Businesses use different methods to study and understand changes in the environment. These methods help organizations predict future trends, prepare for risks, and make better decisions. Below are the major methods of environmental scanning explained in simple terms.
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Extrapolation method predicts the future by extending past trends. It assumes that whatever happened in the past will continue in the same pattern. For example, if sales have been increasing by 5% every year, extrapolation will predict similar growth in the future. This method is simple but may not work when sudden changes occur.
2. Intuitive Reasoning
Intuitive reasoning relies on the experience, judgment, and intuition of experts or managers. Instead of using strict data, experts analyze the environment based on their instincts and understanding. This method is useful when information is limited or when decisions must be made quickly.
3. Scenario Building
Scenario building involves creating different possible future situations. Organizations imagine various “what-if” scenarios such as economic crisis, new competition, or major changes in technology. By preparing for multiple futures, businesses can handle uncertainty better and make flexible plans.
4. Cross-Impact Matrix
The cross-impact matrix helps analyze how one event or factor might affect another. It shows the relationship between different environmental factors. For example, a rise in fuel prices may increase transportation costs, which then affects product pricing. This method helps understand interconnected impacts.
5. Morphological Analysis
Morphological analysis breaks down a complex problem into smaller parts and analyzes each part separately. It helps businesses explore all possible solutions by combining different factors in various ways. This method is useful when dealing with complicated problems with many variables.
6. Delphi Technique
The Delphi Technique collects opinions from a group of experts through repeated rounds of questionnaires. Experts do not meet physically; instead, their responses are combined and shared anonymously. Over several rounds, the opinions become more accurate. This method is widely used for forecasting and decision-making.
7. Survey Method
The survey method collects information directly from people such as customers, employees, or market participants. It uses questionnaires, interviews, or online forms to gather data about trends, preferences, and behaviors. This method is useful for understanding public opinions and market demand.
8. Brainstorming
Brainstorming gathers a group of people to generate as many ideas as possible about an issue. It encourages creativity and free thinking without criticism. Later, the ideas are evaluated and the best ones are selected. This method helps businesses find innovative solutions and identify new opportunities.
9. Historical Analogy
Historical analogy studies past events that are similar to current situations. Businesses compare present conditions with previous ones to predict outcomes. For example, analyzing a past recession can help predict what might happen in a new economic slowdown. This method works well when patterns tend to repeat over time.