SM Chap2 - Strategic Management Chapter 2 Analyzing the...

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Strategic Management Chapter 2 – Analyzing the External Environment of the Firm Creating the Environmentally Aware Organization Managers use three important processes to become environmentally aware. Scanning Monitoring Competitive Intelligence Scanning, Monitoring, Competitive Intelligence, Forecasting and Scenario Analysis Environmental Scanning Environmental scanning involves surveillance of a firm’s external environment to predict future environmental changes and detect changes already under way. Successful environmental scanning alerts the organization to critical trends and events before the changes have developed a discernible pattern and before competitors recognize them. Environmental Monitoring Environmental monitoring tracks the evolution of environmental trends, sequences of events, or streams of activities. These are often uncovered during the environmental scanning process. They may be trends that the firm came across by accident or were brought to its attention from outside the organization. Ability to respond to these trends requires close monitoring, which involves closer ongoing scrutiny. Monitoring enables firms to evaluate how dramatically environmental trends are changing the competitive landscape. Competitive Intelligence Competitive intelligence helps firms better define and understand their industry and also identify rivals’ strengths and weaknesses. Competitive intelligence helps a company avoid surprises by anticipating competitors moves and decreasing response time. Competitive intelligence is: Information that has been analyzed to the point where it is possible to make an appropriate decision A tool to alert management early to both threats and opportunities A means to deliver reasonable assessments. CI offers approximations of the market and competition. It is not a peek at a rival’s financial books. Reasonable assessments are what modern entrepreneurs need and want on a regular basis A way of life, a process. If a company uses CI the way it should be used, it becomes everyone’s job. It is a process by which critical information is available to those who need it. Environmental Forecasting Environmental forecasting involves the development of plausible projections about the direction, scope, speed, and intensity of environmental change. It’s purpose is to predict change. A danger of forecasting is that managers may view uncertainty as black and white and ignore important grey areas. Either they assume that the world is certain and open to precise predictions, or they assume it is uncertain and completely unpredictable. Underestimating uncertainty can lead to strategies that neither defend against looming threats nor take advantage of opportunities. At the other extreme, if managers assume the world is unpredictable, they may abandon the analytical rigour of their traditional planning process and base strategic decisions on gut instinct. Scenario Analysis
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This note was uploaded on 09/22/2010 for the course SM ADMN4106 taught by Professor Stevenmoore during the Spring '10 term at AIB College of Business.

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SM Chap2 - Strategic Management Chapter 2 Analyzing the...

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