SM

2. • Environmental scanning in strategic management is termed
as the utilisation and possession of information regarding
patterns, relationships, occasions and trends within a
company’s external and internal environment that impact the
future and current strategies.
• An environment should be scanned to determine forecasts and
growth of the factors that influence an organisation’s success.
As a result, during the strategy formulation, the organisation
should try to minimise threats and gain from the opportunities.

3. • Components Of Environmental Scanning In Strategic
Management
• The environment of business is divided into two parts namely,
external and internal environment. However, there are various
components related to both environments which can be studied
further.
1.Internal environment
2.External environment

4. Internal Environment
Firstly being an example of environmental
scanning in strategic management is
internal analysis. They lie inside the
organisation and impacts the performance
of the company as a whole. This involves
understanding and interpreting different
resources like human resources( employee
relation with management & other
employees, management with
shareholders, brand awareness), capital,
technological, culture, objectives, corporate
structure, value system, labour union etc.
As a result, the internal analysis identifies
weaknesses and strengths within the
company.
External Environment
Now, the external environment talks about the
outside walls of the company. As competition
adds up, the external environment becomes
dynamic and plays a crucial role in long term
plans. The factors are infinite therefore the
organisation should be vigilant and adjust
according to the changes. Strategic managers
must focus on the present state and future
positions.

5. Optimize Resources
Environmental scanning in strategic management
results in making correct use of resources like
capital, natural and human
Growth And Survival
By exploiting the environment with the help of SWOT
analysis,
Identifies Strengths And Weaknesses
Strengths depict the advantage area which acts as
the power of the business.
Identifies Opportunities And Threats
Research of the market is done to find information
and gaps where the company can benefit.
Long Term Strategy Formation
When the information is gathered and trends are
known, the business tries to formulate the strategies
that help in the long run
Productive Decision-Making
Decision making is a term that depicts choosing the
best among the various alternatives available.

8. • Strengths: The strength of any organization is related to its
core competencies i.e. efficient resources or technology or skills
or advantages over its competitors. For example, the marketing
expertise of a firm can be its strength. Apart from this, an
organization’s strength can be:
• Strong customer relations
• Market leader in its product or services
• Sound market image and reputation
• Smooth cash-flows

9. • Weaknesses: A weakness or limitation of an organization is
related to the scarcity of its resources or skill-set of staff or
capabilities that creates an adverse effect on its
performance. For example, limited cash-flow and high cost are
considered as a financial weakness of the organization.
Similarly, other weaknesses can be:
• Poor product quality
• Low productivity
• Unrecognized brand name or poor brand image

10. • Opportunities: An opportunity of the organization’s environment is
considered as its most favorable situation. These are the
circumstances that are external to the business and can become an
advantage to the organization. For example, different opportunities
for a firm can be:
• Social media marketing
• Mergers & acquisitions
• Tapping new markets
• Expansion in International market
• New product development

11. • Threats: Threats of an organization are current or future
unfavorable situations that may occur in its external
environment. For example, below are a few major threats for a
firm:
• A new competitor in the market
• The slow growth of the market
• Changing customer preferences
• Increase in the bargaining power of consumers
• Change in regulations or major technical changes