Managing Change In an Organization through Environmental Analysis

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"At the beginning of the 21st century the forms of change within organizations have been innovatory and a widespread conviction has arisen as to the revolutionary nature to such changes as a sign of the times, (Pettigrew & Massini, 2003). While Tushman & O'Reilly III (1996) argues that the industry level of studies has not been helpful in illustrating the path of organization's change, Greiner (1972) outlines a corporate growth model in order to provide a useful framework in understanding organizational change. Psychologists believe that learning as a human behavior can be defined as the relatively permanent change in actions as a result of experience or practice, (Baars, 1986). Reflecting and highlighting this concept in relation to an organization it is subsequently essential to look at organizational change from a historical perspective as organizations learn from their own experiences. Thus innovations in terms of evolutionary and revolutionary change occur at each organizational growth level as determined by Greiner (1972). To answer these fundamental questions about the nature of organizational change it is vital to distinguish between two levels of change. Similarly the factors that directly influence organizational behavior and organizational features that determine these factors should be examined in turn need to be considered. In line with Greiner's (1972) theory each of the organizational elements and processes are shaped by its choices implied in the consciousness of the history of the organization".

Environmental Scanning:

Definition: It is a process of analyzing, gathering and dispensing information for tactical or strategic purpose.

Environmental Analysis:

Meaning: It's a very significant business tool by which businesses can gather information from the surroundings to achieve a sustainable competitive advantage in a better way. In order to attain it the company must also respond to the information gathered from environmental scanning by altering its plans and strategies when the need arises.

Types of Scanning:

The Ad-hoc scanning is a short term which has infrequent examinations usually initiated by a crisis.

The regular scanning studies done on a daily basis one time in a year.

In continuous scanning also called as continuous learning in which structured data collection and processing on a broad range.

"Most commentators feel that in present turbulent business environment the best scanning method available is continuous scanning because this allows the firm to act quickly, take advantage of opportunities before competitors do and respond to environmental threats before significant damage is done". 

1.1.1 Information for strategic plan :-

Porter (2004, 1) notes that a successful strategy should result in "a favourable position in an industry" -- a "competitive advantage". Sustainable competitive advantage is achieved by gathering resources that are inimitable, are valued by the customer and can be used effectively (Fahy and Smithee, 1999).Environmental scanning provides information about the strengths or weaknesses of competitors and consumer behaviour. That enables companies to distinguish which resources are valuable to the market and provides information which can be used as the basis of marketing strategies to influence these resources and apply them most appropriate.

1.1.2 Detect new opportunity:-

Kotler (2003) notes that it important to detect new opportunity and forecast demand.

Introduction of online music there is big loss to CD single market collapsed between 2000 and 2004, with annual sale fall from 80 million units, worth £ 200 million, to just 31 million units, worth £80 million. By this big sale falling music industry badly hit, but they found new opportunity in this big threat by putting music online through i-tunes, Napster and MyCokeMusic.com have finally made digital downloading profitable arm.

1.1.3 Executive development and simulation:-

Executive level strategic planning should build on data rather than craze. This is important as it not only projects a more professional image but also keeps the executive decision makers in tune with the market. Further, it provides decision makers, who are usually appointed to these positions due to their capacity to turn thought in to action and ultimately profit.

1.1.4 Monitor trends and fashions of market:-

Strategic Direction (2005, 21) note that success or failure depends on "ever-quicker reactions to market trends, requirements and aspirations". However, it could be said that to "react" advises that companies should act after the event, by which time, it may be too late. Environmental scanning increases compassion to customers changing needs and companies should be active in monitoring, expecting and replying to market trends. Even if the company is not able to be first to market with a new product, simply know what is happening in the competitive environment enables them to plan ahead and build competitive strategies.

