SANTO TOMAS COLLEGE OF AGRICULTURE,

SCIENCES AND TECHNOLOGY

Feeder Road 4, Barangay Tibal-og Santo Tomas Davao del Norte, 8112, Philippines

ABM 111
STRATEGIC MANAGEMENT

MODULE 2 TOPICS

Lesson 1: Scanning the Environment

CHALLENGES Lesson 2: Identify the components of

IN THE
SWOT Matrix Analysis

EXTERNAL Lesson 3: The External Environment

ENVIRONMENT
INTENDED LEARNING OUTCOMES

 Discuss the environmental scanning.

 Identify the SWOT Matrix Analysis
 Identify the forces interplaying in the external environment.

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Module No. MODULE 2
and Title

Lesson No. Lesson 1: Strategic Management Definition

and Title

Learning Discuss the environmental scanning

Outcome

Time Frame 3 Hours

Hello student! Let us fill this lesson with self-trust and self-motivation. For sure,
you will enjoy this lesson because this is one of the best parts where we explore
the overview of management where it embraces the operations management’s
definition, the origin and its nature and the total contribution of this subject to
your chosen degree/endeavor.

So, what are we waiting for let’s begin!

Introductio
n

To launch your understanding on the topic, give me a word or two that comes
into your mind when you hear or read the word:

Activity 1. Organizations
2. Environmental Scanning
3. Strategic Information

With your answers on the activity above, can you share your thoughts now? Do
Analysis the above words associate with each other? If yes, in what form? Expound your
answer.

Environment scanning is the study and interpretation of the forces

existing in the external and internal environments. The external environment
includes social, economic, political, technological, and environmental forces that
Abstraction may influence an organization, an industry or an entity. The competitive
environment covers competitors, suppliers, customers, stakeholders, culture,
and the government.

Environmental scanning is also carefully monitoring the surroundings

with the end goal of ascertaining early indications of prospects and challenges
that may influence the organization’s present and future plans.

Conducting environmental scanning is both easy and difficult. For formal

scanning, experience and expertise will help make the process effortless and
straightforward. The competencies, skills, and intelligence of the individual will
allow for easy scanning of the environment. On the other hand, environmental
scanning can be demanding, is that there is a need for comprehensive, as well
as accurate information. It will be mostly dependent on the following:

1. The speed of the organization to conduct scanning;

2. The presence and availability of complete information; and
3. The physical and financial capability to do so.

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 SOURCES OF STRATEGIC INFORMATION

STRATEGIC INFORMATION – consists of the facts and data used by

organizations to assist them in achieving their vision, mission and goals.
Strategic information can be drawn from both external and competitive
environments. Both external and internal environments symbiotically interplay
and directly and indirectly affects organizations. Information is either primary or
secondary.

• Primary Data – are gathered through personal experience, observation, and

experimentation.

• Secondary Data – are collected from reports, internet sources, and other
published materials.

MODES OF ENVIRONMENTAL SCANNING

Scanning the environment involves two processes which are the following:

(First) Looking at or simply viewing information; and

(Second) Looking for or searching of information.

According to Aguilar (1967), there are FOUR (4) ways of environmental

scanning. These modes are undirected viewing, conditioned viewing, informal
search and formal search.

1. UNDIRECTED VIEWING - The individual is exposed to the information

with no specific informational need in mind. The sources of information
are wide-ranging and large chunks of information are quickly dropped
from the individual’s attention. Thus, the individual ends up with general
information that may be helpful for him in spotting early signals of
change. It is a significant mode of feeling the environment as this
increases awareness in the organization to undertake needed proactive
strategic moves. Accordingly, organizations should continuously
undertake undirected viewing of the environment. Many times, this
process of environmental scanning can save an organization from losing
out in the survival game or maybe the reason for organizational success.

2. CONDITIONED VIEWING – The individual directs viewing of information

to specified facts and data to be able to assess their general impact on the
organization. It is not an active search but a mere viewing of information.
It provides a cue or hint that more purposive scanning should be
instituted if the effect is assessed to be sufficiently significant.

3. INFORMAL SEARCH – The individual actively looks for information to

increase knowledge of a particular issue. It essentially involves a
relatively unstructured effort where the objective is to gather information
to expound on the issue, thus, determining whether a strategic move is
needed by the organization. If a need for a decision or action has been
established, more time and resources on a formal search will be spent by
the organization.

