discussion on environmental scanning.

💡Specific External Business Environment

The specific external business environment includes factors that directly impact the operation of a particular company. In the script, it is mentioned in contrast to the general external environment and is important for businesses to consider when tailoring their strategies to their specific market conditions and industry dynamics.

💡Stakeholders

Stakeholders are defined in the script as parties likely to be affected by the activities of a company. They are a key part of the specific external business environment and understanding their interests and potential impact is vital for effective business strategy and decision-making.

💡SWOT Analysis

SWOT analysis is a strategic planning tool used to identify and analyze the Strengths, Weaknesses, Opportunities, and Threats related to business operations. The script explains that it helps organizations understand their current position and is essential for making informed decisions about future strategies.

💡Competitive Mindset

A competitive mindset, as discussed in the script, involves understanding current competitors, barriers to entry, substitutes, and dependencies in the market. It is a key concept in the video's theme of business strategy, emphasizing the importance of being aware of market dynamics for success.

💡Business Forecasting

Business forecasting, also known as prediction, is the process of making predictions about the future based on past and present data. The script mentions it as a tool for making decisions about expansion or downsizing, and while it's important, the video also notes that its accuracy can't always be guaranteed.

💡Benchmarking

Benchmarking is defined in the script as the process of comparing one's own products, services, and practices with industry leaders to identify areas for improvement. It is a concept that relates to the video's theme of continuous improvement and strategic positioning within the market.

💡Opportunities and Threats

In the context of SWOT analysis mentioned in the script, opportunities refer to potential positive developments that an organization can exploit, while threats are factors that can negatively impact the business. These concepts are integral to the video's discussion on strategic planning and the importance of anticipating and responding to changes in the business environment.

Highlights

The environment in which a business operates is a major consideration in determining an organization's design or structure.

Environmental scanning is defined as seeking for and sorting through data about the environment to monitor external and internal factors.

External business environment is composed of outside factors that impact the operation of a business, while internal business environment includes elements within the organization.

General external business environment consists of factors a business typically has no control over, such as economic, social, cultural, political, legal, and technological situations.

Specific external business environment consists of factors that directly impact the operation of a company, such as stakeholders, customers, suppliers, and investors.

The internal business environment includes resources, research and development, production, procurement, and services, which require analysis for strengths and weaknesses.

Developing a competitive mindset involves understanding competitors, barriers to entry, substitutes, and dependencies on powerful suppliers and customers.

Business forecasting, or prediction, involves making future predictions based on past and present data to guide decisions like offshoring, expansion, or downsizing.

Benchmarking is the process of comparing one's products, services, and practices with industry leaders to identify areas for improvement.

SWOT analysis is a tool used to assess strengths, weaknesses, opportunities, and threats, helping organizations to strategize effectively.

Strengths are aspects where an organization excels, setting it apart from competitors, while weaknesses focus on areas for improvement.

Opportunities are external chances for positive outcomes, requiring awareness of future developments in the market or technology.

Threats are external factors that could negatively impact a business, such as supply chain issues or market changes.

SWOT analysis helps organizations maximize strengths and opportunities while mitigating weaknesses and threats.

Continuous analysis of internal and external environments is crucial for future business managers to detect opportunities, threats, and trends that impact strategy.

Transcripts

[Music]

