Environmental Scanning 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 Domain Definition Long-term Objectives Geographic Market Area Segment Primary Competition Target Market Performance Measure Action Plan Resources Needed Evaluation Timetable Responsibility Accountability Rational Environmental Events Competitive Methods Strengths and Weakness Analysis S2 P2 P3 S3 P1 S1 Industry Remote Task Firm Functional 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 Major Trend a consistent pattern of events-all firms Industry Structure All firms in the sector have invested in the CM Ideal Scanning Window Evidence of use by leaders Leading firms adopt and invest in the new CM A pattern is emerging Introduction of new CMs Innovator/Entrepreneur creates a new CM Fads Innovations Major Trend Fact of Life Innovation / CM Life Cycle

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 Elements of the domain Geographic market area Segment defined by competitive methods made up of the mix of product and service attributes Primary competition Major descriptors of target market Industry structure Existing competitors, potential competitors, substitutes, suppliers and buyers Determine interdependencies Relationships with suppliers, competitors Relationships among different environmental categories Primary and secondary relationships (hierarchical)

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 Primary Demand Generators Population Housing Transportation Industry Health facilities Recreational facilities Special events Attractions Income levels Secondary Demand Generators Business travelers Conventions and meetings Incentive travel Government Military Fraternal groups Pleasure travelers Airline business Sports teams Special events

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 Economics Accounting Ecology Finance Food Science Management Information Systems Nutrition Human Resources Organizational Behavior Linguistics Organization Theory Marketing Psychology Management Science Political Science Operations Technology Engineering Sociology Strategic Management

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 Quantitative & Qualitative Information Personal Researchers Internal personnel Consultants Suppliers External business associates Friends and family Non-personal Conferences Seminars Trade Associations Trade Magazines Newsletters News Services On-line Services Newspapers Government Statistics/Reports Internal Research Databases

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 Today’s 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 Executive Level External Level Operations Level Functional Level 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.html (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

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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 (cont’d) 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 (cont’d) 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 (cont’d) 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 (cont’d) 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 (cont’d) Which company led the hotel industry in utilizing technology in the1980s? Holiday Inn Worldwide Marriott Hilton Starwood

Chapter Questions (cont’d) 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 (cont’d) 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 (cont’d) Which is not considered a category of information? Quantitative Qualitative Personal and personal Signals and signs

Chapter Questions (cont’d) 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 (cont’d) Which mode of scanning activities would most managers fit into now? Proactive Routine Reactive Null

Chapter Questions (cont’d) 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 (cont’d) Environmental scanning activities should be carried out: annually. bi-annually. quarterly. continuously.

Chapter Questions (cont’d) 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 (cont’d) 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 (cont’d) 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.