Importance Of Environmental Scanning

Last Updated on Tue, 19 Dec 2023 | Marketing Planning

Without taking into account relevant environmental influences, a company cannot expect to develop its strategy. It was the environmental influences emerging out of the energy crisis that were responsible for the popularity of smaller, more fuel-efficient automobiles and that brought about the demise of less efficient rotary engines. It was the environmental influence of a coffee bean shortage and geometric price increases that spawned the "coffee-saver" modification in Mr. Coffee automatic drip coffee makers. Shopper and merchant complaints from an earlier era contributed to the virtual elimination of deposit bottles; recent pressures from environmental groups, however, have forced their return and have prompted companies to develop low-cost, recyclable plastic bottles.

Another environmental trend, Americans' insatiable appetite for eating out (in 1990, restaurant sales accounted for $0.44 of every $1 spent on food; this number is expected to reach $0.63 by the year 2000), worries food companies such as Kraft. In response, Kraft is trying to make cooking as convenient as eating out (e.g., by providing high-quality convenience foods) to win back food dollars.1

The sad tales of companies that seemingly did everything right and yet lost competitive leadership as a result of technological change abound. Du Pont was beaten by Celanese when bias-ply tire cords changed from nylon to polyester. B.F. Goodrich was beaten by Michelin when the radial overtook the bias-ply tire. NCR wrote off $139 million in electro-mechanical inventory and the equipment to make it when solid-state point-of-sale terminals entered the market. Xerox let Canon create the small-copier market. Bucyrus-Erie allowed Caterpillar and Deere to take over the mechanical excavator market. These companies lost even though they were low-cost producers. They lost even though they were close to their customers. They lost even though they were market leaders. They lost because they failed to make an effective transition from old to new technology.

In brief, business derives its existence from the environment. Thus, it should monitor its environment constructively. Business should scan the environment and incorporate the impact of environmental trends on the organization by continually reviewing the corporate strategy.

The underlying importance of environmental scanning is captured in Darwinian laws: (a) the environment is ever-changing, (b) organisms have the ability to adapt to a changing environment, and (c) organisms that do not adapt do not survive. We are indeed living in a rapidly changing world. Many things that we take for granted today were not even imagined in the 1960s. As we enter the next century, many more "wonders" will come to exist.

To survive and prosper in the midst of a changing environment, companies must stay at the forefront of changes affecting their industries. First, it must be recognized that all products and processes have performance limits and that the closer one comes to these limits the more expensive it becomes to squeeze out the next generation of performance improvements. Second, one must take all competition seriously. Normally, competitor analyses seem to implicitly assume that the most serious competitors are the ones with the largest resources. But in the context of taking advantage of environmental shifts, this assumption is frequently not adequate. Texas Instruments was a $5- to $10-million company in 1955 when it took on the mighty vacuum tube manufacturers—RCA, GE, Sylvania, and Westinghouse—and beat them with its semiconductor technology. Boeing was nearly bankrupt when it successfully introduced the commercial jet plane, vanquishing larger and more financially secure Lockheed, McDonnell, and Douglas corporations.

Third, if the environmental change promises potential advantage, one must attack to win and attack even to play the game. Attack means gaining access to new technology, training people in its use, investing in capacity to use it, devising strategies to protect the position, and holding off on investments in mature lines. For example, IBM capitalized on the emerging personal computer market created by its competitor, Apple Computer. By becoming the low-cost producer, distributor, seller, and servicer of personal computers for business use, IBM took command of the marketplace in less than two years.

Fourth, the attack must begin early. The substitution of one product or process for another proceeds slowly and then predictably explodes. One cannot wait for the explosion to occur to react. There is simply not enough time. B.F. Goodrich lost 25 percentage points of market share to Michelin in four years. Texas Instruments passed RCA in sales of active electronic devices in five to six years.

Fifth, a close tie is needed between the CEO and the operating managers. Facing change means incorporating the environmental shifts in all aspects of the company's strategy.

