International Journal of Economy, Management and Social Sciences, 2(8) August 2013, Pages: 593-597

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International Journal of Economy, Management and Social Sciences

ISSN
2306-7276

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Environmental Scanning Assessment in Zimbabwean SMEs

Gibbet Murambiwa Magaisa *1, Satinder Duggal 2, Rafael Muhwandavaka 3
1

Christ University India, Christ College an Affiliate of Great Zimbabwe University: Zimbabwe- Australian Institute of Business Facilitator Australia.
Christ University - India
3
Christ College an Affiliate of Great Zimbabwe University Zimbabwe
2

AR TIC LE INF O

AB STR AC T

Keywords:

This paper is designed to look at how the owner/managers of Small and Medium Enterprises
(SMEs) in Zimbabwe scan their business environment to create a competitive atmosphere that
keeps them in business and facilitate the growth of their enterprises. The sample size of this
research paper consisted of 1000 SMEs located in 5 out of a total of 10 Zimbabwean Provinces,
namely Bulawayo Metropolitan, Harare Metropolitan, Matabeleland North, Matabeleland South
and Midlands. Stratified random sampling technique was used. The research instrument used was
the self -administered questionnaire. Data collected was analyzed using both inferential and
descriptive statistical tools. Results from the study revealed that environmental scanning is not
fully utilized by SME organizations and yet its a critical tool to be used by large corporations or
SMEs. The paper recommended that SME owner/managers should embrace formal environmental
scanning into their strategic management processes for the success of their organizations.

Environmental Scanning
Strategic Management
Strategies
SMEs

2013 Int. j. econ. manag. soc. sci. All rights reserved for TI Journals.

1.

Introduction

Organizational success depends upon how well the organization defines, understands, and faces changes in its environment (Gupta, 1995).
These organizations are assumed to be independent and are an open system, as interaction between these organizations and their
environment is inevitable (Analoui and Karami, 2003). Business environments include internal and external environments (Oghojafor,
2006; Aluko, Odugbesan, Gbadamosi and Osuagwer, 2004; and Kazmi, 2002; Dakare and Oghojafor, 2009).
SMEs the world over; play a significant role towards the development of national economies, whether it be in developed or developing
countries. Studying the progress of SMEs is an activity that no country can take lightly because of the sectors significant contribution to
the nations economy. Wickert and Herschel (2001:329) suggest that 97, 9% of all companies in Germany fall within the SME sector
category. Concurring with the above Wimmer and Wolter (2000) further adds that SMEs provide 36% of all the industrial investments.
According to the Australian Bureau of Statistics (2001:1) SMEs account for 97% of all the private sector businesses and produce 30% of
the nations output. A National Policy on Small and Medium Enterprises was formulated in Zimbabwe in July, 2002 to develop the sector.
SMEs in Zimbabwe according to the policy framework contribute over 90% of the Gross National Product and there is need to grow this
sector.

2.

Literature Background

In strategic management, environmental scanning involves the process of monitoring, evaluating and disseminating information from the
external and internal environments to key people within an organization with a view to identifying external and internal strategic factors
that can have a profound influence on an organizations operations. (Wheelen & Hunger, 2003:9)
According to Thompson & Strickland (2003:2), Wheelen & Hunger (2003: 9), Anheier (2005:266) the study of Strategic Management
involves the monitoring and evaluating of external opportunities and threats in light of the organizations strengths and weaknesses
(SWOT). Opportunities are positive environmental trends or changes that will help the organization to improve its performance. Strengths
are resources that the organization possesses and capabilities that the organization has developed which can be exploited and developed
into, attainment of sustainable competitive advantage. Weaknesses are resources and capabilities that are lacking or deficient which prevent
the organization from developing a sustainable competitive advantage.
Wheelen & Hunger (2003:9) maintain that environmental scanning is the monitoring, evaluation and dissemination of information from the
external and internal environments to key people within the corporation. Its purpose is to identify strategic factors those external and
internal elements that will determine the future of the organization. The simplest way to conduct environmental scanning is through SWOT
* Corresponding author.
Email address: mgibbet@yahoo.com

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Int ernational Journal of Ec onomy, Mana ge ment and Soci al Sc iences , 2(8) Au gust 2013

