The document discusses environmental scanning, which involves examining and studying a business's internal and external environment to identify opportunities and threats. It identifies factors in the external environment like economic, demographic, technological, political, and cultural factors. The internal environment includes organizational resources, behavior, capabilities, and strengths/weaknesses. Several analysis tools are discussed, including Porter's Five Forces model, BCG matrix, Porter's generic strategies, and value chain analysis. Adaptive strategies mentioned include prospector, defender, analyzer, and reactor strategies.

1. ENVIRONMENT SCANNING

2.  Introduction
 Need for Environment Scanning
 Appraisal of external environment
 Dynamics of internal environment
 Porter’s Five forces model
 BCG Matrix
 Porter's Generic Strategies
 Value Chain analysis
Types of Adaptive strategies

3. ⱺ Environmental Scanning means an examination and study of
the environment of a business unit in order to identify its
survival and prosperity chances.
ⱺ It includes analysis of internal as well as external environment.
ⱺ In short, the process by which organizations monitor their
relevant environment to identify opportunities and threats
affecting their business is known as environmental scanning.

4. o Prime Influence – Environment is a prime influence on the effectiveness of
business strategies. If strategic planning is done without considering
environment, it is likely to be defective.
o A tool to anticipate Changes – Environmental scanning is a very useful
tool not only to understand business surroundings, but also as a good
instrument to anticipate the changes and be prepared to face the
challenges of such changes.
o EarlyWarning system- Environmental Scanning gives advance warning
or danger signals of the adverse changes in environment.

5.  It means scanning the external environment.
 It includes following points –
1. Economic environment
2. Demographic environment
3. Technological environment
4. Legal & political environment
5. Socio-culture environment
6. Global/International environment
These factors of external environment affects the business externally. So, while making
strategies keeping in mind to analysis or scan the external environment.

6.  It includes –
a. Organisational resources
b. Organisation behavior
c. Strength and weakness
d. Organisation capabilities
e. and so on..
These factors also affect the strategic planning.
Note – Here, we came to know that it is necessary to analysis the internal &
external business environment (because it is so dynamic - keeps on
changing)for making good strategies.

7. It is an analysis tool that is uses for determining the intensity of competition
in an industry and its profitability level.
This model was created by Michael Porter in 1979 to understand how five
key competitive forces affecting an industry.
It includes :-
1. Threats of new entrants
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threats of substitutes
5. Rivalry among existing competitors

8. Industry
Rivalry
Threats of
entry
Bargaining
power of
buyers
Threats of
substitutes
Bargaining
power of
suppliers

9. I. Threats of new entrants –
• This force determines how easy to enter into a particular industry.
• If there is few barrier on entry of new firm then it easily established,
results in profit start falling.
• So, it is essential to create a high barrier to enter a new firm.
• Threats of new entrant is high when –
Low amount of capital required for entering, no government regulation,
economies of scale can be achieved easily, existing firms do not possesses
patents, trademarks etc. and so…

10. II. Bargaining power of suppliers –
• Strong bargaining power allows suppliers to sell higher priced or low
quality raw materials to their buyers.
• This directly affects the buying firm’s profit because it has to pay more for
materials.
• There are some reasons of high bargaining power of suppliers are –
Few suppliers, suppliers hold scare resources, cost of switching raw materials
is especially high and so on…

11. III. Bargaining power of buyers –
• Buyers have power to demand high quality products at low cost.
• Here, low price means low revenue for producers, while high quality
products usually raise production costs.
• Buyers have high bargaining power when –
Buyers in large quantities, many substitute, buyers are price sensitive and so
on….
IV. Threats of substitutes –
• For example :- switch from coffee to tea, from car to bicycle and so on.
• There are more alternative available in the market.

12. V. Rivalry among existing competitors –
• Rivalry among competitors are increased when :
Many competitors, exit barriers are high, industry growth is slow,
competitors are equal size, products are homogeneous and so on..
These five forces affects the strategy decision.

13. Question
mark
Stars
Dog
Cash
Cow
Marketgrowthratefor
products/services
High
Low
Market Share of product/services
Low High

14.  BCG Matrix = Boston Consulting Group Product
Portfolio Matrix.
It is designed by Bruce Henderson in 1970’s.
It is made for help in long-term strategic planning.
It is also known as Growth/Share matrix.

