Environmental scanning - Marketing Management

Discussion has concentrated on reviewing the significance of environmental factors as well as a format for classifying different levels and factors associated with each level. These may impact on different industries in different ways and to a different extent. Environmental trends or changes may affect an organization and its strategic marketing planning in different ways from other organizations. Trends and changes in the environment give rise to marketing opportunities and threats. These observations suggest the requirement for an effective environmental scanning system: effective, in the sense of improving the process of strategic marketing planning. These requirements are:

  1. an ability to identify environmental forces and factors at any point in time that are of significance to the organization, i.e. which environmental forces are likely to pose the most significant opportunities and threats to the company;
  2. an ability both to monitor and forecast future trends and changes in these factors;
  3. the ability to interpret the significance of these environmental trends and changes i.e. their implications for future marketing strategies;
  4. the ability to develop and implement marketing strategies to respond to environmental trends and changes.

The last of these requirements is not only a requirement of an effective environmental scanning system, but also part of a broader set of issues involving the ability of the organization to cope with environmental change, encompassing organizational resources, flexibility and the quality of management. This final element is included because it illustrates the point that the sole purpose of a system of environmental scanning is that is should improve strategic marketing plans in the sense of improving the opportunity for organizational success. We now focus on requirements for an effective environmental scanning system.

Organizational practice and environmental scanning

One of the earliest studies on environmental scanning in organizations was that conducted by Francis Aguilar2 and published in 1967. Based on a sample of selected chemical companies in Europe and America, Aguilar identified four basic patterns for scanning information about the environment:

  1. undirected viewing representing the most unsystematic approach to environmental scanning, composed of ‘exposure without a specific purpose’;
  2. conditioned viewing adopted by companies who are aware of some key factors and trends in their environment, but do not undertake active search;
  3. informed search where companies actively collect information on their environment for specific planning and decision-making processes, but do so in an informal and ad hoc manner;
  4. formal search representing the most highly developed environmental scanning practices. Aguilar found that some companies had a structured process for the collection of specific information for a specific purpose.

Aguilar’s study showed there was a lack of a systematic approach to environmental scanning in the companies he studied, with few conducting formal searches.

Over time, more and more companies have come to develop formal scanning systems. By the mid-1980s, a study by Jain3 suggested that although still evolving, more and more companies were beginning to develop formalized environmental scanning procedures. Jain identified four distinct phases in this evolution, namely:

Phase 1: Primitive where information is noted with no purpose and effort to scanning and little discrimination used to distinguish between strategic and non-strategic information;

Phase 2: Ad hoc where there is no formally planned scanning, but increased sensitivity to information on certain issues or events which may be explored further;

Phase 3: Reactive where scanning is still unstructured and random, but often specific information is collected with a view to making appropriate responses to markets and competition;

Phase 4: Proactive where scanning is structured and deliberate using pre-established methodologies with a view to predicting the environment for a desired future.

Perhaps the overriding reason for the slow development of formal environmental scanning and appraisal systems is that it is difficult to achieve. However, modern companies have developed skills in this area. In addition, although it was once a neglected area in the planning literature, Johnson illustrate how environmental appraisal is now the subject of more research as its importance to strategic planning has become appreciated. The development of more ‘proactive’ appraisal systems requires the establishment of systematic procedures designed specifically to input into strategic marketing decisions. We now consider one such system.

A framework for appraisal

A number of frameworks for environmental appraisal have been developed. In our view, one of the most useful of these is that proposed by Jain5.

The six key steps are as follows:

  1. Seek to maintain an awareness of broad trends in each of the key environmental factors outlined earlier. At this stage, scanning need not be detailed so long as trends are monitored.
  2. Environment appraisal and strategic planning

    Environment appraisal and strategic planning

  3. Delineate those trends which are deemed most relevant – i.e. to have potential significance to the company – for further more detailed investigation.
  4. Undertake an in-depth analysis on the possible impact of these selected trends on the company’s current product or markets. In particular, this analysis should delineate the extent to which the trend is an opportunity or a threat and the potential magnitude of its impact. In addition, an analysis should be made of the extent to which the trends isolated open up new opportunities.
  5. Forecast the future direction of the trends isolated.
  6. Further analyse possible effects of the forecasted trends on future product or market momentum: (a) on the assumption of no action, (b) on the assumption that trends are responded to.
  7. The final step is to assess the implication of the preceding analysis for overall strategic decision making.

This framework for environmental appraisal represents a structured and logical approach to this procedure. Moreover, it fulfils many of the requirements outlined earlier for an effective appraisal system. However, there are still practical problems in this appraisal process which we need to consider further.

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