CHAPTER 4

Environmental Scanning
Identifying Forces Driving Change

By Anil Bilgihan for Dr. DeMicco

Student Learning Objectives

On completion of this chapter, you will be able to;

Identify the environmental scanning process.

Develop an appreciation to scan the business environment effectively.
Describe the effective environmental scanning system.
Identify the unique elements business domain.
Identify and define the sources of information and give at least 1 hospitality
related example for each of them.
Identify the timing information.
Achieve a more practical understanding of forces that drive change in hospitality.
(Case Study)
Comprehend the feedback and evaluation systems.

Objectives

Upon completion of this chapter, you will:

1. Understand the skills necessary to scan the business environment effectively.
2. Develop and maintain an effective environmental scanning system.

Key Concepts of the Chapter

Environmental scanning
The business domain
Setting up a structure for scanning
Determining information needs
Determining information mediums
Timing information
Identifying sources of information
Choosing scanning activities
Analyzing and synthesizing information
Information sharing
Information feedback and evaluation systems

Objectives
1. Develop the skills necessary to scan the business environment effectively.

Please read pages 91 through 112 in the text book for further information.

Strategic Management Model

Long-term Objectives

Domain Definition
Geographic Market Area
Segment
Primary Competition
Target Market

Environmental Events

Remote

Competitive Methods
P1

S1

Task
Industry

P2

S2

P3

S3

Firm
Functional

Performance Measure
Action Plan
Resources Needed
Evaluation Timetable
Responsibility
Accountability
Rational

Strengths and
Weakness Analysis
Functional Analysis
Financial Position
Structural Analysis
Physical Assets
Labor Force
Risk
Competitiveness

Short-term Objectives

Mission Statement
Nature of Business
Target Customer
Products/Services
Standard Desired
Means to Accomplish Above

Evaluation

Scanning the Business Environment

Identifying the Forces Driving Change

The goal of any environmental scanning process is to successfully identify the

key forces driving change within the contextual environment of the
organization.

To achieve that goal, managers must set up personal and organizational

scanning systems to be sure that the widest perceptional view of the
environment is achieved. This scanning system should;

Identify each force, the variables, and their interdependencies with other variables.
Suggest cause-and-effect relationships.
Determine the history and timing associated with the development of the forces.
Assist the manager estimating the impact of forces driving change on the firm.

Please read pages 91 through 94 in the text book for further information.

Identifying Events in the Environment

Industry Structure
All firms in the sector
have invested in the CM

Ideal Scanning Window

Leading firms adopt and
invest in the new CM

Innovator/Entrepreneur
creates a new CM

Fads

Innovations

Major Trend
Innovation / CM Life Cycle

Fact of Life

Establishing an Environmental Scanning

System

Establish domain definition

Organizational structure issues
Determine information needs quantitative and qualitative
Determine information mediums
Assess timing of information
Identify sources
Choose scanning activities regular and irregular
Determine analysis and synthesis processes
Determine information sharing
Establish information feedback and evaluation systems

Domain Definition

The task of domain definition is the first step in

establishing an effective environmental scanning

system.
The domain of an organization refers to the context
in which it exists and functions.

Please read page 94 in the text book for further information.

Criteria of the Domain Definition

Organizational Structure Issues

Who participates in the process, what resources

are allocated to this endeavor, and how the
information is processed and used.
Scanning the environment must fit into that
structure because resources
must be allocated to this
important management activity.

Please read page 95 in the text book for further information.

Determining Information Needs

Determining the information needs of the firm can

begin only after the process of defining the domain
the firm must complete in is completed.

Once established, the information will generally fall

into four categories;

Quantitative
Qualitative
Personal
Non-personal

Examples of Quantitative Information

Determining the Information Medium

Most common medium is face-to-face personal

interaction.
The written medium, both personal and impersonal,
continues to be an important one.
The telecommunication revolution will no doubt
bring about rapid changes in the mediums used.

Please read page 101 in the text book for further information.

New Communication in the Information

Age

Assessing Timing of Information

The phase timing is everything has a great deal of

validity in the world of strategy.

Bad timing can be avoided most often when firms
have effective scanning systems and the
organization has structured itself to improve the
processing of information and its timing.
The timing also reflects how managers study the
emerging forces that are developing.

Please read pages 101 through 102 in the text book for further information.

Body of Knowledge in the Hospitality

Industry

Identifying Sources of Information

The primary concern of the manager in selecting

the sources of information are validity and

reliability.
Validity refers to fact that the information
accurately represents and describes the
relationships that are necessary to make important
strategic decisions.
Reliability refers to the need for accuracy and
consistency over time.

Please read page 103 in the text book for further information.

Common Information Sources Available

to the Hospitality Manager

Choosing Scanning Activities

Scanning is an activity that does not lend itself to

neatly defined processes or timetables.

It cannot be done effectively without strong
cognitive, experimental, and perceptional skills.
Please read pages 105 through 107 in the text book for further information.

Concept Map of Environmental Event

Please read pages 110 through 113 in the text book for further information.

Matrix Analysis

Todays manager must be able to understand the

present relationships and regulators.

To do this, the use of matrices to assess

relationships becomes extremely useful.

Matrix analysis help to create greater

understanding of the present and emerging body of
knowledge.

Please read pages 113 through 117 in the text book for further information.

Information-Sharing Feedback and

Evaluations Systems

Please read pages 117 through 118 in the text book for further information.

