The environment of a business is extremely dynamic in nature. It is always in a flux, i.e. constantly changing. Which means that the future of the business is also ever changing. And the organization must keep a close at its environment via environmental scanning. Let us learn the environmental scanning meaning.
In any business organization, there is an internal and external environment. They comprise all the factors that can affect the business of a company in any way. And they also present opportunities for the business to grow and threats that may harm the business. So these environments need constant monitoring. This is where environmental scanning comes into the picture.
Environmental scanning meaning is the gathering of information from an organizations internal and external environments, and careful monitoring of these environments to identify future threats and opportunities. It is the analyses of all factors that may affect the future of the organization.
Now that we know the environmental scanning meaning, let us see the purpose. The purpose of this process of environmental scanning is to provide the entrepreneur with a roadmap to the changes likely to happen in the future. So this way they can adapt the business to overcome the threats and capitalize on the opportunities coming their way.
Importance of Environmental Scanning
1] SWOT Analysis
As we saw previously in the environmental scanning meaning, it is a complex process. The close study of the internal and external environment of an organization will reveal some very valuable information, i.e. the strengths, weaknesses, opportunities, and threats of a company. Let us take a brief look.
- Strength: After analysis of the internal environment of a company, we will be able to identify the strengths that give the company a competitive advantage. The entrepreneur can use this information to maximise these strengths and earn more profits.
- Weakness: Study of the internal environment also point out the weaknesses of the company. For the growth and stability of the company, these identified weaknesses must be corrected without delay.
- Opportunity: Analysis of the external environment helps with the identification of possible opportunities. The entrepreneur can prepare to capitalize on these.
- Threats: Analysis of the external environment will also help in the identification of any business threats from competitors or any other factors. The company can come up with a strategy to diffuse such threats or minimize its impact.
2] Best Use of Resources
Environmental scanning helps us conduct a thorough analysis and hence leads to the optimum utilization of resources for the business.
Whether it is capital resources, human resources or other factors of production, their best use and utilization is very important for any business.
Environmental scanning will help us avoid any wastages and allow for the most effective and economical use of these resources.
3] Survival and Growth of the Business
It is a very competitive world and for any business to survive and thrive it is a difficult task. But if the business employs all the techniques of environmental scanning it can gain a significant advantage.
It will allow the firm to prepare for future threats and opportunities while at the same time eliminating their weaknesses and improving on their strengths.
4] Planning for Long Term
A business must have a plan for both short term and long term. The planning of long-term objectives can only occur after proper analysis and environmental scanning meaning. This will help the entrepreneur plan the necessary business strategy.
5] Helps in Decision Making
Decision making is the choice of the best alternative done by management. Environmental scanning allows the firm to make the best decision keeping in mind the success and growth of the business. They point out all the threats and weaknesses. And they also identify the strengths of the firm.
Solved Question on Environmental Scanning meaning
Q: Explain the importance of environmental scanning in entrepreneurship.
Ans: Environmental Scanning is an important business tool in any entrepreneurship. When an entrepreneur is coming up with new ideas, plans or innovation of any kind he must first understand if the environment is suitable for this. It helps him develop his creative ideas into actual products that can be offered in the market. So scanning the environment will help him gauge the acceptance of the product, and the opportunities and threats he may face.