Mahendra: Institute of Management and Technical Studies

MAHENDRA
INSTITUTE OF MANAGEMENT AND TECHNICAL STUDIES

(Approved by AICTE, Ministry of HRD, Govt. of India, New Delhi) At- Pitapalli, PO- Kumarbasta, Dist- Khordha, Odisha
Environmental Scanning & Monitoring Techniques Environmental scanning is a concept from business management by which businesses gather information from the environment, to better achieve a sustainable competitive advantage. To sustain competitive advantage the company must also respond to the information gathered from environmental scanning by altering its strategies and plans when the need arises. Environmental Scanning & Monitoring- Techniques SWOT (Strength-Weakness-Opportunity-Threat) Identification of threats and Opportunities in the environment (External) and strengths and Weaknesses of the firm (Internal) is the cornerstone of business policy formulation; it is these factors which determine the course of action to ensure the survival and growth of the firm.
The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT stemmed from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure. The Research Team were Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie. SWOT: Studying Internal & External Environment The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories: Internal factors The strengths and weaknesses internal to the organization. External factors The opportunities and threats presented by the external environment. Examples of SWOTs Strengths and Weaknesses Resources: financial, intellectual, location Cost advantages from proprietary know-how Creativity / ability to develop new products Valuable intangible assets: intellectual capital Competitive capabilities Big campus selection Opportunities and Threats Takeovers Market Trends Economic condition Mergers Joint ventures Strategic alliances
Expectations of stakeholders Technology Public expectations Competitors and competitive actions Poor Public Relations Development Criticism (Editorial) Global Markets Environmental conditions Uses of SWOT Analysis 1. Corporate planning 2. Set objectives defining what the organisation is intending to do 3. Environmental scanning Internal appraisals of the organisations SWOT, this needs to include an assessment of the present situation as well as a portfolio of products/services and an analysis of the product/service life cycle 4. Analysis of existing strategies, this should determine relevance from the results of an internal/external appraisal. This may include gap analysis (compare its actual performance with its potential performance which will look at environmental factors) 5. Strategic Issues defined key factors in the development of a corporate plan which needs to be addressed by the organisation 6. Develop new/revised strategies revised analysis of strategic issues may mean the objectives need to change Industry Analysis An industry is a group of firms producing a similar product or service An examination of the important stakeholders group in a particular corporations task environment is a part of industry analysis Porters approach to Industry Analysis A corporation is most concerned with the intensity of competition within its industry
The level of this intensity is determined by basic competitive forces In scanning its industry, the corporation must assess the importance to its success of each of the six forces Forces Driving Industry Competition Refer to the diagram attached at the end Threat of New Entrants: Some Barriers to Entry Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Size Government Policy Expected Retaliation Properties of Entry Barriers Entry barriers can and do change as the conditions change Entry barriers can change for reasons inside the firm : impact of the firms strategic decisions Some firms may possess resources or skills which allow them to overcome entry barriers into an industry more cheaply than most other firms Entry Barriers and Exit Barriers When entry barriers are high and exit barriers are low, entry will be deterred, and unsuccessful competitors will leave the industry When both entry and exit barriers are high, profit potential is high, but is usually accompanied by more risks, and unsuccessful firms will fight to stay The worst case is when entry barriers are low and exit barriers are high (overcapacity, poor profitability)
Bargaining Power of Buyers Buyers compete by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other A buyers group is powerful if: 1. It purchases large volumes relative to seller sales 2. The products it purchases from the industry represent a significant fraction of the buyers cost of purchase (shop for good price) 3. The products it purchases from the industry are standard or undifferentiated 4. It faces few switching costs 5. It earns low profits (thus sensitive to costs) 6. Buyers pose a credible threat of backward integration 7. The industrys product is unimportant to the quality of the buyers products or services 8. The buyer has full information Bargaining Power of Suppliers Suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services A supplier group is powerful if: 1. It is dominated by a few companies 2. It is not obliged to contend with other substitute products for sale to the industry 3. The industry is not an important customer 4. The suppliers product is an important input to the buyers business 5. The suppliers group products are differentiated or it has built up switching costs 6. The supplier group poses a credible threat of forward integration 7. Labour must be considered as a supplier that exerts great power in many industries

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MAHENDRA

INSTITUTE OF MANAGEMENT AND TECHNICAL STUDIES

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