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Benefits of environmental scanning

ENVIRONMENTAL SCANNING

INTRODUCTION

Environmental scanning is the acquisition and use of information about events, trends and relationships in an organization's external environment, the knowledge of which would help in planning the management future course of action for the organization (Anguilar 1976; Choo and Auster 1993). Environmental scanning is carried out by organizations to asses their internal and external environment for the preparation of future strategies so that no opportunity of growth is loss and set goals are achieved. Companies become aware of the changing trends, identify threats and competition. Organizations scan the environment in order to avoid surprises, identify threats and opportunities, gain competitive advantage and improve short term and long term planning (Sutton, 1988)

Environmental scanning can be done by the company itself or by hiring an outside source for this purpose. For example, HMV has appointed Retail Eyes to create a customer experience insight programme. This decision has been taken just in time before Christmas so that HMV can use this research in order to improve their customer service and retain a strong market position. Retail Eyes will be assessing all aspects of HMV'S customer's experience including speed of service, staff awareness of promotion and offers and the overall in store experience (http://www.marketingmagazine.co.uk/news/940202/HMV-appoints-Retail-Eyes-improve-customer-service/)

BENEFITS OF ENVIRONMENTAL SCANNING

Is environmental scanning of any benefit? Does it really help in improving the performance of organizations? Several studies show that it does. One study found that companies that implemented advanced environmental scanning systems increased their profits and revenue growth. (Robbins, Coulter, 2003, p )

The major advantage of environmental scanning is that it prepares the Organization for any crises or problem. An environmental scanning is to detect changes in the environment which is extremely important if an organization is to avoid crises management. A change in the external environment of the organization's can suddenly alter an organization's opportunities or resources. (Sandy Dibb et al, 2006, P)

One of the fastest growing areas of environmental scanning is competitor's intelligence which can be described as a process by which today organizations gather information about their competitor's future plans, strategies, and ideas.

Competitors can be monitored by collecting data about them. Today most of the data is available by different sources like websites of companies etc. on current and developing products, prices, bargains and deals. These materials help in establishing the basis of a competitor's strong and weak points, future plans and policies.

GLOBAL SCANNING

Obtaining Geographical data is important as marketing strategies, consumer preference, effectiveness, efficiency and availability of products are analysed according to a region and country.

The importance and value of global scanning for a company depends on the extent of the organizations international activities. For a company that has significant international operations, global scanning can provide a wealth of information. (Robbins, Coulter, 2003, p )

Environmental scanning creates the foundation and pathway for forecasting. Information generated and gathered by environmental scanning is used to develop scenarios. This in turn establishes premises for forecasts which are predictions of outcomes.

Two specific outcomes managers attempt to forecast are future revenues and new technological revenues. (Robbins, Coulter, 2003, p )

An awareness of the dynamic environment was responsible for Nokia taking advantage of increased growth by other companies. Nokia accurately predicted and planned for a slow down in growth when other companies like Sony Ericsson's strategies were based on a predicted 30-40 percent growth. This inaccurate forecasting lead to the misuse of resources available to Sony Ericsson. Moreover, it also missed an opportunity to create products more relevant to the markets demand (Strategic Direction, 2007)

TECHNOLOGICAL FORCASTING

Technological forecasting attempts to predict changes in technology and its time frame in which new technologies are likely to be economically feasible (Terry Lucey, 1997 )

After the launch of Apple's iPod Nano and iPod Shuffle, other companies like Dell, Sony, Samsung has come out with MP3 players as well which have got added features like voice recording and offer their gadgets at lower prices. Although, Apple has the edge of introducing their products first but they are expensive when compared with the products of their competitors. In most cases, it is seen that customers plan to buy the technology with added features at lower prices offered to them.

INTRODUCTION

The EMI Company is one of the four largest Music companies in the World along with Sony BMG, Universal and Warner. It is a British Company which was founded in 1931 after the merger of two companies called UK Columbia Graphaphone Company and Gramopahone Company.

EMI has been involved in the many aspects of the music industry like manufacturing of broadcasting equipment like broadcast television cameras and supplied BBC, ITV and other television stations in early 70s and 80s.

HISTORY

From the inception of EMI, the Gramophone Company established and spread their business in other countries like India, Australia, New Zealand and overshadowed their music scene. Today EMI has got its activities going on in 40 Countries.