Continue reading here: Intuitive Reasoning In Environmental Scanning

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Readers' Questions

  • bilbo
    Why is it important for businesses to scan demographic data?
    1 month ago
    • There are several reasons why it is important for businesses to scan demographic data:
    1. Targeting the right audience: Demographic data provides comprehensive information about a population's age, gender, race, income level, education level, occupation, and more. By scanning this data, businesses can identify their core target audience and tailor their marketing efforts accordingly. This ensures that their products or services reach the right people, maximizing the effectiveness of their marketing campaigns.
    2. Understanding customer preferences: Demographic data provides insights into consumer preferences and behavior patterns based on their demographic characteristics. This information helps businesses understand what their customers want, their buying habits, and their preferences. By analyzing demographic data, businesses can identify trends and adjust their strategies to meet customer demands more effectively.
    3. Market segmentation: Demographic data allows businesses to segment the market into distinct groups based on specific demographic traits. For example, they can target their products or services to a specific age group, income level, or geographic location. By understanding the unique needs and interests of different demographic segments, businesses can create personalized marketing strategies and offerings, which can lead to increased sales and customer satisfaction.
    4. Identifying new market opportunities: Scanning demographic data can reveal potential market gaps or emerging trends that businesses can capitalize on. For example, if there is a growing population of young professionals in a specific area, businesses might want to create products or services that cater to their needs. By identifying and targeting these untapped markets, businesses can gain a competitive advantage and expand their customer base.
    5. Making informed business decisions: Demographic data provides businesses with a solid foundation for making informed decisions about product development, pricing, distribution, and marketing strategies. By understanding the characteristics and preferences of their target audience, businesses can make better decisions that align with customer needs and expectations, leading to improved business outcomes.
      6. Overall, scanning demographic data helps businesses understand their customers and market better, enabling them to develop effective marketing strategies, tailor their products or services, and make informed business decisions.
    • Caradoc
      Why is it important for businesses to conduct environmental scans on a regular basis?
      3 months ago
      • It is important for businesses to conduct environmental scans on a regular basis for several reasons:
      1. Anticipate and adapt to changes: Environmental scanning helps businesses stay informed about external factors that may impact their operations. By identifying and analyzing changes in the business environment, such as technological advancements, regulatory changes, or shifts in consumer preferences, businesses can anticipate potential threats and opportunities. This allows them to proactively adapt their strategies and operations to remain competitive.
      2. Identify market opportunities: Environmental scanning helps businesses identify new market opportunities. By monitoring trends and developments in the industry and broader market, businesses can identify gaps in the market or emerging customer needs. This can guide the development of new products or services that cater to these opportunities, helping the business to grow and expand.
      3. Mitigate risks: Conducting environmental scans helps businesses identify and understand potential risks that may impact their operations. For example, changes in government policies or regulations, economic downturns, or technological disruptions can pose significant risks to a business. By scanning the environment, businesses can develop strategies to mitigate these risks, such as diversifying their product offerings or expanding into new markets.
      4. Stay ahead of competitors: Environmental scans enable businesses to monitor their competitors' activities, strategies, and market positioning. By analyzing their competitors' strengths and weaknesses, businesses can make informed decisions about their own competitive advantages and how to differentiate themselves in the market. This helps businesses stay ahead of the competition and maintain or gain market share.
      5. Enhance strategic planning: Environmental scanning provides valuable information for strategic planning. By understanding the external environment, businesses can align their goals, objectives, and strategies with the market realities. It ensures that businesses are not operating in isolation but are responsive to the changes happening in their industry and market.
        6. Overall, regular environmental scanning helps businesses remain agile, responsive, and competitive in a dynamic and ever-changing business environment. With a constant pulse on the external factors impacting their operations, businesses can make informed decisions and navigate successfully through uncertainties and opportunities.
      • sampsa
        Why is it important for businesses to include technology in environmental scanning?
        3 months ago
        • It is important for businesses to include technology in environmental scanning due to the following reasons:
        1. Access to real-time information: Advancements in technology have made it easier for businesses to access real-time data and information about market trends, customer behavior, and industry developments. By including technology in environmental scanning, businesses can gather and analyze relevant data quickly, helping them make informed decisions and respond promptly to changes in the market.