15. I. Question Mark –
• Here, product is in high growth market but have low market share.
• So, it preferred growth or retrenchment strategy.
• E.g.:- Nestle noodles
II. Stars –
• Here, product is in high growth market and have a high market share.
• So, it preferred growth strategy.
• E.g.:- Mc Donald

16. III. Dog –
• Here, product is in low growth market and also have low market share.
• So, it preferred retrenchment strategy.
• E.g.:- Subway
IV. Cash Cows –
• Here, product is in low growth market but have a high market share.
• So, it preferred stability or modest growth strategy.
• E.g.:- KFC

17. Cost
leadership
Differentiation
leadership
Cost focus
Differentiation
focus
Scope
Source of competitive Advantage
Broad
Narrow
Cost Differentiation

18.  This model is developed by Michael Porter.
 Porter suggested four “generic” business strategies that could be adopted
in order to gain competitive advantage.
 Under this model there are four strategies –
1. Cost Leadership
2. Differentiation leadership
3. Cost focus
4. Differentiation focus

19. I. Cost leadership –
• With this strategy, the objective is to become the lowest-cost producer in the industry.
• To be the lowest-cost producer, a firm is likely to achieve or use several of the following
:
1. High levels of productivity
2. High capacity utilisation
3. Lean Production method (i.e. Just-in-time)
4. Effective use of technology in production process
5. Use of bargaining power to negotiate the lowest prices for production inputs
6. Access to most effective distribution channel.

20. II. Differentiationleadership –
• With this strategy, the business targets much larger markets and aims to achieve
competitive advantage through differentiation across the whole of an industry.
• This strategy is usually associated with charging a premium price for the product-often
reflects the higher production cost and extra value-added features provided for the
customer.
• This would be achieved through several ways –
1. Superior product quality
2. Branding
3. Consistent promotional support
4. And so on..
E.g. :- Nike & Mercedes

21. III. Cost Focus –
• Here a business seeks a lower-cost advantage in just one or a small number of market
segments.
• The product will be similar and have a high price and featured market leader, but tis
product is acceptable by some customer.
IV. DifferentiationFocus–
• In this strategy, business aims to differentiate within just one or a small number of
target market segments.
• This strategy is made due to different needs and wants of customer.
• It is the classic niche marketing strategy (focus on particular section of the market).
• E.g. :- Tyrrell's Crisps.
So, these are four strategies, through which any business gains competitive advantage.

22. M. Porter introduced the generic value chain model in 1985.
Value chain analysis (VCA) is a process where a firm identifies its primary
and support activities that add value to its final product and then analyze
these activities to reduce costs or increase differentiation.
Value chain analysis is a strategy tool used to analyze internal firm activities.
Its goal is to recognize, which activities are the most valuable (i.e. are the
source of cost or differentiation advantage) to the firm and which ones could
be improved to provide competitive advantage.

23. Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Service
Firm Infrastructure
Human Resource
Management
Procurement Technology
P
R
O
F
I
T
Primary Activities
Support Activities

24.  There are two types of firms activities-
A. Primary activities - those activities that are involved in the creation, sale and
transfer of products (including after-sales services).
• Inbound Logistics
• Operations
• Outbound logistics
• Marketing & Sales
• Services
B. Support activities – those activities which are merely support primary activities .
• Firm Infrastructure
• Human resource management
• Procurement
• Technology

25.  Inbound Logistic - concerned with receiving, storing, distributing raw
materials (e.g. handling of raw materials, warehousing, inventory control).
 Operations - comprise the transformation of inputs into final products (e.g.
production, assembly and packaging).
 Outbound Logistic - involves the collecting, storing and distributing the
products to buyers (e.g. processing of orders, warehousing of finished
products and delivery).
 Marketing & Sales - identification of customer needs and generation of
sales (e.g. advertising, promotion, distribution)
 Services – involves after sale-services (e.g. installation, repairs, maintenance)

26.  FirmInfrastructure – involves organisation structure, control system,
company culture.
 Humanresourcesmanagement – involved in recruiting, training,
development and compensation.
 Procurement– concerned with the tasks of purchasing inputs such as raw
materials, equipment and labour.
 Technology – includes improvement of product quality.
Firm Infrastructure
Human Resource
Management
Procurement Technology

27. ☺To reduce costs or increase differentiation.
☺To provide competitive advantage.
☺Helps to stay out of “no profit zone”.
☺And so on….

28.  Prospector Strategy – pursuing innovations & new opportunities in the
face of risk and with prospects for growth.
 Defender Strategy – protecting current market share by emphasizing
existing products and current share without seeking growth.
 Analyzer Strategy – maintaining stability of a core business while
exploring selective opportunities for innovation and change.
 Reactor Strategy– merely responding to competitive pressure in order to
survive.