Many businesses can conduct such a procedure through a PEST Analysis or a SOOT Analysis. A PEST analysis is a useful business measurement tool for understanding market growth or decline and a direction for a business. PEST is an acronym for political, economic, social and technological analysis. Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs. The economic factors relate to changes in the wider economy such as economic growth, interest rates, exchange rates and inflation rate.
Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns (Research and markets, 2012). Once these factors have been determined the use of a SOOT analysis can be extremely helpful in identifying the “strengths, weaknesses, opportunities, and threats” towards selling a product online. (Adrian & Monica, 2008, p. 1 52) This scanning can allow a business to develop a product that will fit with potential consumers wants and needs, and also be able to rate a internationalization strategy to help the business keep a competitive advantage.
If organizations use these analysis’s effectively they can have “an information advantage over those that do not and become better aligned with the external conditions” (Daft, Sorensen, & Parks 1 988, as cited in Choc, 2011 , p. 1 52) Business should regularly undertake environmental scanning as there is consistent environmental changes which “increase information processing needs within organizations as managers must detect and interpret problem areas, identify opportunities, and implement strategic adaptations” (Ihram&
Marvel, 201, p. 83) This will also allow businesses to “act quickly, take advantage of opportunities before competitors do and respond to environmental threats before significant damage is done” (Battened & Adobe;I, 2012, p. 25). Several studies suggest that environmental scanning can improve organizational performance. One of these studies was conducted by West (1988) who examined the relationship of organizational strategy and environmental scanning in regards to organizational performance.
The study found that strategy and environmental scanning had a substantial influence n the firm’s return on assets and return on sales (Coho, 2001, Para. 7). Also Battened & Debits (2012) conducted a study that found the use of strategic environmental scanning enables an organization in opportunities to avoid threats existing within the environment, as well as leading to positive organizational performance. Failure to collect information before starting plans can result in costly mistakes and missed opportunities. An example of a company who regularly undertakes environmental scanning is Monika.
In 2007 Monika accurately predicted and planned for a slowdown in growth when their competitors’ tragedies were based on a predicted increased percent growth. This enabled Monika to have a competitive advantage, while it’s competitors missed opportunity to create products more relevant to the market demands and environmental conditions. These studies demonstrate how curial it is for a business to conduct environmental scanning. Especially in today’s society with it becoming more difficult to effectively sell products online as product domains often containing a dizzying variety of brands and models (Transparent, Headway & Karachi, 2007).
This decreases the likely chances of business’ opportunity to be successful without undertaking environmental scanning as they would not correctly be able to identify aspects of pricing, competition, and promotions strategy. If a business does just advertise their product online they may still have potential consumers, however not ensuing the lack of fit between the environment and the organization’s strategy and structure may result in a performance decline and other organizational problems, as well as a smaller consumer base.
Therefore, when selling a product on the web environmental scanning is curial in not only determining customers’ wants and needs, but also to understand how needs change, how technology is changing wants and needs, and how legislation affects competitive activity. This is important as the greater the match between managers’ perceived environmental uncertainty and true environmental volatility, the higher the economic performance of a firm” (Eleanor, 1997, p. 288). In conclusion this essay demonstrates the importance of a business undertaking environmental scanning.
It shows that such a procedure not only allows for a competitive advantage, but also for a business to develop a strategic position in the market place. It also helps a business to avoid surprises, identify threats and opportunities, gain competitive advantage, and improve long-term and short-term planning. It is curial that a business should use environmental scanning and an internationalization strategy to help determine the present situation and condition of the external environment before advertising a product online. References Adrian, G. , & Monica, D. (2008).