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Importance and effectiveness of environmental scanning

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In your own words and analysis of business, please reply to following non-graded questions. Thank you.

What are lessons learned in the case study (below) relative to the importance and effectiveness of environmental scanning?

As a result of this case study, what concepts and analytic tools will one be able to use in the development of a strategic plan (i.e., how does one expect to apply what was learned)?

What do the results of the case study reveal about the challenges facing strategic planners?

Case Study
Thinking Strategically

Identifying the factors that characterize a company's strategic situation is the basis for the strategy process. These factors can be classified as SWOT (strengths, weaknesses, opportunities, and threats). Analyzing these factors using various tools enables a manager to formulate strategies more effectively.

Strategy, in business is the combination of foresight, planning, and decision-making that prepares an enterprise to achieve long-term goals and manage the consequences of contemporary decisions.

In this case study, one determines a long-term objective for a bicycle manufacturing company on the basis of internal and external information. Using the long-term objective as a framework, one can isolate the strengths, weaknesses, opportunities and threats of the company. Then perform strategic analysis using a tool known as the Matched Pair Analysis to identify strategies that enable the company achieve its long-term objective.

Matched pair analysis extends the scope of the conventional SWOT analysis that matches the internal strengths and weaknesses of a company with its external opportunities and threats. Matched pair analysis enables more alternatives, and hence, more strategic alternatives.

Barnum's Pro Sports needs to decide on a long-term objective that defines its growth parameters and target for the next five years. Despite repeated discussions, management has been unable to make a single, unanimous choice from the choices under consideration.

The Chairman is keen that Barnum's becomes the number 1 bicycle specialty retailer in the United States in terms of revenue, by achieving annual revenues of $130 million. Alternatively, the chairman would like the company become the number 1 specialty bicycle retailer in the United States in terms of the number of stores, by increasing the number of stores to 50.

The CEO wants profitability, rather than competitive position, to be the yardstick. He wants Barnum's to improve profitability from the current 28 percent to an industry-leading 38 percent. Alternatively, he wants Barnum's to become the lowest-cost producer of mountain bikes in the United States by reducing manufacturing costs per bikes to under $100.

The first task is to recommend a long-term objective. However, in order to do that, one needs to start by assembling critical internal and external information. The internal information is readily available, however, external information comes with a price tag.

Considering the advice of Ken Shrathum, Strategy Consultant: he is a stickler for the best information that money can purchase. His selections are ideally to be the U.S. Specialty Bicycle Consumers Study for its statistical significance and the U.S. Bicycle Retailing-Industry Analysis for its level of detail.

Since working with a budget of $15,000 and five options to consider, the U.S. Specialty Bicycle Consumers Study and the National Specialty Bicycles Retailing Industry Report are selected for trends analysis, statistical data, and information specific to specialty bicycle retailers. This information should hold one in good stead while deciding the long-term objective.

The U.S. Specialty Bicycle Consumers Study and National Specialty Bicycles Retailing Industry Report were selected based on the strategy consultant's advice with a total cost of $14, 590 based on advice from Ken Shrathum, the Strategy Consultant. The information package seems to be the most optimum utilization of the budget as well.

Having assembled the information required to decide the long-term objective, there are four long-term objectives under consideration. Based on advice from Ken Shrathum, the Strategy Consultant, the long-term objective selected was "To become the No. 1 specialty bicycle retailer in the United States in terms of revenues (target $130 million). The objective selected seems to be the most suited to the internal situation and the external environment of Barnum's. The information package compiled seems to have aided in decision-making. Nevertheless, the more optimum information package is likely to added greater focus to one's decision-making.

S W O and T are the internal strengths and weaknesses of a company and the environmental opportunities and threats facing the company. Identifying these factors is key to performing the SWOT analysis.

Further on, one will expand the scope of SWOT analysis by performing the Matched Pair Analysis for Barnum's, as this may generate more strategic alternatives than a conventional SWOT analysis. The next task is to identify the three key SWO and T factors, which can be derived from the purchased reports and the internal information.

The strengths identified are cash position, store mountain bike brand 'Anti-Gravity' sold exclusively through Barnum's and in-store advisory and service network.
Weaknesses are low retail presence in areas where demand is growing, brand image as a male-oriented' retailer and low brand recall among 12-24 years age group (extreme sports market; juvenile bicycles).

Opportunities identified include market for women consumers, extreme sports market (juvenile bikes segment) and government spending on physical education programs at $60 billion, and policy on 'bicycle-friendly' public spaces.
The threats are low-cost imports from Asia turning bicycles into a commodity, maturing of the mountain bikes segment and low interest among Generation Y for bicycling, and saturation among 'Baby Boomers' - the core consumer segment.

Matched Pair Analysis expands the scope of conventional SWOT analysis by enabling 7 more matches between SWO and T than the latter. Matching pairs from the SWOT analysis enables the identification of optimum strategies.

Although there is no prescribed order while performing the matches, Ken Shrathum, Strategy Consultant, has the following suggestion:

Perform the conventional SWOT matches such as S/O, S/T, W/O and W/T
Then, do the O/T and S/W matches
Finally, the S/O/T, O/S/W, T/S/W, and S/W/O/T matches

Of the strategic choices arising from the various matches, strategies need to be identified that will enable Barnum's to achieve its long-term vision of becoming the No. 1 specialty bicycle retailer in the United States in terms of revenue in the next five years.

Based on conducting matched Pair Analysis, the Strategic Alternatives discovered consist of shifting focus from Baby Boomers to women consumers, improve brand recall among women consumers, create a range of bikes appealing to women consumers, increase women sales staff in advisory roles and sell Anti-Gravity brand bikes through other specialty bicycle retailers as well.

Strategy is re-emerging as the new wave in corporate planning to secure growth, profitability, and competitive advantage. Organizations committed to thinking strategically sharpen their ability to leverage change to their advantage.

The outcome of strategic planning is no longer a hard-bound, occasionally referenced, strategic plan. Strategic Thinking is, instead, a readiness for action-based on market realities, organizational competencies, and brand equities. It is supported by long-range objectives, strategic flexibility, and a need to stay ahead of change.

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Solution Preview

What are lessons learned in the case study (below) relative to the importance and effectiveness of environmental scanning?
Environmental scanning involves study of all the factors whether internal or external, which has impact on the working of the business. It helps in forming long term objectives.
It involves study of SWOT that is External Opportunities and Threats: External opportunities and external threats refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization in the future. Opportunities and threats are largely beyond the control of a single organization, thus the term external.
Internal Strengths and Weaknesses: Internal strengths and internal weaknesses are an organization's controllable activities that are performed especially well or poorly. Identifying and evaluating organizational strengths and weaknesses in the functional areas of a business is an essential strategic-management activity.
An external audit focuses on identifying and evaluating trends and events beyond the control of a single firm, such as increased foreign competition, Internet and mobile revolution. It reveals key opportunities and threats facing an organization, so managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats. External trends and events significantly affect all products, markets, and organizations in the world. Changes in external forces translate into changes in consumer demand for both industrial and consumer products and services.
In both small and large organizations, strategists can use online databases and other research studies to gather the information for external environment. For example in this case it has used U.S. Specialty Bicycle Consumers Study for its statistical ...

Solution Summary

This explains the importance and effectiveness of environmental scanning