However because of depression in 1930s a much diminished Columbia USA was purchased by American Record Company and EMI were forced to sell it because of growing opposition from its American competitors. EMI however retained the rights to the Columbia name in most other territories like UK, Australia and New Zealand and continued the label until 1972 when it was replaced by EMI Records. (http://en.wikipedia.org/wiki/EMI). EMI sold its remaining rights to the Columbia name to Sony and the label is now operated exclusively throughout the world by Sony Music Entertainment; except in Japan where the trade mark is owned by Columbia Music Entertainment.

ACCOMPLISHMENTS

EMI enjoyed huge success in the POP or Popular music sector in the 1950's to the early 1970s. Many well renowned artists joined EMI and its subsidiary labels including Columbia and Capitol Records like The Beatles, Pink Floyd and Frank Sinatra to name a few

EMI was awarded Queen's Award for Technological Innovation in 1973 which is a prestigious and highest official award given to British businesses because of its improvisation and new approach.

EMI is also involved in music Publishing and is one of the largest music publisher in the World. Because of its renowned name and high standards, EMI has been winning the Music Week Award for Publisher of the Year for the last 10 years

EMI has signed Robbie Williams for 6 albums in 2002 at $157 million. This is the biggest recording contract in the British Music History but the second biggest in the music history as well.

LOSSES FOR EMI

EMI has faced a record loss of £260 million in 2006/2007 and after that was taken over by Terra Firma Capital Partners in August 2007. EMI's market share dropped from 16% to 9%. Several important clients left EMI like Sir Paul McCartney, Radiohead. Other artists change their company like The Rolling stones and signed album deal with Universal.

LATEST DEVELOPMENTS

CEO of Terra Firma Capital Partners, Guy Hands has new plans to cut 1,500 to 2000 jobs and to generally reduce the cost £200 million a year. This will have an affect on 5,500 employees of EMI.

MICRO ANALYSIS

MACRO ANALYSIS

PEST ANALYSIS

Describes a framework of macro environmental factors used in the environmental scanning component of strategic management, PEST is taken into consideration while assessing market growth or decline, position of the business and its potential for further growth

(http://ivythesis.typepad.com/term_paper_topics/2009/08/environmental-scan-of-the-london-eye.html)

POLITICAL

ECONOMIC

An economic condition of a company is an important aspect as it is directly related to the pricing of the products. If the company's economic condition is not well then it is more likely that it will have to cut down its expenses and pay roll other it won't be able to sustain its position in the market.

SOCIAL

The socio cultural environment encapsulates demand and tastes, which vary with fashion & disposable income. General changes can again provide both opportunities and threats for particular companies (Thompson, 2002; Pearce and Robinson, 2005)

Companies should keep in mind the changing taste and trends of the public. For keeping ahead, it is Important to offer innovative ideas before the competitors.

For example, in May 2009 EMI, Warner and Chrysalis Music has signed a partner ship deal with fashion supplier Webwear to launch a range of clothing inspired by song lyrics.

Webwear also supplies to high street shop including River Island, Jane Norman and Miss Selfriges.

By Sarah Johnson, marketingmagazine.co.uk 11 May 2009

http://www.marketingmagazine.co.uk/news/904913/Record-labels-launch-lyrics-inspired-clothing-range/?DCMP=ILC-SEARCH

TECHNOLOGICAL

In 2007 EMI was able to release its music on a higher quality of sounds with out the DRM Software, Because of this; the consumers can buy and play tracts on any device they want.

SWOT ANALYSIS

SWOT

STRENGTH

  1. Remarkable history with wonderful heritage with legendary recording artists like Beatles.
  2. Big Artists are still signing with EMI like Robbie Williams and Kylie Minogue etc.
  3. Appointing new but experienced senior team with experience in digital and consumer markets.
  4. EMI music publishing's organization is doing really well and its EMI music needs a make over.
  5. EMI's music business is divided into two parts. One supports, promotes, records and sell music for the new found talent called New Music Business and the second division take cares of the clients that they have, compiles their work, produces the greatest hits cds etc.

WEAKNESS

  1. Poor operational performance. Needs to focus on retailing aspect and how to present and sell their products.
  2. Lack of long term planning. EMI has not been able to change itself with the rapidly changing demands of the consumers and their markets. Although EMI's music catalogue with over 3 million songs but most of these songs can not be downloaded from EMI's website as they are not digitalised for downloading.
  3. Lack of understanding of origins and cultures of other countries and their music industry. Needs to focus more on the growing markets like Japan and Asia and design strategies accordingly to their culture and heritage
  4. EMI has never re invented itself, its strategies and approach towards artists. It has followed the same approach at all times whether the company was doing good, whether there was a changing trends in music, booming CD sales or a decline in them.
  5. The company's internal reporting or environmental scanning was not thoroughly done and so the company was not aware of, or didn't focus on changes taking place in its external environment. (http://www.emi.com/page/emi/EMIReports/0,,12641,00.html)

