Steps of Environment

Analysis

Introduction
A

strategist is required to understand all the

intricacies of external environment in which an
organization operates as well as the internal
operations of an organization before a strategy can be
effectively formulated and implemented.
An organizations environment consists of two parts:
(1) The macro environmental dimensions i.e. economic,
social, technological, global and political; and
(2) The micro environment which refers mainly to the
industry within which it operates ( for multi-business
firms, the industry is usually considered in the
activity in which the firm generates the majority of
its revenue).

Process of Environment
Analysis
The process consists of four sequential

steps:
(1) scanning,
(2) Monitoring,
(3) Forecasting, and
(4) Assessment

(1) Scanning
Being

the first step in the process of

environment analysis, scanning involves
general surveillance of all environmental
factors and their interactions in order to
(a) Identify
early
signals
of
possible
environmental changes, and
(b) Detect environmental change already
under way.
()Scanning

is ambiguous environmental
analysis activity.
()The potentially relevant data for scanning

Cont
The fundamental challenges for analysis in

scanning is, therefore, to make sense out of

vague, ambiguous, and unconnected data.

(2) Monitoring
Monitoring

involves
tracking
the
environmental trends, sequences of events,
or streams of activities. It frequently
involves following signals or indicators
unearthed during environmental scanning.
The purpose of monitoring is to assemble
sufficient data to discern whether certain
trends and emerging. Thus, as monitoring
progresses, the data turn frequently from
imprecise to precise.

Cont
Three outcomes emerge out of monitoring:
(a) A specific description of environmental

trends and patterns to be forecast;

(b) The identification of trends for further
monitoring, and
(c) The identification of areas for further
scanning.
()These

outputs
become
inputs
for
forecasting. They will also cause for further
scanning and monitoring.

(3) Forecasting
Scanning and monitoring provide a picture of

what has already taken place and what is

happening. Strategic decision-making, however,
requires
a
future
orientation.
Naturally,
forecasting
is
an
essential
element
in
environmental analysis.
Forecasting
is concerned with developing
plausible of the direction, scope, and intensity of
environmental change. It tries layout the
evolutionary path of anticipated change.
For example, how long will it take the new
technology to reach the market place? Are
current lifestyle trends likely to continue ?

Cont
These kinds of questions provide the grist

for forecasting efforts.

Unlike
scanning
and
monitoring,
forecasting is well focused and is much
more deductive and complex activity. This
is so because the focus, scope and goals of
forecasting are more specific than the
earlier two stages of environmental
analysis.

(4) Assessment
Scanning, monitoring, forecasting are not

ends in themselves. Unless their outputs

are assessed to determine implications for
the organizations current and potential
strategies,
scanning,
monitoring
and
forecasting simply provide nice-to-know
information.
Assessment
involves
identifying
and
evaluating how and why current projected
environmental changes affect or will affect
strategic management of the organization.

Cont
In

assessment, the frame of reference

moves
from
understanding
the
environment the focus of scanning,
monitoring and forecasting to identifying
what the understanding means for the
organization.
Assessment, therefore, tries to answer
questions such as what are the key issues
presented by the environment, and what
are the implications of such issues for the
organization ?


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