A Continuous Process of Scanning is

Necessary

A good scanning system will never be able to

remove all the uncertainty from a decision.

Scanning should be done on a continuous basis

levels of executives who contribute substantively to
the strategic management process.

Please read page 118 in the text book for further information.

Summary of the Chapter

The chapter provides an overview of tools

necessary for proper environmental scanning.

It begins with the importance of identifying forces
that drive change and how to establish a domain for
analysis purposes.
It then provides insight into the steps in the
effective assessment of key forces and
opportunities.
Shows the importance of sharing derived
conclusions throughout the organization.

Readings for the Chapter

http://www.widenarrow.com/begrepp__bi-cykeln.htm
l

(interactive webpage)

Literature in strategic management in

the hospitality industry,
Michael D. Olsen

CEO Perspectives on Scanning the Global Hotel

Business Environment, Michael D. Olsen,
Bvsan Murthy and Richard Teare

Case Study

Please read Case Study: Technology as a

Competitive Method: The Case of InterContinental
Hotels (page 119-125).

Please answer the discussion questions at the end

of the Case Study.

Case Study Answers

Case Study Answers

Figures for Case Study

Figure 1

Figures for Case Study

Figure 2
IT Planning Process

Figures for Case Study

Figure 3

Figures for Case Study

Figure 4

Chapter Questions

Which is NOT a function of the scanning system?

Identify each force, the variables, and their

interdependencies with other variables
Suggest cause and effect relationships
Determine resource allocation
Determine the history and timing of the development of
the forces
Assist in estimating the impact of forces driving change

Chapter Questions (contd)

The concept of industry structure refers to

the degree of complexity in the market place.

the degree of uncertainty in the market place.
another way to define the industry domain.
the degree of concentration of suppliers.
the degree of dispersion of customers.

Chapter Questions (contd)

In understanding industry structure, the manager must be able to
assess the degree of interdependencies that exist in the domain. This
statement refers to

the firm's ability to lead competitors in creating new products and services.
the investment in strategic alliances with other firms.
the degree to which the firm is dependent upon its board of directors.
the manager's ability to determine the cause and effect relationships in the business
domain.
the manager's ability to utilize such management tools as yield management.

Chapter Questions (contd)

The term body of knowledge refers to

the sum total of the firm's knowledge regarding its

competitive method.
the ability of the firm to gain competitive advantage
because it possesses more knowledge.
the sum total of all literature that has been written on
a particular topic.
the consultants' reports on industry structure.
none of the above

Chapter Questions (contd)

Which is not a criterion for evaluating the quality of

information sources?

The influence it has on strategic thinking

The number of sources
Timing
Validity
Reliability

Chapter Questions (contd)

Which company led the hotel industry in utilizing

technology in the1980s?

Holiday Inn Worldwide

Marriott
Hilton
Starwood

Chapter Questions (contd)

When discussing the structure of an environmental

scanning system, one must consider the following
issue(s):

who should participate in the process.

what resources should be allocated.
how the information is being processed and used.
all of the above
none of the above

Chapter Questions (contd)

What skill is not required for the director of

competitive intelligence or development analysis?

Analytical skills
Marketing skills
Communication skills
Self-management capability

Chapter Questions (contd)

Which is not considered a category of information?

Quantitative
Qualitative
Personal and personal
Signals and signs

Chapter Questions (contd)

Which field is not mentioned in the sampling of

disciplines and fields of study contributing to the
body of knowledge in the hospitality industry?

Nutrition
Sociology
Safety and security
Accounting

Chapter Questions (contd)

Which mode of scanning activities would most

managers fit into now?

Proactive
Routine
Reactive
Null

Chapter Questions (contd)

Content analysis is a tool to help managers interpret the
large amount of information about the environment. In using
content analysis, which skills are not required for applying
the content analysis process?

Comprehension skills
Analytical skills
Synthesizing skills
Application skills
Extrapolation skills

Chapter Questions (contd)

Environmental scanning activities should be carried

out:

annually.
bi-annually.
quarterly.
continuously.

Chapter Questions (contd)

Concept mapping is another tool to help interpret the large
amount of data that a manager must review in analyzing the
environment. It is a useful tool to help managers:

determine the frequency and volume of ideas that have emerged

from the content analysis process.
assess the relationship among various themes identified in the
content analysis process.
rank the most important themes.
identify relationships among various themes.
all of the above

Chapter Questions (contd)

Matrices are excellent ways of understanding the

relationship of:

the task environment with the remote environment.

the task environment with the resources of the firm.
the firm environment with the multinational environment.
the task environment with the resources of the firm; the
firm environment with the multinational environment.
all of the above

Chapter Questions (contd)

Scanning is best accomplished by

a team of individuals working independently on policy oriented

matters.
a team of individuals working together on strategic issues.
information shared equally among all the firm's employees.
information sharing based on the total body of knowledge on the
subject.
a team of individuals working together on strategic issues;
information sharing based on the total body of knowledge on the
subject.

Student Learning Objectives

On completion of this chapter, you will be able to;

Identify the environmental scanning process.

Develop an appreciation to scan the business environment effectively.
Describe the effective environmental scanning system.
Identify the unique elements business domain.
Identify and define the sources of information and give at least 1 hospitality
related example for each of them.
Identify the timing information.
Achieve a more practical understanding of forces that drive change in hospitality.
(Case Study)
Comprehend the feedback and evaluation systems.