OPPORTUNITIES

JOINT VENTURE/ PARTNER SHIP COLLABORATION

  1. EMI made partnership with You Tube and Google in 2007 which enables it to acquire revenues from music and videos played on these websites. Similar partner ships are also been announced in 2008 with Nokia and My space which enables EMI music to be available legally on mobile phones and social networking sites.
  2. Google will be introducing a new search engine service. Consumer will be able to search songs, listen to an audio preview of the song which will be provided by partners MySpace and Lala and then will be provided with direct links to purchase the full song. MySpace will provide streaming music from record labels EMI, Sony Universal and Warner.
  3. (Fiona Ramsay, marketingmagazine.co.uk, 29 Oct 09)

    http://www.marketingmagazine.co.uk/news/949333/Google-reveals-music-search-service/?DCMP=ILC-SEARCH

  4. Similarly Sky is to launch an online music service offering access to over 4 million tracts for download and ad- free streaming.

This service will be available for anyone who has an active broadband connection. http://www.marketingmagazine.co.uk/news/944745/sky-rivals-Apple-Spotify-music-downlaod-launch/?DCMP=ILC-SEARCH

This service launches new releases and back catalogues from EMI, Sony, Universal and Warner (Fiona Ramsay, marketingmagazine.co.uk)

THREATS

  1. At the moment EMI has been paving its way so that its presence can be felt in the digital and cyber space. At the moment the major threat is the diminished and downfall of the sales of its traditional product, the CD (http://www.emi.com/staticFiles/ef/24/0,,12641~140527,00.pdf)
  2. Now the major sellers for CDS are the supermarkets and EMI faces a threat from them as they may cease stocking the CDS if the sales are not up to their expectations. This has been a major route for EMI to reach out to their customers and it cannot afford the cessation of this route.

  3. Piracy has been another major issue for EMI. Although EMI has introduced DRM free songs, but they haven't develop any other technology which can avoid their songs from being copied illegally
  4. 20 billion songs were sold completely DRM free and unprotected on CDS by the 4 BIG music companies themselves. There is no change of behaviour seen in this aspect as majority of the revenues depends on selling CDS..... (Steve Jobs, 2007)

  5. The Warner Music Company offered to buy EMI at $1.6 billion which was turned down. This was done in response to EMI'S offer to buy Warner Music Company but the deal didn't go through.

MARKETING STRATEGIES FOR EMI

Advertising and promotion plays an important role in the exchange process by informing consumers of an organization's product or service and convincing them of its ability to satisfy their needs or wants (Paul Smith et al, 2000)

It is very important for EMI to create a new market based on internet and e commerce.

There is an urgent need to increase the promotions of new products and services offered to the public at competitive prices. For example EMI should design something like Universal Music Group pricing initiative which is a very drastic action but it is an aggressive move made by Universal to strengthen its position in North America.

http://www.scribd.com/doc/2559417/CASE-STUDY-EMI-Group-PLC

EMI's new market strategy should be selling music directly to its customers through its website as it has the biggest collection

THE MARKETING MIX

PRODUCT

There are several key factors that are essential for product to sell.

In order to create the right marketing mix:

If possible product should be individually tailored according to the target market for an example: Pizza Hut is biggest franchise which has branches all over the world. In Pakistan beside their regular menu they have introduced several different type's pizzas for the local market such as Chicken Tikka, Spicy, Kebab etc. This has not only increased their appeal towards local people but also it is a key factor in their success.

PRICE

Of all the factors of the marketing mix, price is the one that generate sales revenue as it is the deciding factor for many people when choosing a certain product. Price is determined by the perception of the people what they think is the value of the item as people are more happy to pay what they expected rather than paying more money for a product that they perceived of a lesser value. In order to determine a price for a product, every company have to do a market survey before deciding a price of the product. Company's pricing policy will also rely on time and circumstances.

PROMOTION

Promotion is the art of communicating directly with the consumer. A good promotion should not only be able to sell the product but most importantly must sell the business itself because this helps the customer to decide next time what to buy if they are satisfied by company. It should provide details and information that will help the customer in making the decision to purchase a product or service. Nowadays most of the companies adopt a comparative technique inorder to promote their product. For an example Supermarkets like ASDA & Tesco always give the prices of their competitors in order to highlight their lower prices.