the environment which a business

operates is a major consideration in

determining an organization's design or

structure

in today's discussion we will learn how

to effectively analyze the environment

where we want to establish our own dream

business

in order for the organization to be

successful

it is important that it scans its

environment regularly to assess its

developments and understand factors that

can contribute to its success

environmental scanning is defined as

seeking for and sorting through data

about the environment it is a process

used by organizations to monitor their

external and internal environments

in doing environmental scanning we must

consider the two environments that every

business have these environments are

external business environment and

internal business environment external

business environment is composed of all

the outside factors or influences that

impact the operation of business while

internal business environment is

composed of various elements present

inside the organization that can affect

or can be affected with the choices

activities or decisions of the

organization

the external environment can be broken

down into two types the general external

business environment and the specific

external business environment

general external business environment

consists of general factors that a

business typically has no control over

on the other hand specific external

business environment consists of the

factors that directly impact the

operation of a company

the general external business

environment includes the economic social

cultural political legal demographic

technological world and ecological

situations all of this must be

considered as managers plan organize

staff lead and control their respective

organizations the economic situations

relate to factors that affect consumer

purchasing power and spending patterns

some examples of these are inflation

rates of interest changing options in

stock markets and changing people's

spending habits for instance a company

should never start exporting to a

country before having examined how much

people will be able to spend

social cultural situations linked to

factors that affect society's basic

values preferences and behavior the

basis for these factors is formed by the

fact that people are part of a society

and cultural group that shape their

beliefs and values for example filipino

customers are now conscious about the

importance of avoiding fatty foods so

many food companies now make sure that

the products they offer are cholesterol

free and are low in cholesterol

political legal situations refer to

national or local laws international

laws and rules and regulations that

influence organizational management for

example laws covering issues such as

environmental protection product safety

regulations competition pricing and etc

might require the firm to adapt certain

aspects and strategies to the new market

demographic situations relate to people

this includes size density age gender

occupation and other statistics for

example india has one of the youngest

populations on earth and is expected to

keep that status by 2020 the median age

in india will be 28 years in contrast

the countries of the european union and

the usa have to face an aging population

already today

this may lead to harmful reductions in

dynamism and challenges regarding the

supply of young workers who at the same

time have to support a growing

population of elderly people

technological situations of companies

involve the use of varied types of

electronic gadgets and advanced

technology such as computers robotics

microprocessors and others that have

revolutionized business management

world and ecological situations are

related to the increasing number of

global competitors and markets as well

as the nature and conditions of the

changing natural environment

meanwhile the specific business

environment focuses on stakeholders

customers suppliers pressure groups

investors or owners and their employees

stakeholders are parties likely to be

affected by the activities of the

company while customers are those who

patronize and buy the products and

services of an organization suppliers

are the ones who provide inputs to the

business like raw material equipment and

so on pressure groups are special

interest groups that try to exert

influence on the organization's

decisions or actions

investors or owners are the one who

provide capital for the continuous

operation of the business and lastly

employees are comprised of those people

who work for another or for an employer

in exchange for salaries or other

considerations

on the other hand internal business

environment of a company includes

resources research and development

production procurement of supplies and

products and services internal analyzes

the strengths and weaknesses of these

factors and must be considered prior to

organizational planning

after knowing the different internal and

external business environment we can now

conduct the environmental scanning which

starts in developing a competitive

mindset

we can cultivate a competitive mindset

by knowing our present-day competitors

the possible number of barriers entering

to your chosen business industry the

existence or non-existence of

substitutes to your planned product or

service and possible dependence on

powerful suppliers and customers

the second thing we need to do when we

scan our business environment is to

consider future business scenario we

must think through the worst case and

best case scenario of our business so we

will have an idea of what to do in the

future

meanwhile business prediction which is

also known as business forecasting is

the process of making predictions of the

future based on the past and present

data and most commonly by analysis of

trends it could be used in making

business decisions regarding offshoring

branching out expanding or downsizing

the company however we cannot always be

sure of the accuracy of these business

predictions

lastly benchmarking is defined as the

process of measuring or comparing one's

own products services and practices with

those of the recognized industry leaders

in order to identify areas for

improvement

one of the tools that we can use to

assess the organization's current

position before deciding on any new

strategy is the swot analysis swot

stands for strengths weaknesses

opportunities and threats and so a swot

analysis is a technique for assessing

these four aspects of your business

strengths refer to the things that your

organization does particularly well or

in a way that distinguishes you from

your competitors think about the

advantages your organization has over

other organizations

weaknesses like strengths are inherent

features of your organization so focus

on your people resources systems and

procedures think about what you could

improve and the sorts of practices that

you should avoid

opportunities are openings or chances

for something positive to happen but

you'll need to claim them for yourself

they usually arise from situations

outside your organization and require an

eye to what might actually happen in the

future they might arise as developments

in the market you serve or in the

technology you use being able to spot

and exploit opportunities can make a

huge difference your organization's

ability to compete and take the lead in

your market

threats include anything that can

negatively affect your business from the

outside such as supply chain problems

shifts in market requirements or

shortage of recruits it's vital to

anticipate threats and to take action

against them before you become a victim

of them and your growth stalls

you can use swot analysis to make the

most of what you've got to your

organization's best advantage and you

can reduce the chances of failure by

understanding what you're lacking and

eliminating hazards that would otherwise

catch you unawares

as future business managers we need to

have a constant and careful analysis of

the internal and external environment of

our organization in order to detect

opportunities threats trends important

lessons and weaknesses which can impact

the current and future strategies of our

organization identification of these

variables can either be used to build

strategies either to expand the business

or to minimize their impacts on the

growth of the business