        2. Competitive advantage: Technology provides businesses with a competitive edge by enabling them to stay ahead of their competitors. By monitoring technological advancements within their industry, businesses can identify potential disruptions or opportunities and adapt their strategies accordingly. This proactive approach allows them to maintain a competitive advantage and stay ahead in the market.
        3. Identifying new market opportunities: Technology plays a crucial role in identifying new market opportunities. By scanning the environment technologically, businesses can uncover untapped markets, emerging technologies, and changing consumer preferences. This insight can help them develop new products or services, establish strategic partnerships, and enter new markets, thereby expanding their customer base and increasing revenue.
        4. Risk management: Environmental scanning with technology helps businesses identify potential risks and challenges that may impact their operations. By monitoring technological advancements, regulatory changes, or environmental factors, businesses can assess potential risks and develop contingency plans to mitigate their impact. This proactive approach allows them to navigate uncertainties and minimize potential threats.
        5. Improved decision-making: The inclusion of technology in environmental scanning enhances the decision-making process. By utilizing data analytics tools and artificial intelligence, businesses can analyze vast amounts of data and extract valuable insights. These insights, in turn, enable businesses to make data-driven decisions that are based on accurate information rather than assumptions or guesswork.
          6. Overall, integrating technology into environmental scanning allows businesses to stay competitive, identify opportunities, manage risks, and improve decision-making. By embracing technology, businesses can adapt to the ever-changing business landscape and position themselves for long-term success.
        • Ulla
          How does each business’s unique relationship with the environment affect environmental scanning?
          5 months ago
          • Each business's unique relationship with the environment affects environmental scanning in several ways:
          1. Industry-specific factors: Different industries have varying impacts on the environment. For example, manufacturing companies may focus on scanning for regulations related to pollution control, waste disposal, and energy consumption. Retail companies, on the other hand, may prioritize monitoring consumer preferences towards sustainable products and packaging. Therefore, each business's specific industry will govern the key environmental factors they need to scan.
          2. Location-based factors: The geographical location of a business can significantly influence its environmental scanning. Companies situated near coastal areas may need to monitor climate change and rising sea levels, whereas businesses in regions prone to natural disasters like hurricanes or earthquakes should focus on disaster preparedness and recovery plans. Hence, the unique location of a business determines which environmental factors are most critical to monitor.
          3. Business operations and practices: Each business has its own operational processes and practices that can impact the environment. For example, a transportation company may need to scan for potential new regulations related to emissions standards and fuel efficiency. Similarly, a tech company may prioritize environmental scanning for regulations surrounding the ethical disposal of electronic waste. Thus, the specific operations and practices of a business dictate the aspects of the environment they should focus on.
          4. Stakeholder expectations: Stakeholders, including customers, investors, employees, and the local community, can influence a business's approach to environmental scanning. Increasingly, stakeholders are demanding businesses to act responsibly towards the environment. Therefore, companies may need to scan for changing societal expectations and incorporate sustainable practices into their operations to maintain their reputation and meet stakeholder demands.
          5. Innovation and opportunities: Businesses that proactively monitor the environment can identify emerging trends and opportunities. For instance, companies scanning the environmental landscape may discover new technologies, materials, or renewable energy sources that can reduce their carbon footprint and improve efficiency. Thus, a business's unique relationship with the environment can uncover innovative solutions that lead to competitive advantages.
            6. Overall, each business's unique relationship with the environment shapes the specific aspects they need to scan, helping them identify risks, opportunities, and societal expectations related to the environment.
          • ethan gordon
            What is an environmental scan in marketing?
            6 months ago
            • An environmental scan in marketing refers to the process of monitoring and evaluating the internal and external factors that can impact a company's marketing strategies and activities. It involves gathering information and analyzing various elements of the business environment to identify potential opportunities, threats, and trends. Internal factors may include the company's strengths, weaknesses, resources, and capabilities. External factors typically encompass the macro-environment (such as economic, political, technological, and socio-cultural factors) and the micro-environment (such as customers, competitors, suppliers, and intermediaries). By conducting an environmental scan, marketers can gain insights into the market dynamics, competitive landscape, customer preferences, technological advancements, regulatory changes, and other factors that may influence their marketing decisions. This information helps organizations adapt and adjust their marketing plans, identify potential risks, and take advantage of emerging opportunities in the marketplace.
            • katrin
              Why is environmental scanning important for business success?
              7 months ago
