Following, an attempt is made here to illustrate how specific trends in the environment may be systematically scanned. A search of the literature in the area of politics shows that the following federal laws were considered as we approach the next century:

    1.  Requiring that all ad claims be substantiated.
    2.  Publishing corporate actions that endanger the environment.
    3.  Disclosing lobbying efforts in detail.
    4.  Reducing a company’s right to fire workers at will.
    5.  Eliminating inside directors.

The marketing strategist of a consumer-goods company may want to determine if any of these trends has any relevance for the company. To do so, the strategist may undertake trend-impact analysis. Trend-impact analysis requires the formation of a delphi panel (see Article 12) to determine the desirability (0-1), technical feasibility (0-1), probability of occurrence (0-1), and probable time of occurrence (2000, 2005, and beyond 2005) of each event listed. The panel may also be asked to suggest the area(s) that may be affected by each event (i.e., production, labor, markets [household, business, government, export], finance, or research and development). Information about an event may be studied by managers in areas that, according to the delphi panel, are likely to be affected by the event. If their consensus is that the event is indeed important, scanning may continue. Next, cross-impact analysis may be undertaken. This type of analysis studies the impact of an event on other events. Where events are mutually exclusive, such analysis may not be necessary. But where an event seems to reinforce or inhibit other events, cross-impact analysis is highly desirable for uncovering the true strength of an event. Cross-impact analysis amounts to studying the impact of an event (given its probability of occurrence) upon other events. The impact may be delineated either in qualitative terms (such as critical, major, significant, slight, or none) or in quantitative terms in the form of probabilities. Crossimpact ratings, or probabilities, can best be determined with the help of another delphi panel. To further sharpen the analysis, whether the impact of an event on other events will be felt immediately or after a certain number of years may also be determined. Cross-impact analysis provides the “time” probability of the occurrence of an event and indicates other key events that may be monitored to keep track of the first event. Cross-impact analysis is more useful for project-level scanning than for general scanning. To relate environmental trends to strategy, consider the following environmental trends and strategies of a cigarette manufacturer:

     Trends
  T1:  Requiring that all ad claims be substantiated.
  T2:  Publishing corporate actions that endanger workers or the environment.
  T3:  Disclosing lobbying efforts in detail.
  T4:  Reducing a company’s right to fire workers at will.
  T5:  Eliminating inside directors.
    
     Strategies
  S1:  Heavy emphasis on advertising, using emotional appeals.
  S2:  Seasonal adjustments in labor force for agricultural operations of the company.
  S3:  Regular lobbying effort in Washington against further legislation imposing
  restrictions  on the cigarette industry.
  S4:  Minimum number of outside directors on the board.

The analysis shows that Strategy S1, heavy emphasis on advertising, is most susceptible and requires immediate management action. Among the trends, Trend T5, eliminating inside directors, will have the most positive overall impact. Trends T1 and T2, requiring that all ad claims be substantiated and publishing corporate actions that endanger the environment, will have a devastating impact. This type of analysis indicates where management concern and action should be directed. Thus, it will be desirable to undertake forecasts of Trends T1 and T2. The forecasts may predict when the legislation will be passed, what will be the major provisions of the legislation, and so on. Three different forecasts may be obtained:

    1.  Extremely unfavorable legislation.
    2.  Most probable legislation.
    3.  Most favorable legislation.

Three different scenarios (using three types of forecasts) may be developed to indicate the impact of each trend. This information may then be passed on to product/market managers for action.

ORGANIZATIONAL ARRANGEMENTS AND PROBLEMS

Corporations organize scanning activity in three different ways: (a) line managers undertake environmental scanning in addition to their other work; (b) scanning is made a part of the strategic planner’s job; (c) scanning responsibility is instituted in a new office of environmental scanning.

Structuring Responsibility for Scanning

Most companies use a combination of the first two types of arrangements. The strategic planner may scan the corporate-wide environment while line managers concentrate on the product/market environment. In some companies, a new office of environmental scanning has been established with a responsibility for all types of scanning. The scanning office undertakes scanning both regularly and on an ad hoc basis (at the request of one of the groups in the company). Information scanned on a regular basis is passed on to all in the organization for whom it may have relevance. For example, General Electric is organized into sectors, groups, and SBUs. The SBU is the level at which product/market planning takes place. Thus, scanned information is channeled to those SBUs, groups, and sectors for which it has relevance. Ad hoc scanning may be undertaken at the request of one or more SBUs. These SBUs then share the cost of scanning and are the principal recipients of the information. The environmental scanner serves to split the work of the planner. If the planner already has many responsibilities and if the environment of a corporation is complex, it is desirable to have a person specifically responsible for scanning. Further, it is desirable that both planners (and/or scanners) and line managers undertake scanning because managers usually limit their scanning perceptions to their own industry; that is, they may limit their scanning to the environment with which they are most familiar. At the corporate level, scanning should go beyond the industry. Whoever is assigned to scan the environment should undertake the following six tasks:

1. Trend monitoring Systematically and continuously monitoring trends in the external environments of the company and studying their impact upon the firm and its various constituencies.

