External Analysis

An analysis of the external environment is undertaken to discover the opportunities and threats that are evolving and that which needs to be addressed by the organisation.

An analysis of the external environment can be broken down into three key steps, each becoming more specific to the organisation. The first step is an analysis of the macro-environmental influences that the organisation face. This is followed by an examination of the competitive (micro) environment the organisation operates within. Finally, a specific competitive analysis is undertaken.

Scanning

The environmental audit is reliant on the monitoring activity that is undertaken by the organisation. The process is referred to as scanning.

According to Aguilar (1967), there are four forms of scanning. 

Click here to view a video on how to identify the target market and use of the target market analysis tool.

They are:

Undirected Viewing: This activity concerns the viewer exploring information in general without carrying a specific agenda. The viewer is exposed to a large amount of varied information, but this is not an active search looking for particular issues, just a broad attempt to be aware of factors or areas that may have changed.

Conditional Viewing: Again, this is not an organised search, but the viewer is sensitive to information that identifies changes in specific areas of activity.

Informal Search: This is an organised but limited search for information to support a specific goal.

Formal Search: This type of search is actively pursued and specifically designed to seek information.

There is of course an unlimited amount of information that can be scanned. Any organisation can only scan a certain amount of this information. A balance must be struck between the resources allocated to this activity and the potential benefits. Also, more information does not lead to better decision-making. Understanding the dynamics of the environment is the critical aspect to this activity, not the volume of information.

Managers search for information in five broad areas:

• Market intelligence
• Technical intelligence
• Acquisition intelligence
• Broad issues
• Other intelligence