              • Environmental scanning is important for business success for several reasons: 1) Identifying opportunities: Environmental scanning helps businesses to identify emerging market trends, technological advancements, and changes in consumer preferences. By keeping a pulse on the external environment, businesses can seize opportunities before their competitors do, leading to a competitive advantage and increased market share. 2) Managing risks: Environmental scanning allows businesses to identify potential threats and risks in the external environment. For example, changes in government regulations, economic downturns, or increased competition can impact a business's operations and profitability. By being aware of these risks, businesses can proactively develop strategies to mitigate them and minimize their negative impact. 3) Innovation and adaptation: Environmental scanning helps businesses stay ahead of the curve and foster innovation. By monitoring industry trends, technological developments, and changes in consumer behavior, businesses can identify new ideas, products, or services to meet evolving customer needs. This adaptability and innovation are critical for long-term business success in a dynamic and competitive marketplace. 4) Anticipating customer demands: Environmental scanning allows businesses to understand customer preferences, expectations, and concerns. By knowing what customers want and need, businesses can tailor their offerings, improve customer experience, and build strong customer relationships. This customer-centric approach is essential for attracting and retaining customers, leading to increased customer loyalty and profitability. 5) Long-term strategic planning: Environmental scanning provides businesses with valuable insights into the external environment, which can inform their long-term strategic planning. By understanding the external factors that may impact their operations, businesses can develop strategies that align with these trends, stay relevant, and remain competitive in the market. Overall, environmental scanning helps businesses to stay informed, adapt to changes, identify opportunities, and manage risks. This enhances their ability to make informed decisions, drive innovation, and ultimately achieve business success.
              • gustava
                Why should business organizations conduct environmental scanning?
                11 months ago
                • Environmental scanning helps business organizations stay informed about the changes in their environment, allowing them to make informed decisions on their actions and strategies. It allows organizations to identify threats, opportunities and trends in the external environment that may affect their operations. This helps them stay ahead of their competitors and seize new opportunities before their competitors do. By understanding the future of the industry and its external environment, organizations can create strategies and plans to successfully navigate the environment. Additionally, environmental scanning can help organizations reduce risk, by ensuring that their strategies are based on the most accurate predictions of the future.
                • Melilot
                  Why are environmental scanning and analysis important to marketers?
                  1 year ago
                  • Environmental scanning and analysis are important to marketers because it helps them identify and understand external trends, events, and forces that may affect the marketing environment, such as customer needs and preferences, technological advancements, competitive activities, economic conditions, and government regulations. By understanding and monitoring these external factors, marketers can develop strategies to effectively meet customer needs and capitalize on market opportunities. This type of analysis helps marketers stay ahead of the competition and ensure their marketing efforts are successful.
                  • PAULINA
                    How would you benefit from market enviroment scanning?
                    1 year ago
                    • Market environment scanning can provide valuable insights that can help businesses make better decisions, improve their competitive advantage, and grow their bottom line. It can give organizations an understanding of the competitive landscape, customer trends, and other external factors that can directly impact their business. By using market environment scanning, businesses can identify opportunities to increase revenue and remain competitive, as well as potential risks that could impede their success. Additionally, businesses can use market environment scanning to accurately assess their positioning relative to the competition and adjust their strategies accordingly.
                    • tiina
                      What is the importance of environmental scanning for marketing?
                      1 year ago
                      • Environmental scanning for marketing is important because it allows companies to identify market trends and threats before they become larger issues. It helps businesses anticipate customer needs, keep up with changing demand, and assess their competitive position in the market. Environmental scanning can provide valuable insights that can inform marketing strategies, product development, and brand positioning. Additionally, environmental scanning can help companies measure their performance, understand their target markets, and monitor customer satisfaction.
                      • Raine
                        What companies use environmental scanning?
                        1 year ago
                        1. Coca Cola
                        2. Nestle
                        3. PepsiCo
                        4. Unilever
                        5. Walmart
                        6. Apple
                        7. Amazon
                        8. Microsoft
                        9. McDonald’s
                        10. Bayer AG
                        • lucius buccho
                          How has marketing text books changed using enviromental scanning?
                          1 year ago