2. Forecast preparation Periodically developing alternative scenarios, forecasts, and other analyses that serve as inputs to various types of planning and issue management functions in the organization.

3. Internal consulting Providing a consulting resource on long-term environmental matters and conducting special future research studies as needed to support decision-making and planning activities.

4. Information center Providing a center to which intelligence and forecasts about the external environment from all over the organization can be sent for interpretation, analysis, and storage in a basic library on long-range environmental matters.

5. Communications Communicating information on the external environment to interested decision makers through a variety of media, including newsletters, special reports, internal lectures, and periodic analyses of the environment.

6. Process improvement Continually improving the process of environmental analysis by developing new tools and techniques, designing forecasting systems, applying methodologies developed elsewhere, and engaging in a continuing process of self-evaluation and self-correction.

Successful implementation of these tasks should provide increased awareness and understanding of long-term environments and improve the strategic planning capabilities of the firm. More specifically, environmental inputs are helpful in product design, formulation of marketing strategies, determination of marketing mix, and research and development strategies. In addition, the scanner should train and motivate line managers to become sensitive to environmental trends, encouraging them to identify strategic versus tactical information and to understand the strategic problems of the firm as opposed to short-term sales policy and tactics.

Time Horizon of Scanning Scanning may be for a short term or a long term. Short-term scanning is useful for programming various operations, and the term may last up to two years. Longterm scanning is needed for strategic planning, and the term may vary from three to twenty-five years. Rarely does the term of scanning go beyond twenty-five years. The actual time horizon is determined by the nature of the product. Forest products, for example, require a longer time horizon because the company must make decisions about tree planting almost twenty-five years ahead of harvesting those trees for lumber. Fashion designers, however, may not extend scanning beyond four years. As a rule of thumb, the appropriate time horizon for environmental scanning is twice as long as the duration of the company’s strategic plan. For example, if a company’s strategic plan extends eight years into the future, the environmental scanning time horizon should be sixteen years. Likewise, a company with a five-year planning horizon should scan the environment for ten years. Presumably, then, a multiproduct, multimarket company should have different time horizons for environmental scanning. Using this rule of thumb, a company can be sure not only of discovering relevant trends and their impact on its products/markets but also of implementing necessary changes in its strategy to marshal opportunities provided by the environment and to avert environmental threats. Discussed below are the major problems companies face in the context of environmental scanning. Many of these problems are, in fact, dilemmas that may be attributed to a lack of theoretical frameworks on the subject.

1. The environment per se is too broad to be tracked by an organization; thus, it is necessary to separate the relevant from the irrelevant environment. Separating the relevant from the irrelevant may not be easy since, in terms of perceptible realities, the environment of all large corporations is as broad as the world itself. Therefore, a company needs to determine what criteria to develop to select information on a practical basis.

2. Another problem is concerned with determining the impact of an environmental trend, that is, with determining its meaning for business. For example, what does the feminist movement mean for a company’s sales and new business opportunities?

3. Even if the relevance of a trend and its impact are determined, making forecasts of the trend poses another problem. For example, how many women will be in managerial positions ten years from now?

4. A variety of organizational problems hinder environmental scanning. Presumably, managers are the company’s ears and eyes and therefore should be good sources for perceiving, studying, and channeling pertinent information within the organization. But managers are usually so tied up mentally and physically within their specific roles that they simply ignore happenings in the environment. The structuring of organizations by specialized functions can be blamed for this problem to a certain extent. In addition, organizations often lack a formal system for receiving, analyzing, and finally disseminating environmental information to decision points.

5. Environmental scanning requires “blue sky” thinking and “ivory tower” working patterns to encourage creativity, but such work perspectives are often not justifiable in the midst of corporate culture.

6. Frequently top managers, because of their own values, consider dabbling in the future a waste of resources; therefore, they adopt unkind attitudes toward such projects.

