Importance of Environment Scanning (determining opportunities ((optional)…
Importance of Environment Scanning
(optional) interaction between the business and the environment leads to identifying opportunities. this gives rise to the 'first mover advantage'
Opportunities refer to favorable or positive external forces that help increase your firm's business.
the changes in the external environment (global warming) leads to the rise of business opportunities (sustainable bikes) and helps the firm design strategies to capitalize them.
Example: By learning that the demand for bikes is going to increase, a bike producing company can produce more bikes, release more models. This gives them the first mover advantage, hero honda-1990s
Identification of threats
threats refer to the negative and unfavorable external forces that creates hurdles for the firm.
Environmental scanning helps us to identify these threats in the future and give warning signals to the firms
Example: an Indian firm discovers that an MNC is entering the Indian market. This serves as a warning signal. The Indian firm will now reduce the cost of production, engage in aggressive marketing and improve the quality of the product
firm is sensitive to the external environment, it will come out with new products and services to meet the requirements of the customers.
this would build the reputation or image in the eyes of the consumer.
Example: because of the sensitivity of the Indian consumer market, LG established an image in a short span of time.
Giving direction for growth
the interaction with the environment leads to opening up new frontiers for growth for the firm
Identifying firm's strength and weakness
helps us to understand individual strengths and weaknesses in view of technological and global developments and management moves accordingly.
basis of strategy
strategists can gather QUALITATIVE information regarding the business environment and utilize it in formulating effective plans
Example: ITC hotels foresaw bright opportunities in travel and tourism industry and started building hotels in India and abroad.