                          • Environmental scanning is a process used to identify opportunities and threats in the external environment that may affect an organization's performance. As marketing texts have adopted this process, they have changed to prioritize understanding of the external environment, which is critical for making informed decisions about product positioning, pricing, branding, and more. Additionally, marketing texts have shifted to focus more on digital marketing, as well as how to take advantage of new technologies and to identify potential risks. Lastly, marketing texts now emphasize the importance of measuring and analyzing customer behavior and how to use customer insights to drive marketing decisions.
                          • essi varvio
                            Why scanning of the marketing environment is strategic and tactical importance?
                            1 year ago
                            • Scanning of the marketing environment is important for both strategic and tactical decision-making. It helps companies make effective and informed decisions to better meet customer needs and remain competitive in the marketplace. Strategically, scanning of the marketing environment helps companies understand consumer trends, the competitive landscape, and the economic and political climate. This allows companies to identify potential opportunities or threats early and adjust their strategies accordingly. Tactically, scanning of the marketing environment provides companies with current consumer insights and data to inform their decisions regarding product development, pricing, distribution, and other marketing initiatives. In this way, scanning of the marketing environment allows companies to stay ahead of their competition and develop marketing plans that respond to changing customer preferences.
                            • pekka
                              What is the importance in scanning environment and market generating ideas?
                              1 year ago
                              • Scanning the environment and market when generating ideas helps to ensure that ideas are grounded in reality. It allows entrepreneurs and businesses to gain insight into the needs, wants, and desires of the target market and take advantage of the latest trends and opportunities. Additionally, it helps to validate whether an idea is viable and provides information that can be used to refine ideas. This process can help to reduce risk and increase the likelihood of success.
                              • scudamor
                                What is the importance of scanning the envirorment and market in generating business?
                                1 year ago
                                • Scanning the environment and market is an essential part of the business generation process. By doing so, businesses are able to identify potential opportunities, as well as threats they must prepare for. By scanning the environment, businesses can gain a greater understanding of the industry, and how their services or products may fit within it. Additionally, scanning the market will help businesses to identify potential customer needs, enabling them to develop strategies to target those customers and drive more revenue. Through scanning the environment and market, businesses can stay relevant and competitive in the ever changing landscape of their industry.
                                • MARSHALL WILSON
                                  Why is it important to conduct an environmental scan to a marketer?
                                  1 year ago
                                  • Conducting an environmental scan is important for a marketer because it is an analysis of current industry trends, customer preferences, competitor activity, economic conditions, and other external factors that could impact their business. This type of analysis helps marketers identify opportunities to gain an edge in the market and allows them to better position their product or service for growth and success. An environmental scan also provides valuable insight into customer needs and allows marketers to tailor their offerings to better meet those needs.
                                  • pia
                                    Why does colgate company use environmental scanning?
                                    1 year ago
                                    • Colgate Company uses environmental scanning to help them identify and assess the external forces impacting their business and use those insights to develop their business strategy. This scanning process allows them to stay ahead of potential changes and trends in their industries and markets, identify opportunities within their competitive landscape, and develop an appropriate response to potential risks. By scanning the environment, Colgate can make more informed decisions and better prepare for the future.
                                    • steffen
                                      What is environmental scanning and its importance?
                                      1 year ago
                                      • Environmental scanning is the process of gathering, analyzing, and assessing information about the external environment. This helps organizations to identify opportunities and threats. Environmental scanning also helps organizations to better understand the dynamics of the environment in which they operate and helps to provide insight into the best strategies for long-term survival and success. By scanning the environment, an organization can better prepare for potential changes and develop strategies that might increase its competitive advantages. It is also important for organizations to learn how other organizations are responding to changes in the environment. This type of information can help organizations adapt to new situations.
                                      • DEREK HUNTER
                                        Why is it crucial for marketers to scan?
                                        1 year ago