7. Many companies, as a matter of corporate strategy, like to wait and see; therefore, they let industry leaders, the ones who want to be first in the field, act on their behalf.

8. Lack of normative approaches on environmental scanning is another problem.

9. Often, a change is too out of the way. It may be perceived, but its relationship to the company is not conceivable.

10. It is also problematic to decide what department of the organization should be responsible for environmental scanning. Should marketing research undertake environmental scanning? How about the strategic planning office? Who else should participate? Is it possible to divide the work? For example, the SBUs may concentrate on their products, product lines, markets, and industry. The corporate level may deal with the rest of the information.

11. Often, information is gathered that is overlapping, leading to a waste of resources. There are frequently informational gaps that require duplication of effort.

The environment is ever-changing and complex; thus firms must constantly scan and monitor it. Environmental scanning may be undertaken at three levels in the organization: corporate level, SBU level, and product/market level. This article approaches scanning primarily from the SBU viewpoint. The environments discussed are technological, political, economic, social, and regulatory. Environmental scanning evolves over a long haul. It is sufficient, therefore, to make a humble beginning rather than designing a fully structured system. The impact of different environments on marketing strategy was illustrated by numerous examples. A step-by-step procedure for scanning the environment was outlined. Asystematic approach to environmental scanning, using such techniques as trend-impact analysis, cross-impact analysis, and the delphi method was illustrated. Feasible organizational arrangements for environmental scanning were examined, and problems that companies face in their scanning endeavors were discussed.

Scanning Techniques Traditionally, environmental scanning has been implemented mainly with the use of conventional methods, including marketing research, economic indicators, demand forecasting, and industry studies. But the use of such conventional techniques for environmental scanning is not without pitfalls. These techniques have failed to provide reliable insights into the future. Discussed below are a variety of new techniques that have been adapted for use in environmental scanning.

Extrapolation Procedures These procedures require the use of information from the past to explore the future. Obviously, their use assumes that the future is some function of the past. There are a variety of extrapolation procedures that range from a simple estimate of the future (based on past information) to regression analysis.

Historical Analogy Where past data cannot be used to scan an environmental phenomenon, the phenomenon may be studied by establishing historical parallels with other phenomena. Assumed here is the availability of sufficient information on other phenomena. Turning points in the progression of these phenomena become guideposts for predicting the behavior of the phenomenon under study.

Intuitive Reasoning This technique bases the future on the “rational feel” of the scanner. Intuitive reasoning requires free thinking unconstrained by past experience and personal biases. This technique, therefore, may provide better results when used by freelance think tanks than when used by managers on the job.

Scenario Building This technique calls for developing a time-ordered sequence of events bearing a logical cause-and-effect relationship to one another. The ultimate forecast is based on multiple contingencies, each with its respective probability of occurrence.

Cross-Impact Matrices When two different trends in the environment point toward conflicting futures, this technique may be used to study these trends simultaneously for their effect. As the name implies, this technique uses a two-dimensional matrix, arraying one trend along the rows and the other along the columns. Some of the features of cross-impact analyses that make them attractive for strategic planning are that (a) they can accommodate all types of eventualities (social or technological, quantitative or qualitative, and binary events or continuous functions), (b) they rapidly discriminate important from unimportant sequences of developments, and (c) their underlying rationale is fully retraceable from the analysis.

Morphological Analysis This technique requires identification of all possible ways to achieve an objective. For example, the technique can be employed to anticipate innovations and to develop optimum configurations for a particular mission or task.

Network Models There are two types of network methods: contingency trees and relevance trees. A contingency tree is simply a graphical display of logical relationships among environmental trends that focuses on branch-points where several alternative outcomes are possible. A relevance tree is a logical network similar to a contingency tree but is drawn in a way that assigns degrees of importance to various environmental trends with reference to an outcome.

Missing-Link Approach The missing-link approach combines morphological analysis and the network method. Many developments and innovations that appear promising and marketable may be held back because something is missing. Under these circumstances, this technique may be used to scan new trends to see if they provide answers to any missing links.

Model Building This technique emphasizes the construction of models following deductive or inductive procedures. Two types of models may be constructed: phenomenological models and analytic models. Phenomenological models identify trends as a basis for prediction but make no attempt to explain underlying causes. Analytic models seek to identify underlying causes of change so that future developments may be forecast on the basis of a knowledge of their causes. Delphi Technique The delphi technique is the systematic solicitation of expert opinion. Based on reiteration and feedback, this technique gathers opinions of a panel of experts on happenings in the environment.