Environmental Scanning and Industry Analysis
The artic is melting and is anticipated by many to be ice-free by 2040. Because of its abundance of natural resources, many nations and corporations may begin jockeying for control over these resources and drawing the Artic into the global economy. There are a number of ways in which this can happen including: globalized frontier, adaptive frontier, fortress frontier, and equitable frontier.
Changing environments can have a significant effect on companies. Companies need to be able to adapt to survive and be competitive. Environmental uncertainty is “the degree of complexity plus the degree of change that exists in an organization’s external environment.”
Organizations need strategy formulation. Before strategy formulation, an organization must do environmental scanning. Environmental scanning “is the monitoring, evaluation, and dissemination of information from external and internal environment to key people within the corporation.” When doing the environmental scan an organization will want to take into account the natural environment which includes physical resources and wildlife, as well as the societal environment which factors in the view of the role of business in a particular society. Societal environment variables fall into four main categories: economic, technological, political-legal, and sociocultural.
It is important for businesses to take into account trends in societal environment. One such trend is that people are becoming increasingly conscious of environmental sustainability. Additionally, it is important to be able to identify potential markets in developing nations. Demand may hit a ‘trigger point’ at some time making it great for business players in that industry. Corporations can anticipate when this is going to happen by studying societal trends.
“The origin of competitive advantage lies in the ability to identify and respond to environmental change will in advance of competition.”
It is also important for corporations and business players to do an industry analysis. An industry analysis includes factors such as: industry competitors, potential entrants, substitutes, buyers, and other stockholders.
Industries move form fragmented to consolidated industries. “Over time most industries evolve through a series of stages from growth through maturity to eventual decline.”
When deciding whether to take an industry global versus regional, a risk assessment can be useful. Business players also tend to form strategic groups. To analyze the level of competition, examine strategic types including: defenders, prospectors, analyzers, and reactors.
Increasing environmental uncertainty leads to hypercompetition. An example of hypercompetition is the computer industry where everything must be the latest version and up-to-date.
Competitive intelligence is the formal process of gathering intelligence on one’s competition. This can be used for forecasting so that a business or corporation can stay ahead of environmental trends.