Situation Analysis – Environmental Scanning & the Organization-Looking Inside the Strategic Window

Posted by 21 September, 2008 Comments Off on Situation Analysis – Environmental Scanning & the Organization-Looking Inside the Strategic Window

In the next step of strategic planning-the situation analysis-planners traditionally analyze information about the firm’s environment, especially its customers and com­petitors. This environmental scanning involves looking at the present state of the en­vironment and forecasting trends in its various aspects. Planners also look inward and analyze their organization’s strengths and weaknesses. They assess not only tangible, observable resources, but also intangible resources, such as the skills of personnel and the company’s image. The focus then shifts to matching the opportunities that exist in the environment with the firm’s particular strengths. The outcome of this analysis is an understanding of how to take advantage of the opportunities by using the dis­tinctive competencies of the organization. It may also require some revision of previ­ously set goals. This crucial step in the strategic market planning process may utilize analytical tools such as the Boston Consulting Group’s growth-share matrix, which will be discussed shortly. It also draws on an organization’s ongoing efforts to monitor its business environment.

Environmental Scanning

A navigator would not plot a course without first establishing the ship’s position and examining a chart with care. Nor should a manager develop strategy without examin­ing the environment. As a practical matter, it is essential to simultaneously monitor the business environment and develop and refine strategy on an ongoing basis.
But what do we mean by the business environment? In the world of strategic planning, this term encompasses any and all important events-and even undercurrents that might lead to future events-in a wide range of areas. Classically, an environmen­tal scan looks for both opportunities and threats, and does so in the following areas:
The social/cultural environment, including the beliefs, values, and norms of be­havior that are learned and shared by people in the business’s environment.

The competitive environment, including changes and objectives at established competitors, plus any and all new competitive threats from entrepreneurs, for­eign companies expanding into the market, and so forth.

The technological environment, including any and all new technologies that might impact the products and/or processes of the industry or related industries.

The economic environment, including any trends that might affect the company directly, plus all that affect consumers and their spending patters.

The political/legal environment, including any legislation that might alter the rules of the game in the firm’s industry and markets. (Anyone in health care right now is used to worrying about this factor!)

The natural environment, including the natural resources the business and its customers depend on, any surprises the weather may dish up, and issues con­cerning the firm’s environmental impact and how to minimize it.
As the breadth of this list makes clear, any full-blown situational analysis must cover a broad range of issues. It is a demanding research project. And yet, even when done carefully and thoroughly, such scanning may fail to reveal the most important threats and opportunities in today’s highly turbulent business environments. The most exciting and important new directions are often difficult to tease out of the mass of data and piles of reports. Managers and marketers must learn to listen for weak signals as well as strong ones. And, increasingly, the eyes, ears, and instincts of the entire organization are required to find and amplify these weak signals in time for appropriate action. That is why Henry Mintzberg refers to modern strategies as “emergent.” They may spring up, like weeds, from unexpected sources anywhere in the organization, or even beyond its doors in the network of suppliers and distribu­tors surrounding it. Scanning can no longer be left to a centralized planning staff-it is so important that everyone needs to be involved.

The Organization-Looking Inside the Strategic Window

Once the external environment has been analyzed, planners traditionally examine the firm’s resources, both tangible and, often more important, intangible. Planners should thoroughly review the tangibles-the firm’s financial resources, production and distri­bution systems, and the like. They also should analyze intangible resources, such as the company’s image and culture, the creative and administrative talent of its personnel, employee attitudes toward the company, and the company’s vulnerability to competi­tion. These intangibles, though difficult to assess, can make the difference between success and failure.
Does Starbucks have the core competencies and financial deep pockets needed to go head to head with leading consumer brand marketers in a battle for grocery store market share? We don’t know for sure, but if we had to make the decision, we would start with a brutally honest examination of the organization itself.

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