PLACE (DISTRIBUTION)

Although figures vary widely from product to product, roughly a fifth of the cost of a product goes on getting it to the customer. 'Place' is concerned with various methods of transporting and storing goods, and then making them available for the customer. Getting the right product to the right place at the right time involves the distribution system. The choice of distribution method will depend on a variety of circumstances. It will be more convenient for some manufacturers to sell to wholesalers who then sell to retailers, while others will prefer to sell directly to retailers or customers.

AIDA

AWARENESS

INFORMATION

DESIRE

ACTION

AWARENESS

Awareness is a process during which information is passed on to customers. This is a process which can be done individually or along with another company.

For example:

Google has unveiled a new product called Discover Music which enables people to find songs by search engine.

This site will provide a peek preview on the new songs released. This is provided by partners MySpace and Lala and then offer links on how to purchase the full song.

By Fiona Ramsay, marketingmagazine.co.uk, 29 October 09, 10:20

MySpace will provide streaming music from record labels EMI, Sony, Universal and Warner.

The pop-up player includes a link to music videos and any relevant tour information. Users will then be able to buy songs from iTunes or Amazon. By this process, Google will be able to attract more clients for viewing its website.

http://www.marketingmagazine.co.uk/news/949333/Google-reveals-music-search-service/?DCMP=ILC-SEARCH

INFORMATION

Many companies are using websites such as YouTube as a launching base for their new products because it makes life easier for the consumer to pick, choose and review a product before buying the actual product. Many artists have their tracks released on YouTube before the actual album release just give fans a sneak peek of the upcoming album and this definitely helps the sales of the album.

DESIRE

After the process of a certain piece creation, it is important that it reaches to the public and they are made aware of its existence. From marketing point of view it is important to create 'the look' for that product. When something is given a hard to get look or must have look then people are automatically attracted to it and they try to acquire it. It is important to know what the public want and how to project the product in front of them.

ACTION

For this purpose, usually organizations have a department or they usually hire services. For example: HMV has appointed Retail Eyes to create a customer-experience insight programme for the specialist entertainment retailer

Retail Eyes will be assessing all aspects of HMV's customers' experience including speed of service, staff awareness of promotions and offers, and the overall in-store experience.

This is a good way of getting the edge in regard to the competitors as many leading retailers are getting fewer customers than what they anticipated this Christmas, with competition from ecommerce even greater. HMV will use the research to improve its customer service in an attempt to retain a strong market position.

Retail Eyes' customer experience programme will comprise fortnightly mystery shopping visits, exit interviews and online customer satisfaction surveys....

Accessed date: 24th Nov 09

http://www.marketingmagazine.co.uk/news/940202/HMV-appoints-Retail-Eyes-improve-customer-experience/

3) In some areas EMI depends entirely on one supplier and because of that it can face interruption of manufacturing, distribution, digital supply. The activates and the intercourse with the external environment can halt if a failure from the provider takes place.

http://riccistreet.net/port80/images/fiveforces2.gif

Kotler, P. (1998) Marketing Management - Analysis, Planning, Implementation, and Control, 9th Edition, Englewood Cliffs: Prentice-Hall.

THREATS OF NEW ENTRANTS

Nowadays every company is threatened by its rival as new marketing techniques have developed and customers are more aware and conscious. When EMI first started their business 1931 they were the market leaders in the music industry but as time went by things changed and new companies were introduced and now today EMI is the fourth behind Sony Music Entertainment, Universal Music Group, Warner Music Group.

BARGAINING POWER OF SUPPLIERS

Suppliers are the key of the supply chain of any company. As price is the deciding factor for customers in choosing a product and a successful sale results in revenue for the company. Price is directly dependant on the cost of the actual product which relies on suppliers. If company manages to bargain a good price from its suppliers this will not only be profitable for the company but will also give the company more flexibility in determining the price of the product.

BARGAINING POWER OF BUYERS:

EMI holds one of the largest collection of songs in the World but many old songs are not available for buying through their website. These songs ae available in MP3 format from other websites as free downlaods.EMI has just recently starting selling through their website and in collaboration to other internet giants.

THREATS OF SUBSTITUTE PRODUCTS

For Emi, this is a major threat. Because of this EMI's policy should be re invention of their products, modes of availability to the public and offers made at competitive price. EMI should also consider the life span of their star product 'The Cd'.

