Organization and Management Lesson 4: Environmental Scanning
Summary
TLDRThis 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
📊 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.
🔍 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.
Mindmap
Keywords
💡Environmental Scanning
💡External Business Environment
💡Internal Business Environment
💡General External Business Environment
💡Specific External Business Environment
💡Stakeholders
💡SWOT Analysis
💡Competitive Mindset
💡Business Forecasting
💡Benchmarking
💡Opportunities and Threats
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
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