analysis. SWOT is an acronym used to decide those particular strengths, weaknesses, opportunities and threats that are strategic factors for
a particular organization. The external environment consists of variables (opportunities and threats) that are outside the organization and are
not within the short run control of top Management. These variables form the context within which the organization exists.
Alpkan (2000) states that of strategic planning and generic strategies extend to the employment of exhaustive decision making process of
upper management concerning environmental threats and opportunities. The principle of comprehensiveness is the intensity of endeavors to
cope with a serious problem, a quantitative measure of these efforts is difficult if not almost impossible. Thus comprehensiveness expresses
the abundance of managerial efforts to cope with these problems of environmental uncertainties (Miller, Burke and Glick1998). Managers
can deviate from rationality by avoiding problems in their respect neither to initiate nor to take decisions, yet they like to preserve the status
quo (Raiifa1994). Decision making and planning is a set of vast cognitive activities involving information gathering, analyzing and
deciding (Yukl 2002).
Nevertheless the strategic planning process has been depicted as the development of decision making rules that guide future organizational
actions. To understand the strategy making process by examining the organizational environmental context is crucial (Miller and Freesen,
1978). Strategy formation can be viewed as the interplay between external and internal dynamics of changing environment with leadership
mediating these two variables (Mintzberg 1978). When the scanning intensity is insufficient, the managers or owners of SMEs will
confront some serious problems (Yukl, 2002).
There has been a tendency to emphasize the role of strategic planning propensity of managers in recent years (Andersen, 2000). Managers
must correctly perceive the nature and dictations of the environment. Environmental scanning and the perceptions on the environment have
powerful effects on strategic planning approaches and strategic orientations of managers (Goll and Rasheed, 1997; Pelham, 1999; Barringer
and Bluedorn, 1999).

3.

Strategic Fit

Successful organizations achieve strategic fit with their task environment and support their strategies with appropriately designed structures
and management processes (Miles and Snow, 1984). According to the Miles and Snow typology, the choice of strategic roles or behaviors
that is defenders, prospectors, analyzers and reactors, is connected with their entrepreneurial problems (Slater and Narver, 1993). We can
deduce that environmental factors such as market dynamism, technological change, market munificence, environmental uncertainty, etc,
necessitate higher levels of environmental scanning and strategic planning efforts of top managers aiming to increase their organizational
performance by making the appropriate strategic choice. Environmental scanning extends to learning and gathering about events and trends
in the organizations environment (Hambrick, 1981). Scanning intensity is related to strategic choices (Mintzberg, 1973; Ansoff, 1975;
Barringer and Bluedorn, 1999). These choices usually seek to increase the firms innovativeness, adaptation, and agile strategic responses
to changes in the external environment (Zahra and Garvis, 2000). Porter (1980) offers two main generic strategies, as the core idea or
strategic orientation on which all the strategic actions are based, low cost and differentiation that may be appropriate for small
manufacturing firms towards industry conditions. Low cost strategy aims to create a sustainable competitive advantage by offering the
lowest prices in an industry segment based on low cost producer status or to maximize the profitability by reducing the costs to supply
product or service with a competitive price. Differentiation strategy on the other hand, aims to create a unique product or service, brand
image, customer loyalty, and higher margins.

4.

Approaches to Industry Analysis

Wheelen and Hunger (2003) define an industry as a group of firms producing similar goods or services. Thorough examination of the
important stakeholder groups such as suppliers, and customers, in a particular corporations task environment is a part of industry analysis.
Porter (1980), an authority on competitive strategy contents that a corporation is concerned mainly with the intensity of competition within
the industry. Porter mentions five forces and the sixth one are added to his list to show how the government, local communities and other
stakeholders affect the activities of the industry. The six forces are: threat of new entrants, rivalry among existing firms, threat of substitute
products or services, bargaining power of buyers, bargaining power of suppliers and relative power of other stakeholders.
4.1.1 Threat of New Entrants
They are therefore a threat to the already established corporations. The threat of entry depends on the presence of entry barriers and the
reaction expected from the existing competitors. An entry barrier is an obstruction that makes it difficult for a company to enter an industry.
It protects the existing corporation within an industry. Some of the barriers to entry are: economics of scale, product differentiation, capital
requirements, switching costs, access to distribution channels, and cost disadvantages independent of size and government policy.
4.1.2 Rivalry among existing firms
Corporations in most industries are mutually dependent. A competitive move by one firm may cause retaliation or counter efforts from the
competitors. Porter states that intense rivalry is related to the presence of several factors which include number of competitors, rate of
industry growth, product or service characteristic, amount of fixed costs, capacity, height of exit barriers and diversity rivalry.

Environmental Scanning Assessment in Zimbabwean SMEs

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Internat ional Jour nal of Economy, Mana ge ment and Social Sciences , 2(8) Au gust 2013

Figure 1. Driving Industry Competition

Source: Adapted with permission of the Free Press, a Division of Simon and Schuster, from Competitive Strategy:
Techniques for Analyzing Industries and Competitors by Michael E. Porter.