Such an example is the selling fo beatles back catalogue by a US based website BlueBeat.com at a very low price of 15p.If music companies continue to sell their songs as a overpriced product, things like these will keep on occuring. The best way out of this is to offer such a deal that the customers come directly to you.( James Hall, www.telegraph.co.uk/culture/music/the-beatles/6488485/EMI-angered-by-US-website-selling-Beatles-songs-for-15p.html)

ADVERTISING AND PROMOTION

EMI needs strong advertising and promotion of its goods. Although EMI has not been able to offer competitive prices to its customers, but they can offer high quality albums, online music downloading, availability of different genres of songs etc.

EMI needs to work on innovation and on latest technology that they offer to their customers. It needs to change the way it is seen by its customers. Regular promotion of new songs, updating their websites is the few things.

EMI has started realizing that their back catalogue is a very valuable asset. EMI has hired Timothy Ryan to head its marketing for the EMI Music catalogue as senior vice president, global priorities, catalogue marketing.( Sarah Johnson, marketingmagazine.co.uk)

http://www.marketingmagazine.co.uk/news/936972/EMI-Music-appoints-Timothy-Ryan-oversee-back-catalogue-marketing/?DCMP=ILC-SEARCH

If music is made available to them on this format it will definitely will have a positive effect on overall sales of the entire company but will also help to create a more trendy and up to date image of the company which will appeal to young generation.

ENDORSMENT

Venturing into artists from different countries, languages and background and to provide them a universal platform to perform and launch their music worldwide. This has its dual advantages for both the Company and the Artist. For an example Junoon, a band from Pakistan signed a record deal with EMI in 1998-1999 for their album Parvaz which opened up a new market for company in South Asia. This band later on became the biggest rock band from South Asia and are the pioneers of the sufi rock genre of music. Q magazine calls them "One of the biggest bands in the world" and NY Times Magazine called them the U2 of Pakistan.

BIBLIOGRAPHY

(Anguilar 1976, Choo and Auster 1993)

Chun Wei Choo (2001) Environmental scanning as information seeking and Organizational learning, Information research, Vol 1, No.1

http://www.scribd.com/doc/2559417/CASE-STUDY-EMI-Group-PLC

http://www.emi.com/staticFiles/ef/24/0,,12641~140527,00.pdf

Fiona Ramsay, marketingmagazine.co.uk, 29 October 09, 10:20

Fiona Ramsay, marketingmagazine.co.uk, retrieved from <http://www.marketingmagazine.co.uk/news/944745/sky-rivals-Apple-Spotify-music-downlaod-launch/?DCMP=ILC-SEARCH>

Fiona Ramsay, Retrieved from marketingmagazine.co.uk,<http://www.marketingmagazine.co.uk/news/949333/Google-reveals-music-search-service/?DCMP=ILC-SEARCH> Accessed Date 26th Nov 09

Marketing Magazine, Retrieved from <http://www.marketingmagazine.co.uk/news/936972/EMI-Music-appoints-Timothy-Ryan-oversee-back-catalogue-marketing/?DCMP=ILC-SEARCH> Accessed Date 2nd Nov 09

Marketing Magazine, Retrieved from <http://www.marketingmagazine.co.uk/news/940202/HMV-appoints-Retail-Eyes-improve-customer-experience/ >, Accessed date: 24th Nov 09

Fiona Ramsay, Retrieved from marketingmagazine.co.uk, <http://www.marketingmagazine.co.uk/news/949333/Google-reveals-music-search-service/?DCMP=ILC-SEARCH> Accessed Date 26th Nov 09

http://www.marketingmagazine.co.uk/news/904913/Record-labels-launch-lyrics-inspired-clothing-range/?DCMP=ILC-SEARCH

Paul Smith et al, 2000

Pearce, J. and Robinson, R (2005) Strategic Management, 9th Edition, New York: McGraw-Hill.

Sandy Dibb and et al.(2006) "Marketing Concepts and Strategies", 5th Edition, Houghton Mifflin, USA,

Sarah Johnson, marketingmagazine.co.uk

Stephen P Robbins, Mary Coulter (2006) "Management" 6th Edition, New Jersey, Prentice Hall, pg 268 to 270

Steve Jobs, 2007

Telegraph,James Hall, Retrieved from http://www.telegraph.co.uk/culture/music/the-beatles/6488485/EMI-angered-by-US-website-selling-Beatles-songs-for-15p.html Published: 7:38PM GMT 02 Nov 2009, Assessed Date 24th Nov 09

Terry Lucey (1997) "Management Information Systems", 8th Edition, Continuum, London, p 249-250

Thompson, J. (2002) Strategic Management, 4th Edition, London: Thomson

http://en.wikipedia.org/wiki/EMI)

(http://ivythesis.typepad.com/term_paper_topics/2009/08/environmental-scan-of-the-london-eye.html)

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