Environmental scanning is the screening of large amounts of information to anticipate and interpret changes in the environment. It’s used by both large and small organizations, and research has shown that companies with advanced environmental scanning systems increased their profits and revenue growth. Competitor intelligence: fastest growing environmental scanning activity that seeks to identify who competitors are, what they are doing, and how their actions will affect the organization.
Another type of environmental scanning is global scanning in which managers assess the changes and trends in the global environment through the gathering of vital global information.
Environmental scanning provides the foundation for developing forecasts, which are predictions of outcomes.
Forecasting effectiveness. a. Forecasting techniques are most accurate when the environment is not rapidly changing. b. Some suggestions for improving forecasting effectiveness are as follows: 1) Use simple forecasting techniques. 2) Compare every forecast with “no change.” 3) Don’t rely on a single forecasting method. 4) Don’t assume that you can accurately identify turning points in a trend. 5) Shorten the length of the forecasts. Forecasting is a managerial skill and can be practised and improved.
Benchmarking is the search for the best practices among competitors or noncompetitors that lead to their superior performance.
The benchmarking process typically follows four steps (see Exhibit 8.2). a. A benchmarking planning team is formed. The team’s initial task is to identify what is to be benchmarked, identify comparative organizations, and determine data collection methods. b. The team collects internal and external data. c. The data are analyzed to identify performance gaps and to determine the cause of the difference. d. An action plan is prepared and implemented.
Managers need to figure out ways to allocate the resources listed on this slide.
How are resources allocated effectively and efficiently so that organizational goals are met? Managers can choose from a number of techniques for allocating resources (many of which are covered in courses on accounting, finance, human resources, and operations management). Exhibit 8.3 summarizes the differences among four techniques covered in the text: budgeting, scheduling, breakeven analysis, and linear programming.
Exhibit 8.4 describes the different types of budgets that managers might use.
Exhibit 8.5 depicts a simplified Gantt chart for book production developed by a manager in a publishing company. Time is expressed in months across the top of the chart. The major work activities are listed down the left side. Where a box sits within a time frame reflects its planned sequence. The shading represents actual progress. The chart also serves as a control tool because the manager can see deviations from the plan. In this example, both the design of the cover and the printing of first pages are running behind schedule. Cover design is about three weeks behind, and printing first pages is about two weeks behind schedule. Given this information, the manager might need to take some action to either make up for the two lost weeks or to ensure that no further delays will occur. At this point, the manager can expect that the book will be published at least two weeks later than planned if no action is taken.
Exhibit 8.6 shows a load chart for six production editors at the same publishing company. Each editor supervises the production and design of several books. By reviewing a load chart, the executive editor, who supervises the six production editors, can see who is free to take on a new book. If everyone is fully scheduled, the executive editor might decide not to accept any new projects, to accept new projects and delay others, to have the editors work overtime, or to employ more production editors. In this exhibit, only Antonio and Maurice are completely scheduled for the next six months. The other editors have some unassigned time and might be able to accept new projects or be available to help other editors who get behind.
3. PERT (program evaluation and review technique) network analysis is a technique for scheduling complicated projects comprising many activities, some of which are interdependent. a. A PERT network is a flowchart-like diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity.
Most PERT projects are complicated and include numerous activities. Such complicated computations can be done with specialized PERT software. However, let’s work through a simple example. Assume that you’re the superintendent at a construction company and have been assigned to oversee the construction of an office building. Because time really is money in your business, you must determine how long it will take to get the building completed. You’ve determined the specific activities and events. Exhibit 8.8 outlines the major events in the construction project and your estimate of the expected time to complete each.
Break-even analysis is a technique for identifying the point at which total revenue is just sufficient to cover total costs. A visual representation of break-even is shown in Exhibit 8.10.
Assume that Pierre’s Photocopying Service charges $0.10 per photocopy. If fixed costs are $27 000 a year and variable costs are $0.04 per copy, Pierre can compute his break-even point as follows: $27 000 ÷ ($0.10 – $0.04) = 450 000 copies, or when annual revenues are $45 000 (450 000 copies x $0.10). This relationship is shown graphically in Exhibit 8.10.
Two planning techniques that are appropriate for planning in an environment that’s both dynamic and complex are project management and scenario planning. Project Management. A project is a one-time-only set of activities that has a definite beginning and ending point in time. Project management is the task of getting a project’s activities done on time, within budget, and according to specifications.
1. Project management process. In a typical project, work is done by a project team whose members are assigned from their respective work areas to the project and who report to a project manager. 2. The role of the project manager. a. The only real influence project managers have is their communication skills and their power of persuasion. b. Team members seldom work on just one project; they’re usually assigned to two or three at any given time.
A scenario is a consistent view of what the future is likely to be. 1. Developing scenarios also can be described as contingency planning. 2. The intent of scenario planning is not to try to predict the future but to reduce uncertainty by playing out potential situations under different specified conditions. 3. Scenario planning is difficult to use when forecasting random events. 4. The Tips for Managers on page 228 lists some suggestions for preparing for unexpected events.