44 Part 1: Strategic Management Inputs
Through scanning, firms identify early signals of potential changes in the general
environment and detect changes that are already under way.^16 Scanning activities must
be aligned with the organizational context; a scanning system designed for a volatile
environment is inappropriate for a firm in a stable environment.^17 Scanning often reveals
ambiguous, incomplete, or unconnected data and information that require careful analysis.
Many firms use special software to help them identify events that are taking place
in the environment and that are announced in public sources. For example, news event
detection uses information-based systems to categorize text and reduce the trade-off
between an important missed event and false alarm rates. Increasingly, these systems are
used to study social media outlets as sources of information.^18
Broadly speaking, the Internet provides a wealth of opportunities for scanning.
Amazon.com, for example, records information about individuals visiting its website,
particularly if a purchase is made. Amazon then welcomes these customers by name
when they visit the website again. The firm sends messages to customers about specials
and new products similar to those they purchased in previous visits. A number of other
companies, such as Netflix, also collect demographic data about their customers in an
attempt to identify their unique preferences (demographics is one of the segments in the
general environment). More than 2.4 billion people use the Internet in some way includ-
ing about 78.6 percent of the population in North America and 63.2 percent in Europe.
So the Internet represents a healthy opportunity to gather information on users.^192-2b Monitoring
When monitoring, analysts observe environmental changes to see if an important trend
is emerging from among those spotted through scanning.^20 Critical to successful mon-
itoring is the firm’s ability to detect meaning in environmental events and trends. For
example, those monitoring retirement trends in the United States learned in 2013 that
57 percent of U.S. workers surveyed reported that excluding the value of their home,
they have only $25,000 or less in savings and investments set aside for their retirement.
This particular survey also discovered “that 28 percent of Americans have no confidence
they will have enough money to retire comfortably—the highest level in the (survey’s)
23-year history.”^21 Partly because of the major economic recessions and low wage growth,
67 percent of respondents to a more recent survey suggested that they had savings that
would cover only six months or less of their expenses. And, approximately 28 percent of
the respondents said that they had no savings.^22 Firms seeking to serve retirees’ financial
needs will continue monitoring this change in workers’ savings and investment patterns
to see if a trend is developing. Once they identify that saving less for retirement (or other
needs) is indeed a trend, these firms will seek to understand its competitive implications.
Effective monitoring requires the firm to identify important stakeholders and under-
stand its reputation among these stakeholders as the foundation for serving their unique
needs.^23 (Stakeholders’ unique needs are described in Chapter 1.) One means of moni-
toring major stakeholders is by using directors that serve on other boards of directors
(referred to as interlocking directorates). They facilitate information and knowledge
transfer from external sources.^24 Scanning and monitoring are particularly important
when a firm competes in an industry with high technological uncertainty.^25 Scanning and
monitoring can provide the firm with information. These activities also serve as a means
of importing knowledge about markets and about how to successfully commercialize the
new technologies the firm has developed.^262-2c Forecasting
Scanning and monitoring are concerned with events and trends in the general environ-
ment at a point in time. When forecasting, analysts develop feasible projections of what