1.1.5 Monitor business environment:-

Saxby et al (2002) highlight the prominence of regular and continual scanning due to the dynamic nature of the modern business environment. This is vital as small fluctuation in the environment such as legislative, cultural or technological changes, if not expected and acted upon, can be the difference between becoming the market leader and liquidation. It is important to note that the affect of environmental changes on one company may be different to the affect on another. Changes in the economic environment have intended that companies with heavy trust on finance have been bare of working capital whereas cash-rich companies have been able to take advantage of this by positioning themselves to acquire bankrupt competitors and increase their market share.

PEST Analysis:

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors such as Political, Economic, Social, and Technological.

The acronym PEST sometimes rearranged as "STEP" is used to describe a framework for the analysis of these macro-environmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram:

Environmental Scan

/ \

External Analysis Internal Analysis

/ \

Macro-environment Microenvironment

/

PEST Analysis

Political Factors:

Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some example includes tax policy, employment laws, environmental regulations, trade restrictions and tariffs, political stability.

Economic Factors:

Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macro economy that includes economic growth, interest rates, and exchange and inflation rates

Social Factors:

Social factors include the demographic and cultural aspects of the external macro-environment. These factors affect customer needs and the size of potential markets. Some social factors include such as health consciousness, population growth rate, age distribution, career attitudes, and emphasis on safety.

Technological Factors:

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include R&D activity, automation, technology incentives, and rate of technological change.

The PEST factors combined with external micro-environmental factors can be classified as opportunities and threats in a SWOT analysis.

Macro Environment:

Macro- environment consist of many factors that can have an impact on organization's decision making. It includes factors such as government rules and regulations, Demographic and environmental changes, financial situation, Latest innovation and technologies, employment laws, Global economic situation etc. To help understand these factors well, it can be classified under the model called "PESTLE". It includes the factors such as Political, Social, Economical, Technological, Environmental and Legal. The figure below shows the influence of these macro- environment factors on the organization. (Kotler, P. (2003), Page: 102)

2.1.1 Political

These refer to government policy such as the degree of interference in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidising firms? What are its priorities in terms of business support? Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system.

2.1.2 Economic

These refer to economic growth, inflation and exchange rates, interest rates, taxation changes. You can see during the "Foundations of Economics" book economic change can have a major influence on a firm's activities. For example:

If interest rates high, it may prevent investment because it costs more to borrow

Strong currency makes the exporting more difficult because it will make the cost of goods high in terms of currency conversion.

Inflation may aggravate higher wage demands from raise cost and employee.

Higher national income growth may boost demand for a firm's products

In the UK inflation rate in April is 3.7% which is surprisingly higher than the march's figure of 3.4%.

2.1.3 Social

Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staffs are living longer. It also means some firms such as ASDA have started to recruit older employees to tap into this growing labour pool. The ageing population also has impact on demand: for example, demand for sheltered accommodation and medicines have increased whereas demand for toys is falling.

2.1.4 Technological

New technologies create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products.

2.1.5 Environmental

Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.

2.1.6 Legal 

These are related to the legal environment in which firms operate. In recent years in the UK there have been many significant legal changes that have affected firms' behaviour. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organisation's actions. Legal changes can affect a firm's costs (e.g. if new systems and procedures have to be developed) and demand (e.g. if the law affects the likelihood of customers buying the good or using the service).

SWOT ANALYSIS:

Identification of threats and opportunities in the environment (External) and strengths and

Weaknesses of the firm (Internal) are the cornerstone of business policy formulation; it is these factors which determine the course of action to ensure the survival and growth of the firm.

The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of Situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, threats. SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT stemmed from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure. The research team was Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie. It all began with the corporate planning trend, which seemed to appear first at Du Pont in 1949. By 1960 every Fortune 500 company had a 'corporate planning manager' (or equivalent) and 'associations of long range corporate planners' had sprung up in both the USA and the UK.

Strategic and Creative use of S.W.O.T:

Analysis: - Orienting to an Objective

If SWOT analysis does not start with defining a desired end state or objective, it runs the risk of being useless. A SWOT analysis may be incorporated into the strategic planning model. An example of a strategic planning technique that incorporates an objective-driven SWOT analysis is SCAN analysis.