4. FORMAL – The effort exerted by the individual is deliberate and planned.

The search is both focused and structured and the research methodology
is clearly enumerated and followed. Specific information is presented and
organizations conduct environmental scanning through varied
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 approaches. These search approaches can include industry analysis,
market studies, and competitor and customer analyses, among others.
Appreciably, results of the formal search normally provide organizations
bases for decision-making and courses of action.

Application Essay Writing:

1. Why should organizations possess “organizational intelligence”? 5 points

2. As a manager, is it always beneficial to conduct a formal search? Explain your
answer. 5 points
3. What do you think is the importance of conducting environmental scanning? 5
points
4. Differentiate the two sources of strategic information and provide your own
examples. 5 points
Essay Rubrics
Outstanding Good Fair Poor Very Poor
5 points 4 points 3 points 2 points 1 point
 Well written  Writes fairly  Minimal  Somewhat  Lacking effort.
and very clear. effort. unclear. Very poor
organized.  Good Minimal  Shows little grammar
 Excellent grammar grammar effort. mechanics.
grammar mechanics. mechanics.  Poor grammar  Very unclear.
mechanics.  Good  Fair mechanics.  Does not
 Clear and presentation presentation.  Confusing and address topic.
concise and  Few choppy, Limited
statements. organization. supporting incomplete attempt.
 Excellent effort  Sufficient details. sentences.
and effort and  No
presentation detail. organization of
with detail. thoughts
 Demonstrates
a thorough
understanding
of the topic.

Lesson No. Lesson 2: The SWOT Matrix Analysis

and Title

Learning Identify the SWOT Matrix Analysis.

Outcome

Time Frame 3 Hours

To launch your understanding on the topic, give me a word or two that comes
into your mind when you hear or read the word:
Activity
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats

With your answers on the activity above, can you share your thoughts now? Do
the above words associate with each other? If yes, in what form? Expound your
Analysis answer.

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 The SWOT matrix is a structured assessment tool used to evaluate an
organization, industry, a place or even a person in terms of set parameters like
strengths, weaknesses, opportunities, and threats. Credited to Albert Humphrey
in 1960, the SWOT matrix classifies strengths and weaknesses as internal
dynamics characterizing in organization and threats and opportunities as
external influences to the organization. Specifically:

• STRENGHTS – are features that organizations possess, thus, giving it

significant advantage over others.

• WEAKNESSES – are characteristics that place organizations at a

disadvantage relative to others, and may just be limitations or vulnerabilities of
organizations.

• OPPORTUNITIES – are possibilities in the external environment that

organizations can exploit to their advantage.

• THREATS – are challenges in the external environment that can cause

problems to organizations.

HUMPHREY’s 2x2 matrix model (2005) suggests actions for issues arising
from the SWOT analysis according to FOUR different categories. The
recommended practical and direct actions are presented in TABLE 2.1 below:

Abstraction Strengths (Internal) Weaknesses (Internal)

Strengths/Opportunities Weakness/Opportunities
 Obvious natural
 Potentially attractive
priorities options.
 Likely to produce
 Likely to produce good
greatest ROI (Return returns if capability
on Investment) and implementation
 Likely to be quickest are viable.
and easiest to
 Potentially more
implement exciting, stimulating,
Opportunities  Probably and rewarding than
justifying
(External) immediate S/O due to change,
action
planning, challenge,
feasibility surprise
study, or business tactics and benefits
plan. from addressing and
 Primary Question: “if achieving
we are not yet looking improvements.
at these areas and  Primary Question:
prioritizing them, then“what is actually
why are we not?” stopping us from
doing these things,
provided they truly fit
strategically and are
realistic and
substantial”?
Strengths/Threats Weaknesses/Threats
 Easy to defend and  Potentially high risk
counter  Assessment of risks is
 Only basic awareness, crucial.
planning, and  When risk is low,

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 implementation are ignore these issues
required to meet these and do not be
challenges. distracted by them.
 Investment in these  When risk is high,
Threats issues is generally safe assess capability gaps
(external) and necessary. and plan to defend or
 Primary Question: “are avert in specific
we properly informed controlled ways.
and organized to deal  Primary Question:
with these issues and “have we accurately
are we certain there assessed the risks of
are no hidden these issues and when
surprises?” and “since risks are high, do we
we are strong here, have specific
can any of these controlled reliable
threats be turned into plans to
opportunities?” avoid/avert/defend?”

