Business Environments Flashcards
Card 1: Definition of Environmental Scanning
Environmental scanning is the process of gathering information about current and future events.
Purpose: To understand factors that could impact business performance.
Helps the business prepare by adapting its resources to:
Take advantage of opportunities
Overcome threats
Using Environmental Scanning
Management must develop flexible strategies:
To respond to crises and opportunities quickly.
It also helps businesses understand the competitive impact and sustainability of their decisions.
Purpose of Environmental Scanning
Goal: Identify challenges and opportunities in the changing environment.
Provides insight into the nature and speed of external changes.
Environmental Scanning in the Strategic Process
Vision/Mission: Where the business wants to go.
Formulate a Strategy: Decide how to get there.
Implement a Strategy: Put the plan into action.
Continuous Environmental Scanning: Monitor the environment for changes.
Evaluation and Control: Adjust as needed.
Conducting Environmental Scanning
External Environment: Look for opportunities and threats.
Internal Environment: Identify strengths and weaknesses.
SWOT Analysis
Opportunities (O) and Threats (T): Found in Macro and Market environments.
Strengths (S) and Weaknesses (W): Found in the Internal (Micro) environment.
Strengths and Weaknesses
Strengths:
Factors (tangible & intangible) that add value or give a competitive edge.
Examples:
Assets (e.g., buildings, machinery)
Skills (e.g., expertise, experience)
Competitive pricing
Strategic location
Weaknesses:
Internal issues the business can control but may lack resources or capabilities in certain areas.
Opportunities and Threats
Opportunities (O):
External factors that can add value to the business.
Threats (T):
External factors that could harm the business.
Strategic Tools for Identifying Opportunities and Threats
PESTLE: Use this tool to analyze Political, Economic, Social, Technological, Legal, and Environmental factors for identifying opportunities and threats.
Porter’s Model: Helps identify competitive forces impacting opportunities and threats in the market
Importance of Continuous Evaluation
The business must continuously recalculate and adjust based on new opportunities and threats.
Strengths should be used to overcome weaknesses and threats while capitalizing on opportunities.
Competitive Price and Location
Competitive Price: Offering products at better prices than competitors can be a key strength.
Location: Businesses like food outlets thrive on foot traffic and need to consider demographics when choosing their location.
Location Considerations
Ease of transportation:
If raw materials (e.g., logs) are easier to transport than finished products (e.g., furniture), the business should locate closer to the target market.
Neighborhood fit:
Ensure the business type fits the area (e.g., not placing a salon in an industrial zone).
Proximity to complementary businesses:
Example: A pharmacy next to a doctor’s office, or a sports shop near a sports facility.
Accessibility:
Parking and security are key to attracting customers.
Future developments:
Consider planned infrastructure like a new taxi rank, which could be an opportunity or threat.
Shopping mall considerations:
Think about the mall’s trading hours and surrounding competitors.
In some cases, being near competitors (e.g., food courts) can be an advantage.
Patents and Product Differentiation
Patents:
Having a registered patent gives legal exclusivity, keeping competitors out.
Product differentiation:
Unique features set the business apart from competitors, creating a competitive advantage.
Skilled Workforce
Reduces waste and boosts productivity.
Attracting skilled workers requires offering fair salaries and a positive work environment.
Business Culture
Corporate culture:
A culture of meeting deadlines or lifelong learning boosts reliability and innovation.
A strong CSR (Corporate Social Responsibility) culture builds a positive image.
