Monday, May 5, 2014

The Benefits of Environmental Scanning for Business Decision Making

All executives must make decisions from time to time and these are based on the ability to understand the environment in which a company exists. Strategy should naturally follow an environmental scan. Only once a company understands the market, their resources, and their competitors should they formulate a strategy. A proper scan can encourage futures thinking, systems practice, scenario narratives and risk assessment that help companies meet their environmental challenges (Clemens, 2009). 

An environmental scan affords organizations an opportunity to examine their internal and external environment to make better decisions. The scan generally requires the investigation of the internal environment, task environment, and the societal/global environment (Vesper, 1996). Using the three frameworks it is possible to put decisions through a larger decision making filter. They are as follows:

Internal Environment: The internal abilities of the organization to meet new demands. It the ability of management to come to new conclusions, put their abilities to use and focus their resources on mastering challenges. This arena includes human capital, financial resources, and much more.

Task Environment: The tasks and goals that need to be achieved in the local competitive environment. Organizations will need to ensure that they can achieve the purpose and marketing. This environment contains direct competitors to the business.

Societal/Global Environment: The larger environment in which the organization competes. Each industry is pressured by larger global and societal trends that impact its ability to succeed. This may be governmental, sociological, and global pricing. 

Executives that work within difficult environments often scan their environment than those who don’t. For example, hotel executives scan their environment to a greater extent when they experience change, a dynamic environment, and complexity in the task allocation (Jorgaratnam & Wong, 2009). They do this to ensure that they understand the environment and make appropriate strategic changes to best that market. 

Certain types of personalities are more likely scan more than others. For example, a study of 201 hotel executives found that entrepreneurial personalities scanned their environment more than those who are not (Jogaratnam, 2005). They scanned their environment to determine their next moves in order to ensure that their decisions exist within a larger context. 

The environmental scan is not a loose cannon approach. It is a system that affords one the opportunity to judge decisions by various frameworks. This includes the ability to judge organizational resources, with the competitive environment and the global environment to ensure the company is ready to meet these challenges. Without this scan there is a higher likelihood that decisions will be made short-sighted, poorly designed, or short-lived thereby pushing a company down the wrong developmental path.

Clemens, r. (2009). Environmental scanning and scenario planning: a 12-month perspective on applying the viable systems model to developing public sector foresight. Systematic Practice & Action Research, 22 (4).

Jogaratnam, G. (2005). Management style and environmental scanning in the search for business opportunities and challenges. International Journal of Hospitality & Tourism Administration, 6 (1).

Jogaratnam, G. & Wong, K. (2009). Environmental uncertainty and scanning behavior: an assessment of top-level hotel executives. International Journal of Hospitality & Tourism Administration, 10 (1).

Murphy, P. (2008). The Business of Resort Management. Elsevier, San Diego

Vesper, K. (1996). New Venture Experience. Seattle: Vector Books

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