Although, the SWOT matrix has been considered an old process for
evaluating the strengths, weaknesses, opportunities, and threats of an
organization, it has constantly proven its worth and functionality when it comes
to assessment. Divided into internal and external environments, it clearly
focuses on the status of an organization. As a result, logical inferences can be
drawn and corresponding strategies can be recommended.
Application
Essay Writing:

1. Explain relevance of SWOT Matrix Analysis to organizations. 5 points

2. Look for a real-life case and apply SWOT analysis. Recommend corresponding
plans of actions or strategies. 15 points

Essay Rubrics
Outstanding Good Fair Poor Very Poor
5 points 4 points 3 points 2 points 1 point
 Well written and  Writes  Minimal  Somewhat  Lacking
very organized. fairly effort. unclear. effort.
 Excellent clear. Minimal  Shows little Very
grammar  Good grammar effort. poor
mechanics. grammar mechani  Poor grammar grammar
 Clear and mechani cs. mechanics. mechani
concise cs.  Fair  Confusing cs.
statements.  Good presentat and choppy,  Very
 Excellent effort presentat ion. incomplete unclear.
and presentation ion and  Few sentences.  Does not
with detail. organizat supporti  No address
 Demonstrates a ion. ng organization topic.
thorough  Sufficient details. of thoughts Limited
understanding of effort attempt.
the topic. and
detail.

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Lesson No.
and Title Lesson 3: The External Environment
Learning
Outcomes Identify the forces interplaying in the external environment.

Time Frame 3 Hours

To launch your understanding on the topic, give me a word or two that comes into your
mind when you hear or read the word:

1. Social Forces
Activity
2. Political Forces
3. Economic Forces
4. Technological Forces
5. Environmental Forces

With your answers on the activity above, can you share your thoughts now? Do the above
Analysis words associate with each other? If yes, in what form? Expound your answer.

Abstraction The external environment today is highly. This fundamental paradigm

conspicuously, characterizes the global scenario. Nations possess different
levels of growth and development. For example, power relationship has become
dynamic, volatile, uncertain, complex and threatening. Multifaceted concerns,
although distinct, have become primordial issues, among countries, causing
differences in policies and global interrelationships. Oftentimes, an atmosphere
of strategic negotiation, compromise, and survival permeates. Consequently,
knowledge of the broad environment is considered an advantage for
organizations when managers constantly develop an audit “intelligence” of the
environment.

Specifically, the external environment presents varying forces that

influence organizational direction and strategic decision-making. These forces
are social, political, technological, economic, environmental, and legal in
perspective. The confluence of these forces can present themselves as threats
and challenges to organizations. On the other hand, they could provide valuable
opportunities. The analysis of the external environment is referred to as PEST
(Political, Economic, Social and Technological) Analysis.

SOCIAL FORCES

Social forces refer to important issues that are characteristic of global

and local societies. Society consists of individuals, families and communities,
including their beliefs, aspirations, traditions, and practices. Significant societal
factors in the environment create varying impacts on organizations. Some of the
more critical social concerns today are changing social structures, the world’s
aging population, the great demand for health services, the evolving
sophistication in the lifestyles of people, and the cross-cultural implications of
mobility of peoples including migration among others.

• CHANGING SOCIAL STRUCTURES – The social environment can be

better understood and analyzed in terms of broad social structures. Social
Structures refers to the network of social institutions that includes the family
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 and the community. The family is one of the basic institutions of a social
organization. It performs various functions that include human reproduction,
raising up children, and sending them to schools to ensure a better life in the
future. When bound together, families form communities.

• AGING POPULATION/ DEMAND FOR HEALTH SERVICES – There are

more maturing and aging individuals today. Like an inverted triangle, the baby
boomers are greater in number. Baby boomers are individuals born in 1940’s.
At present, they are precisely the people who need more medicine and health
services.

• SOPHISTICATED LIFESTYLES OF PEOPLE – Compared to the past, the

lifestyles of people today have dramatically changed, too. Their way of looking at
themselves, the people around them, their lives and careers, their values,
attitudes, philosophies and expectations have taken a deeper and wider
perspective.