4.1.3 Threat of substitute products or services

Substitute products are those products that appear to be different but can satisfy the same need as another product. Substitutes limit the
potential returns of an industry by placing ceiling on the prices that the industry can profitably charge. This has much bearing on SMEs,
who normally lack the capacity to be innovative and produce own products.
4.1.4 Bargaining power of buyers
Buyers have an effect on industry due to their ability to force down prices, bargain for higher quality or more services and play competitors
against each other. Buyers or a group of buyers is powerful if some of these factors take place: - If a buyer purchases a large portion of the
sellers product or service for example oil purchased by a major motor-car maker. A buyer has the potential to integrate backwards by
producing the product itself for example a newspaper chain can produce its own paper. Alternative suppliers are many if the product is
standard or undifferentiated. Changing of suppliers costs very little and therefore it becomes easy to change suppliers. Buyers are sensitive
to costs and service differences as they earn low profits.
4.1.5 Bargaining power of suppliers
Suppliers can affect an industry through their ability to raise prices or reduce the quality of purchased goods and services. Suppliers or
supplier groups are powerful due to the following factors:- If the supplier industry is dominated by a few companies, but it sells to many for
example the petroleum industry, when the product or service is unique and it has built up switching costs, or substitutes are not readily
available, or if suppliers are able to integrate forward and compete directly with their present customers and finally if a purchasing industry
buys a small portion of the supplier groups and services and is thus unimportant to the supplier.
4.1.6 Relative power of other stakeholders
This sixth force should be added to Porters list and it is a variety of stakeholder groups, from the task environment. These groups comprise
of governments, local community, creditors, trade unions, special-interest groups, union, shareholders and complementers. The importance
of these shareholders varies from industry to industry and they have a significant role to play in the industrial framework.

5.

Research Methodology

The research design applied was motivated by the exploratory nature of the research. The SMEs in the 5 Provinces out of a total of 10
Provinces of Zimbabwe and the 5 chosen were chosen through stratified random sampling technique as follows:

Harare Metropolitan
Bulawayo Metropolitan
Bulawayo North
Bulawayo South
Midlands

400
300
100
100
100

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Int ernational Journal of Ec onomy, Mana ge ment and Soci al Sc iences , 2(8) Au gust 2013

A total of 1000 self administered questionnaires were sent to owner/managers and their employees who validated their responses. The
response rate of 100% was achieved due to constant follow ups made by the researcher. The research instrument was validated by 5 Experts
in the area of study and their comments were incorporated on the research instrument. Reliability of the instrument was tested on
Cronbachs Alpha and the results obtained are as stated below:-

Cases

Case Processing Summary

N
%
Valid
1000
100.0
Excluded
0
.0
Total
1000
100.0
Reliability Statistics
Cronbach's Alpha
N of Items
.864
51

The Cronbachs Alpha value of 7 and above is considered good and according to the above test results value of 9 is considered good and is
reliable. The checks and balances in this regard are appropriate to produce results that are valid, reliable and generalizable.

6.

Results and Discussion of Findings

Inferential and descriptive statistical tools of analysis were applied in this paper to analyze data collected from the field. Of the 1 000
respondents 52% are male and 48% are women. The respondents who are in the 20-29 years age group constitute 16%, 30-39 years are
48%, whereas those in the 40-49 years age group constitute 34% and those who are 50 years and above constitute only 2%. Marital status
of the respondents is that 72% are married, 22% are single and 6% are widowed. The sample indicated a relatively well educated sample of
the respondents with 68% having done O Level; 26% A Level; 4% first degrees and 2% Masters Degrees and above. SMEs that had
operated for a period of 1-5 years were 82%, whilst those in the 6 10 years were 4% and those in the 11 years and above were 14%.
The SMEs that had 1 5 employees constituted 76%, whilst those with 6- 10 employees were 12% and those with 11 employees and above
were 12%. The turnover of SMEs selected ranged from US$500 000 to US$1 000 000. The random sampling technique was used to select
the sample size.
The respondents were asked whether they applied formal strategic management in their organizations. Likert scale responses were given,
2% of the respondents strongly agreed, 42% disagreed, and 2% strongly disagreed whilst 54% were neutral. Only 2% who indicated that
they applied formal strategic management in their organizations were the only ones employing formal environmental scanning whilst the
entire 98% who did not apply formal strategic management did not employ formal environmental scanning, as illustrated by figure 2 below.

Figure 2. Significance of Strategic Management Application

The One Way Anova Test Statistic Results in Table 1 indicate the importance of the use of strategic management in these organizations.

Environmental Scanning Assessment in Zimbabwean SMEs

597

Internat ional Jour nal of Economy, Mana ge ment and Social Sciences , 2(8) Au gust 2013

Table 1. Anova Statistical Results Summary

Parameter
Significance of Strategic Management Application

Sum of Squares

df

Mean Square

Sig.

3.769

2:997

3.769

11.023

0.002

The significance level of 0.002 is below the critical value that is 0.05, illustrating that the use of strategic management in these SME
Organizations is significant. Since environmental scanning forms an integral part of strategic management it is imperative that SMEs in
Zimbabwe employ strategic management and its tools in their operations.

7.

Conclusion

Environments that businesses operate in have become complex, dynamic and competitive. This should motivate owner managers of SMEs
to make use of strategic tools at their disposal to achieve the competitive edge in the volatile environments they operate in. Since formal
environmental scanning is not fully utilized by the Zimbabwean SMEs, this paper recommends that the owner/managers embrace the
strategic management tools and take advantage of environmental scanning for them to know and take advantage of the environment they
are operating in.

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