Important and specific occurrences that taking
place in a certain sector . Past events of
business environment is the important factor of
The general tendencies of courses of action
along which these events take place. Not to just
see the past events are defective but to establish
the trends on the basis of events is also very
important factor of business environment
The current concerns that arise in response to
events and trends. As a businessman, have to
scan both cold and burning issues on daily
The demand made by interested groups in the
light of their concern for issues.
Three approaches to scanning
Systematic : Information related to markets &
customers , changes in legislation ®ulations that
have a direct impact on organization’s activities that
could be collected continuously to monitor changes.
Ad-hoc: Conduction of special surveys & studies to
deal with specific environmental issues.
Processed form: information available from
different sources both internal & external of the
organization in processed form.
Five force analysis
A scan of the external macro-environment in which the
firm operates can be expressed in terms of the following
The acronym PEST (or sometimes rearranged as
"STEP") is used to describe a framework for the
analysis of these macro environmental factors.
Political Factors include government regulations
and legal issues and define both formal and informal
rules under which the firm must operate
Economic Factors affect the purchasing power of
potential customers and the firm‘s cost of capital.
Social factors include the demographic and cultural
aspects of the external macro environment. These
factors affect customer needs and the size of potential
markets cost of capital.
Technological Factors can lower barriers to entry, reduce
minimum efficient production levels, and influence
A scan of the external micro-environment in which the
firm operates can be expressed in terms of five force
FIVE FORCE ANALYSIS
Threat Of New Entrants
Threat Of Substitutes
Bargaining Power Of Buyers
Bargaining Power Of Suppliers
Rivalry Among Existing Firms
Environmental scanning is one essential component of
the global environmental analysis. Environmental
scanning can be defined as ‘the study and interpretation
of the political, economic, social and technological
events and trends which influence a business, an
industry or even a total market’.