Environmental scanning is the process of monitoring and collecting information about business conditions affecting a market. As marketers develop and then implement their marketing strategies—combinations of pricing, PRODUCT, distribution, and SALES PROMOTION decisions for each target market—businesses must keep track of changes in the marketplace. Yet most business managers have more than enough to do directing day-to-day operations; one analogy of a typical businessperson’s day is that it is spent swatting mosquitoes. In addition a manager must also hire new workers, meet government requirements, decide which products to produce or terminate, and cultivate relationships with customers and distributors, resulting in workweeks that are often 70–80 hours long. Often managers can become so consumed with these necessary activities that they fail to notice the “lion”—some change in the marketplace that can create a major new opportunity or a dire threat to their enterprise. Thus, environmental scanning is needed to look beyond all the mosquitoes and see if there are any lions coming. The main purpose of environmental scanning is to track changes in ECONOMIC CONDITIONS, GROSS DOMESTIC PRODUCT, INFLATION, UNEMPLOYMENT, technology, COMPETITION, international trade agreements, and other cultural, political, and legal factors that affect business decisions. Businesses consider changes in economic conditions, which usually do not change very quickly, when making long-term planning decisions. On the other hand, changes in technology can rapidly redefine markets and sources of competition or of COMPARATIVE ADVANTAGE. For example, while the U.S. Postal Service has a MONOPOLY in mail service, the fax machine and cellular and INTERNET technologies are changing the ways people communicate, often bypassing standard mail service. When conducting competitive environmental scanning, marketers consider three types of competition: direct competitors producing similar products, competitors producing substitute products, and firms competing for the same consumers’ spending. Most marketers can name their direct competitors instantly, and they are usually aware of producers of substitute products. Many companies maintain MARKET INTELLIGENCE efforts to monitor the activities of these sources of competition. Changing social and cultural conditions require marketers to be aware of and sensitive to changing values and to changes in market DEMOGRAPHICS. For example, in 2001 California no longer had a majority population as Hispanic and Asian Californians together represented a majority of the state’s residents. Cultural groups have different values, consumer preferences, and buying activities. Some groups, such as Japanese consumers, are reluctant to use CREDIT CARDS, and many cultural groups in the United States tend to be very brand-loyal consumers. During environmental scanning, marketers attempt to identify changing social and cultural trends and adjust their marketing strategies to meet changing market opportunities. Political and legal changes can harm or help a business. Often firms or business organizations will attempt to influence regulatory processes affecting their markets. Industry associations use environmental scanning to monitor proposed changes in laws, testify at public forums for and against legislation, and lobby on behalf of their interests.
See also MARKETING STRATEGY.