This document discusses environmental scanning, which involves gathering and analyzing information about the external business environment for strategic purposes. It describes three types of environmental scanning: ad-hoc, regular, and continuous. The document also discusses analyzing the macro environment using PEST analysis (Political, Economic, Social, Technological factors) and the micro environment using Porter's Five Forces model. Environmental scanning is useful for predicting future market conditions and helping businesses make strategic decisions.

1. BusinessBusiness
EnvironmentalEnvironmental
SScanningcanning
PUTTU GURU PRASAD
M.Com. M.B.A., L.L.B., M.Phil. PGDFTM, APSET.
ICFAI TMF, (PhD) at JNTU K,
Asst.Professor
S&H Department- VVIT

2. Business EnvironmentalBusiness Environmental
SScanningcanning
Professor, Lawyer & EntrepreneurProfessor, Lawyer & Entrepreneur
Puttu GuruprasadPuttu Guruprasad

4. 6 Business Environmental Factors6 Business Environmental Factors
PESTLEPESTLE

5. EnvironmentalEnvironmental scanningscanning
EnvironmentalEnvironmental scanningscanning isis aa
processprocess ofof
gathering,gathering, analyzing,analyzing, andand
dispensingdispensing informationinformation forfor
tacticaltactical oror strategicstrategic purposes.purposes.
TheThe environmentalenvironmental scanningscanning
processprocess entailsentails obtainingobtaining bothboth
factualfactual andand subjectivesubjective informationinformation
onon thethe businessbusiness environmentsenvironments inin

6. KindsKinds ofof environmentalenvironmental scanningscanning
Ad-hocAd-hoc scanningscanning - Short term, infrequent
examinations usually initiated by a crisis
RegularRegular scanningscanning - Studies done on a regular
schedule (e.g. once a year)
ContinuousContinuous scanningscanning (also(also calledcalled continuouscontinuous
learning)learning) - continuous structured data
collection and processing on a broad range of
environmental factors

7. Environmental scanning usually refers just to the
macro environment, but it can also include industry,industry,
competitorcompetitor analysisanalysis, marketingmarketing researchresearch (consumer
analysis), newnew productproduct developmentdevelopment (product
innovations) or the company's internal environment.

8. EnvironmentalEnvironmental scanningscanning
External analysis Internal analysis
Macro environment Micro environment
PEST analysis Five force analysis

9. A scan of the external macro-
environment in which the firm
operates can be expressed in terms of
the following factors:
Political Economic Social TechnologicalPolitical Economic Social Technological
The acronym PESTPEST (or sometimes
rearranged as "STEP")"STEP") is used to
describe a framework for the analysis
of these macro environmental factors.
Political Economic Social TechnologicalPolitical Economic Social Technological –– (PEST)(PEST)

10. PoliticalPolitical FactorsFactors :-Political factors include
government regulations and legal issues and
define both formal and informal rules under
which the firm must operate. Some examples
include:
TaxTax PPolicyolicy
EmploymentEmployment LLawsaws
EnvironmentalEnvironmental RRegulationsegulations
TradeTrade RRestrictionsestrictions andand TTariffsariffs
PoliticalPolitical SStabilitytability

11. Economic Factors :-
Economic factors affect the purchasing
power of potential customers and the firm's
cost of capital. The following are examples
of factors in the macro economy:
EconomicEconomic GGrowthrowth
InterestInterest RRatesates
ExchangeExchange RRatesates
InflationInflation RRateate

12. SocialSocial FactorsFactors
Social factors include the demographic and
cultural aspects of the external macro
environment. These factors affect customer
needs and the size of potential markets.
Some social factors include:
HealthHealth CConsciousnessonsciousness
PopulationPopulation GGrowthrowth RRateate
AgeAge DDistributionistribution
EmphasisEmphasis onon SSafetyafety

13. TechnologicalTechnological FactorsFactors :-:-
Technological factors can lower barriers to
entry, reduce minimum efficient production
levels, and influence outsourcing decisions.
Some technological factors include:
R&DR&D activityactivity
AutomationAutomation
TechnologyTechnology IIncentivesncentives
RateRate ofof TTechnologicalechnological CChangehange

14. Porter’sPorter’s
Five forceFive force AAnalysisnalysis
• ThreatThreat OfOf NewNew EntrantsEntrants
• ThreatThreat OfOf SubstitutesSubstitutes
• BargainingBargaining PowerPower OfOf BuyersBuyers
• BargainingBargaining PowerPower OfOf SuppliersSuppliers
• RivalryRivalry AmongAmong ExistingExisting FirmsFirms

15. Macro EnvironmentalMacro Environmental SScanningcanning
Macro environmental and industryindustry
scanningscanning are useful as they reveal currentcurrent
conditionsconditions of market.
It help managers to predict the future
characteristics of the organizational
environment and hence make decisions
today that will help the firm deal with the
environment of tomorrow

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