Studying Internal &External Environment:

The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories are:

Internal factors - The strengths and weaknesses internal to the organization.

External factors - The opportunities and threats presented by the external environment.

If a clear objective has been identified, SWOT analysis can be used to help in the pursuit of that objective. In this case, SWOT categorized as follows:

Strengths: attributes of the organization that is helpful to achieving the objective.

Weaknesses: attributes of the organization that is harmful to achieving the objective.

Opportunities: external conditions that is helpful to achieving the objective.

Threats: external conditions that is harmful to achieving the objective.

Examples of SWOT:

Strengths and Weaknesses

Resources: financial, intellectual, location

Cost advantages from proprietary know-how

Creativity / ability to develop new products

Valuable intangible assets: intellectual capital

Competitive capabilities

Big campus selection

Opportunities and Threats

Takeovers

Market Trends

Economic condition

Mergers

Joint ventures

Strategic alliances

Expectations of stakeholders

Technology

Uses of SWOT Analysis:

• Corporate planning

• Set objectives - defining what the organization is intending to do.

Internal appraisals of the organizations SWOT; this needs to include an assessment of the present situation as well as a portfolio of products/services and an analysis of the product/service life cycle.

2.2.1 Marketing Mix

Marketing mix usually falls into following four categories:

(1) Product

(2)Price

(3)Place

(4)Promotion

This term "Marketing Mix" accepted after Neil H. Bowden published his 1964 article.

Professor Neil Boldetn in 1940's was the first person to introduce the marketing mix. It may be defined as various goals variables which are available to marketing strategies at a particular point of time which are popularly known as 4P's. They are Pace, People, Policy, Process, Packaging etc., the discussed12 variables which were reduced to 4 variables by J McCarthy.

a) Product: The key factors for a successful product are its brand, features, design, quality, range warranty, service, size, packing and performance. With applying these principles and policies EMI has generated good revenue in the music industry for the past years.

b) Price: It defines the current strategies, credit limit for the online customers, providing cost effective measures and offering discounts can significantly increase the sales.

c) Promotion: The key factors such as promotion of sales, door- door selling, advertising on T.V, sponsorship, multi-level marketing, direct marketing, trade fair & expositions which can be combined for the profit of an organization". EMI usually promoting their products using online methods, Media Like MTV and radio. At the same time artist popularity and reputation can make an enormous impact on sales.

d) Place: It relies on various factors like channels, location, coverage, transportation, inventory, width, spread, and shippers. EMI should strive hard to keep up the good work and maintaining that by exploring new emerging technology and innovative ideas to retain its customers to buy and listen to their music.

Conclusion:

For organizations to flourish, let alone survive in the future, their perspective must be global. This is the key to why Managing Cultural Differences by Harris and Moran was written.

In the instance managers should be encouraged to get involved in local volunteer work, they should never allow their attention to be diverted from their core corporate responsibilities.

The theory is that the best community relations in the world, and the clearest expression of social responsibility, is to provide steady, well-paying jobs.

While many directors do so, all too frequently they are too subservient to the chief executive.

Corporate refugees often do become entrepreneurs. But generally, corporate managers are a different type.

The entrepreneur is built to run his own show, be his own boss, and take his own risks.

REFERENCES:

Books referred:

Coates,J.F., Inc(1985)Issues, identification and management: the state of the art of methods and techniques(Research project 2345-28)

Kendra S. Albright, "Environmental Scanning: Radar for Success", Information Management Journal 38 (3), May/June 2004: p. 38)

Kotler, P. 2003. Marketing Management: International edition. Prentice Hall Marketing. USA

Websites referred:

http://wikipedia.org/Environmental_scanning -accessed on 25/05/10

http://www.allbusiness.com on 27/05/10

http://dictionary1.babylon.com/Environmental_Scanning accessed on 28/05/10

http://definitions.uklegal.com/e/environmental-scanning accessed on 03/06/10

http://horizon.us.edu/courses/papers/enviroscan accessed on 03/06/10

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