• CROSS CULTURAL DIVERSITY- The global community is getting

figuratively smaller. Workplaces are shifting and people in the global community
are either working or migrating to every part of the world. As a result, cross-
cultural diversity has become an important organizational issue; culture being a
basic component of the global environment. When it tackles about
multicultures, it considers the culture of the individual and the host country.

POLITICAL FORCES

There are crucial concerns confronting nations today. Geopolitical

issues have become the focus of major political powers. Some of these issues are
political independence, changing governments, balance of power, terrorism,
suicide bombings, global alliances, and chemical and nuclear warfare. These
critical problems are affecting the global political balance.

• POLITICAL INDEPENDENCE/ CHANGING GOVERNMENTS – Political

sustainability has become the focus and concentration of developed and power-
driven countries. They fight wars to attain and maintain political supremacy.
The call for global political equilibrium has challenged nations to involve
themselves in the attainment of global peace and security.

• TERRORISM/SUICIDE BOMBINGS – The bloody and painful transition

toward equality of basic human rights and the right to a better life have brought
about critical security problems like terrorism, kidnappings, suicide bombings,
and hijackings. News about wounded and dead children, elderly citizens, and
innocent people have become normal occurrences heard over radio and seen on
television.

• CHEMICAL AND NUCLEAR THREATS – Some countries go on developing

and producing weapons with the intention of blackmailing and/ or intimidating
other countries. True enough, the spread of deadly chemicals, viruses and other
forms of microorganisms pose dangerous effects. This likewise true with nuclear
military hardware. Nuclear threat, is imminent where countries continue to beef
up their nuclear arsenals.

• GLOBAL ALLIANCES – Politically, nations are aligning themselves for

self-preservation and more so, for global stability and strength. At present, no
nation attempts to stand alone because global relationships are essential to
national survival. European nations have bonded themselves as the European
Union. The same is true with ASEAN nations.
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 ECONOMIC FORCES

Economic realities have concomitantly come to the forefront. Economic

issues greatly affect the growth and development of a nation. NATIONS are
STRATEGIZING to maintain a continuum of financial stability. Most often, trade
and investments are transacted to ensure monetary security. Economic
nowadays includes globalization of products and services, the presence of
aggressive competitors, and suppliers, the fall of large and supposedly
financially stable organizations, increasing oil prices, economic trade
agreements, the emergence of new markets, and the rise of CHINA as a major
economic player in the world.

• GLOBALIZATION – This is one major determinant of competition. It can

be viewed from four (4) perspectives: products, people, ideas and money. Before,
simple and traditional goods were generally accepted but today’s consumers’
demands flexibility and versatility in the products they use.

• COMPETITORS AND SUPPLIERS – Aggressive competitors and creative

suppliers compete to get a larger slice of the market, both energizing the
industry, and business environments. Pricing, quality, differentiation, and
innovation are the usual criteria for business success with consumers more
likely patronizing less expensive but quality products.

• FALL OF FINANCIALLY STABLE ORGANIZATIONS – The last few years

saw the downfall of a number of financially successful organizations that were
managed by respectable and competent presidents and chief executive officers
(CEO’s).

• INCREASING OIL PRICES – Never-ending increases in oil prices have

been creating economic instability in world communities. Characterized by
unpredictability in price and production, organizations using oil and any of its
derivative products find difficulty in projecting costs and profit figures.

• ECONOMIC TRADE AGREEMENTS – Economic trade agreements among

nations have likewise become a vital bargaining power in a country’s economy.
Bilateral and multilateral economic treaties between and among economic global
partners provide trade priorities and privileges, allowing local products to reach
other markets like WTO or World Trade Organizations. Basic example of this is
the specialized EXPORT handicraft made by the PHILIPPINES.

• EMERGING MARKETS – Closely interrelated to the political, social, and

economic growth and development of a country is the emergence of different
markets. Developed, develop and developing, and underdeveloped countries are
economic markets with unique needs, wants, demands, distinct traits, and
peculiarities.

• RISE OF CHINA – One of the most potent economic markets in the world
today is China. It is seen both as a supplier and big market. Constituting 1/3 of
the world’s population, China is a market for other countries’ products and
services.