                                        • It is essential for marketers to scan the marketplace in order to assess the competitive environment, identify opportunities, determine the best strategies and tactics to deploy, and monitor the success of their campaigns. Scanning helps marketers keep up with industry trends and news, as well as their competitors’ activities, so they can make informed decisions about their target audiences, product offerings, and pricing. Additionally, scanning enables marketers to quickly identify and address any potential threats, such as new competitors entering the marketplace, so they can take proactive steps to maintain their competitive advantage.
                                        • Lori
                                          What are the advantage of environmental scanning in marketing?
                                          1 year ago
                                          1. Helps companies identify new opportunities: Environmental scanning helps companies identify new opportunities to grow and develop. By monitoring industry trends and external events, companies can identify new markets, products, and services to pursue.
                                          2. Allows companies to stay ahead of competitors: Companies that use environmental scanning stay one step ahead of their competitors by anticipating market changes and adapting their strategies accordingly. By having an outside perspective, companies can identify how competitors may respond to trends and adjust their marketing strategies accordingly.
                                          3. Helps companies create more effective marketing strategies: Knowing the external environment allows companies to create more effective marketing strategies. Environmental scanning helps companies better understand their target audience, stay on top of emerging trends, and tailor their marketing efforts to changing consumer tastes.
                                          4. Provides insights into the industry: Environmental scanning provides insights into industry trends and other market developments that can inform and guide a company’s marketing efforts. By understanding the market and consumer preferences, companies can create more effective marketing campaigns that resonate with their target audience.
                                          5. Allows companies to react quickly to changing conditions: Environmental scanning also helps companies react quickly to changing conditions. By monitoring the external environment, companies can make adjustments to their marketing plans and adapt to changing market conditions as needed.
                                          • miska vaara
                                            What are the significance of environmental scanning?
                                            1 year ago
                                            • Environmental scanning is a process of monitoring and assessing the external environment to identify factors that may impact an organization, including opportunities and threats. It is a critical component of the strategic planning process, as it allows organizations to remain informed of potential risks and opportunistic scenarios that may affect their strategies. By having an effective environmental scanning strategy in place, organizations can be proactive in their decision-making, better plan for the future, and take advantage of potential opportunities. Additionally, it can help minimize or eliminate threats, enhance competitive advantage, and ensure compliance with legal and regulatory requirements.
                                            • jaska
                                              Why is iniromental scanning important?
                                              1 year ago
                                              • Environmental scanning is important because it allows an organization to identify and assess opportunities and threats in the external environment in order to make better business decisions. By monitoring the environment, organizations can anticipate potential changes and plan accordingly. Environmental scanning also helps organizations to develop competitive strategies and respond proactively to major external changes.
                                              • miriam onio
                                                What are the importances of environmental scanning?
                                                1 year ago
                                                1. Increased Competitiveness: Environmental scanning can help organizations to respond quickly to changes in the external environment, making them more competitive compared to other businesses.
                                                2. Improved Decision-Making: By understanding the external environment, organizations can make more informed and sound decisions that meet their interests and goals.
                                                3. Enhanced Adaptability: By regularly scanning the environment, organizations can become more agile and adapt to external changes.
                                                4. Increased Market Insight: Environmental scanning gives organizations a better understanding of their market and the opportunities and threats they may face.
                                                5. Enhanced Strategies: Organizations can use environmental scanning to gain the information they need to develop competitive strategies that better influence their external environment.
                                                • Graham
                                                  Why is environmental scanning important to Colgate?
                                                  1 year ago
                                                  • Environmental scanning is important for Colgate because it helps the company stay informed about its external environment, including trends, risks, and opportunities in the marketplace. Keeping up-to-date with potential disruptions in the global marketplace is critical for understanding how Colgate can best compete and succeed in the long-term. It also allows the company to identify market shifts, assess competitive threats, and develop effective strategies to capture new market opportunities. Environmental scanning can help Colgate anticipate problems and make informed decisions before they become major issues.