How the Current State of the Economy Affects an Environmental Scan

An environmental scan is an analysis carried out on the surrounding area to check on the current market condition to start a project or launch a new product. It is a means of gaining information on the external and internal factors, which will help your organization identify opportunities and threats in the market. An environmental scan is carried out in five main forces – regulatory, economic, competitive, technological and social forces. It is important for an organization to apply a proactive approach in its plan rather than changing processes and plans after projects or products have been launched. Therefore, this paper focuses on the five main forces of the environmental scan and how they are affected by the current economy.

Macroeconomic forces are beyond our control since they include national and international forces such as gross domestic product, unemployment, and inflation. High inflation rates, recession, and increase in purchasing power constitutes forces in macroeconomic that affect business. For instance, recessions cause reduced production, increased unemployment, and less money for consumers to spend. The recession was experienced in the US lately between 2007 and 2009 (Camilleri, 2018). During this period, running businesses is very difficult. Due to these forces, the organization has to adjust to accommodate these changes.

Microeconomic forces include the costs of production. They affect the daily activities of the business, partners, and vendors. With current fluctuation in oil prices, it becomes difficult to establish the future cost of production. Also, with the current change in customer’s tastes and preferences, it becomes difficult to establish what their long-term product hence requires the company to be dynamic.

Social forces include demographic factors such as age, religion, gender, and ethnicity. For instance, in the US the biggest population constitutes citizens above the age of forty. Currently, the different races present in America are growing at a higher rate and hence spend a lot ($1.3 trillion, $1.1 trillion, and 0.88 trillion for Hispanic, African American, and Asian American respectively) hence companies are adjusting to this new growth to grow their market share (Camilleri, 2018). Also, most consumers are now more concerned with sustainability and environmental protection unlike in 1970 where industrialization was the most important factor (Camilleri, 2018). To meet this, for instance, Waal Mart Store Inc. has set its goals aiming at cutting energy costs through less packaging and switching to renewable energy.

Technological forces result from new inventions and innovations. Technology gives value through the development of new products, for instance, 3D TVs from Hisense (Camilleri, 2018). Recent technology has affected marketing in a big way. For instance, many customers have embraced the introduction of online advertising and shopping. Online shopping has open many distribution channels and reaches a bigger market. Hence, when carrying out an environmental scan, these factors should be included to fetch a big market share.

Competitive forces are forces from alternative firms that satisfy the same market need. These competitions include pure, monopolistic, oligopoly, and pure monopoly. Also, the current growth of small businesses is something to study. For instance in America, there are more than 28 million small businesses employing more than 50% of all private sector employees and generate 44% of the total GDP (Camilleri, 2018). With so much small businesses present, it becomes difficult to establish your competitors.

Regulatory forces are put in place to protect producers, competition, and consumers. For instance, in the 1930s the federal government acted to ensure fair competition. During this time, the Great Atlantic and Pacific Tea companies emerged (Camilleri, 2018). Therefore, it becomes challenging to scan factors relating to changing legislation by the government as they keep on changing.

So far, we have seen how the five major forces in an environment scan affect the market. Furthermore, we have seen how the current condition of the world affect the environmental scan through its major forces. Therefore, it’s important for the organization to establish the current state of the environment to be able to predict future threats and opportunities before launching a product or a project.

 

 

References

Camilleri, M. A. (2018). The Marketing Environment. In Travel Marketing, Tourism Economics and Airline Product. (pp. 51-68). Springer, Cham Switzerland.