TECHNOLOGICAL FORCES

Another important catalyst of competition is technology. In the 1980’s,

information technology began its journey toward radical communication and
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 technology growth. Significant changes happening in the world today have been
the result of rapid developments in information technology. These technological
advances are observed in the fields of communication, business, banking,
education, medicine, security and in all facets of everyday living.

• COMMUNICATION TECHNOLOGY – It is seen the proliferation of mobile

phones, popularity of text messaging, convenience of sending fax messages,
usefulness of CCTV cameras for surveillance and simple monitoring, and
benefits of video conferencing, among others.

• COMPUTER INTEGRATED BUSINESS – Nowadays, enterprise resource

planning (ERP) integrates business operations in marketing, accounting,
production, operations, and management. Computer – aided manufacturing
makes production more efficient, computer aided design result in a concise
output while telecommunication technology makes physical distances
immaterial.

• E-BANKING – Banking transactions like deposits, withdrawals, and

payments can be done online at this time. Intra-banking operations are more
efficient while international banking transactions are operated with accuracy
and expediency. Confidentiality of transactions can be largely maintained while
anomalies can easily be tracked as long as procedures for check and balance
are in place.

• E-LEARNING – One of the most recent developments in education is

distance or online learning. It is learning from home, the office, while on
vacation, or from any place outside of four walls of a classroom.

• DIGITAL MEDICINE – Another surprising and most welcome development

in the field of medicine is the use of technology. Scientist, conduct stem cell
researches from left-over human embryos with the hope of curing illnesses like
diabetes, Parkinson’s disease and spinal-cord injuries.

• E- SECURITY – This is another vital globe issue. The use of information

technology is inevitable in manufacturing missiles and other forms of
ammunitions, coding military secrets, safeguarding fortified installations,
monitoring enemies, securing soldiers, and planning counterattacks.

ENVIRONMENTAL FORCES

ECOLOGICAL RESPONSIBILITY is the urgent call for global

neighborhood. Ecological damage is happening everywhere. There seems to be
an utter disregard or seeming indifference about the environment.
Environmentally, no country can claim complete isolation. The safety and
survival of one should be the concern of others. It includes the following:

• CLIMATE CHANGE/USE OF BIODEGRADABLE MATERIALS – the effects

of environmental degradation, malpractices, neglect, and indifference are critical
and serious. The use of non-biodegradable materials emitting
chlorofluorocarbons continuously causes the widening and deepening of the
hole in the ozone layer. As a result, global warming has caused countries to
experience extreme weather changes, that is, from heat strokes on one end to
extreme rainstorms on the other end.

• ENVIRONMENTAL WASTE MANAGEMENT – in may underdeveloped

countries, noise, air, and water pollution levels are high. Smog, fumes, and
contaminants continue to cause increasing incidents of diseases, more
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 specifically those related to the lungs.

• PRESERVATION OF RAINFORESTS AND MARINE LIFE – rainforests are

no exception. Continuous depletion and denudation of forests explain why
torrential rains are more destructive and intense nowadays.

These forms of man-made abuses and destructions are alarming. One realizes
that care of the environment is a serious concern and responsibility for
everyone: the individual, the organization, the community, and the government.
In short, environmental preservation is a global priority for everyone.

Essay Writing:

1. In relation to critical social concerns today in the external environment, how do

changing social structures, the world’s aging population and great demand for
health services, the evolving sophistication in the lifestyle of peoples, and cross-
cultural diversity impact organizations? Justify your answer by providing
examples. 10 points
2. How do technological advances observed in the fields of
communication, business, banking, education, medicine, and
security, contribute to the decision-making of organizations? 10
points

Essay Rubrics
Application Outstanding Good Fair Poor Very Poor
5 points 4 points 3 points 2 points 1 point
 Well written  Writes  Minimal  Somewhat  Lacking
and very fairly effort. unclear. effort.
organized. clear. Minimal  Shows little Very
 Excellent  Good grammar effort. poor
grammar grammar mechani  Poor gramma
mechanics. mechani cs. grammar r
 Clear and cs.  Fair mechanics. mechan
concise  Good presentat  Confusing ics.
statements. presentat ion. and choppy,  Very
 Excellent effort ion and  Few incomplete unclear.
and organizat supporti sentences.  Does
presentation ion. ng  No not
with detail.  Sufficient details. organization address
 Demonstrates effort of thoughts topic.
a thorough and Limited
understanding detail. attempt
of the topic. .

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