Environmental Scan and Industry Analysis in Strategic Planning

Environmental Scan and Industrial Analysis

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Environmental Scan and Industry Analysis in Strategic Planning

Environmental scanning is a major component in strategic planning. A strategic plan is a formal depiction of the firm’s set goals, tactics and strategies for a certain period of time. It usually takes the vast part of environmental monitoring, forecasting as well environmental assessment. According to Kroon (1995), environmental scanning is the study and interpretation of the political, economic, social and technological occurrences that has an impact on a business, on an industry or on the whole market as well. The following factors need to be considered when carrying out environmental scanning; the trends, events, issues and what different interest groups expect.  Environmental scanning is the process that surveys and interprets the relevant information systematically so as to identify the threats and opportunities (Jeffs, 2008). There scanning can take two approaches, macro environment scanning and micro environment scanning.

Firstly, we can take a look at macro environment scanning. These are the external factors that influence the business. The organization usually has no control over these external forces. According to Kroon (1995), these factors can only indirectly affect the organization. The six macro environmental factors are one, political factors (Dillerup and Stoi, 2006).

Political factors are the extent to which the government influences the economy. They basically include tax policy, law of labor, the environmental law, the tariffs, restrictions on trade as well as the political stability. The tax policy basically talks about the choice of the government as to what to levy, on whom and in what amounts. The aspect of macro environment concerns the total amount of taxes to collect. Political factors may also include the goods and services that the government offers to the public. The government also plays a very important role provision of infrastructure.

The second macro environmental factors are economic factors.  These comprise of the economic growth, the rates of interest, rates of exchange as well as the inflation rates. These factors have a great influence on the business strategic planning. They directly or indirectly affect the entire economy and all its participants.  The economic factors also affect the recession and depression in the environment. In strategic planning, economic factors affect the interest rates which affect the firm’s cost of capital thus affecting the rate of expansion of the firm (Jhinan, 2009). Exchange rates affect the exporting and importing costs in the economy which affects the strategic planning of the firm (Sullivan and Steven, 2003).