1. Introduction
Can a business like Airbnb, operating in
the home-sharing and tourism sector, disregard months-long lockdowns and shutdowns
caused by a global pandemic and yet sustain its growth in the long run?
Was it possible for a global investment bank
like Lehman Bros. to evade an inevitable bankruptcy in the face of a disastrous
financial crisis that primarily hit the US market in the late 2010s, with
ripple effects eventually felt worldwide?
In both cases, the answer is a straight
“NO.” Thousands of small and medium brick-and-mortar enterprises around the
world faced forced shutdowns, at least temporarily, due to COVID-19 over the
last couple of years. However, a significant number of entrepreneurs not only
sustained their businesses but, in fact, successfully grew them over the
pandemic period.
How could they stand out from the rest
in a market hit by one of the deadliest human crises ever known to mankind? How
could a lot of entrepreneurs successfully keep their businesses like bakeries
or restaurants operational by exploring the online route while others could
not?
These questions can be answered with a
detailed discussion of environmental scanning. In this paper, we will also
discuss strategic procurement and its relationship with environmental scanning.
We will begin with a brief literature review, followed by a case study.
2. Literature Review
2.1 Environmental Scanning
Environmental scanning is the process of
obtaining information about an organization’s external factors, such as
different events, trends, and forces attributing to potential changes, with the
sole intention of making informed and knowledge-based decisions in the context
of the organization’s future plan of action. So, the scanning involves “knowing
and interpreting the external changes,” which effectively becomes “a primary mode
of organizational learning.” (Choo 1999)
Here, it is noteworthy that scanning an
organization’s external environment is not merely an act of gathering
information; there is more to it. It helps the management to determine
potential threats and explore possible opportunities while protecting the
organization from facing any impending surprises.
Environmental scanning, as Chun Wei Choo
(1999) elaborates, “…analyzes information about every sector of the external
environment that can help management to plan for the organization's future.
Scanning covers not only competitors, suppliers and customers, but also
includes technology, economic conditions, political and regulatory environment,
and social and demographic trends.”
Delving deep into the study
of environmental scanning, Chun Wei Choo (1999) comes up with four
different aspects of information sought. Situational dimensions demonstrate
a strong co-relation between environmental uncertainty and the intensity and
frequency of scanning. The complexity of external factors, coupled with
frequently changing external forces, makes a strong case for an environmental
uncertainty that demands an increased rate and greater intensity of environmental
scanning.
The second aspect reveals an
intrinsic relationship between organizational strategy and scanning strategy. A
strategy or a set of strategies adopted by an organization- be it from Porter’s
(1985) Generic strategies or strategic stances proposed by Miles & Snow
(1978)- determines the intensity, purview, and fineness of environmental
scanning.
Looking into different
sectors of the environment is what is called Information Needs, while
sources and modes of scanning come under the purview of Information Seeking. Information use,
on the other hand, guides the management towards a better understanding of the
organization and helps devise its future planning, leading to desired
performance. Managerial traits, too, play a significant role in determining the
nature of environmental scanning administered by the organization. Managers at
the upper echelon of the organization tend to scan more extensively than those
in the downstream hierarchy.
Organizational learning by means of
environmental scanning requires both searching information and viewing
information. Based on these two acts of information seeking and viewing, Chun
Wei Choo (1999) proposes four different modes of scanning the external
environment of an organization, namely, Undirected viewing, Conditioned
viewing, Informal search, and Formal search.
As the name suggests, undirected viewing means
looking at information spread over a wide area to identify any traces of
potential change early so that information can be used in an organization’s
planning to gain a competitive advantage over others. Keeping no particular
information needed into consideration, the management employs distinct sources
in large numbers to screen a huge volume of information collected.
Conditioned
viewing, on the other hand, is used in scanning when the
management intends to study the potential influence a set of information could
have on the organization. Information need is much more specific in nature, so
the scope of screening is narrow as well, meaning it entails less time and
minimal effort. Once the information is proven to be important enough for the
organization, the searching mode of scanning is triggered by the management.
Informal search
comes into play when there is a need for information to develop a more detailed
understanding of a particular topic. Following no formal methodology, the
search intends to delve deep into the topic, seeking specific insights and
details, to realize whether to employ more time and effort on this issue.
The most sophisticated and
formal mode of scanning goes by the name "formal search." A
well-planned, structured methodology is followed here to collect reliable
information from comparatively more trustworthy and knowledgeable sources
compared to other modes of scanning. Particular information on a specific area
or topic is sought so that it can be used in the process of planning the
organization’s future course of action. So, the relative significance of the
information sought necessitates enhanced focus on its accuracy and overall
quality.
Describing an intelligent organization,
Garvin (1993) says, “…an intelligent organization is a learning organization
that is skilled at creating, acquiring and transferring knowledge, and at
modifying its behavior to reflect the new knowledge and insights.”
Environmental scanning can be a great
tool for an intelligent organization to better understand and learn about
itself and its external forces, and if carried out effectively, it can provide
the organization with a sustained competitive advantage over its competitors in
the long run. However, to successfully administer a scanning project, the
organization must have a long-term plan in mind and employ sufficient resources
and efforts for it to bear fruit in the form of enhanced organizational
understanding for the management. Scanning programs generally take 3 to 5 years
to make significant contributions to the organization’s long-term progress.
(Choo 1999)
Another highly significant trait of an
intelligent organization is its holistic approach. “The intelligent
organization adopts a holistic approach to knowledge management,” opines Chun
Wei Choo (2002), “that successfully combines tacit, rule-based, and background
knowledge at all levels of the organization.”
So, as a highly effective tool for
organizational learning, environmental scanning needs to be incorporated into
the organization’s formal system, in which coordinated efforts from a domain
expert, a skilled information manager, and an information technology expert can
be a great recipe for holding a sustained competitive edge in the market over a
long period.
Japanese companies like Canon and Honda
have proven how continuous monitoring of external factors and sustained
research and development (R&D) efforts over time have continued to provide
them with a technological edge in a highly competitive global technology market.
(Choo 2002)
However, effective
coordination between different parts of information management- identifying,
acquiring, organizing and storing, developing and disseminating, and using
information- must be ensured to get the best results from environmental scanning.
Regarding best practices of scanning, Chun Wei Choo (1999) writes, “environmental scanning
has to balance the tensions between control and creativity, centralization and
decentralization, focus and exploration.”
If this balance can be maintained,
coupled with effective use of time and resources, environmental scanning can
generate valuable assets for an organization in the form of knowledge about the
organization’s relative stance to the market forces and future opportunities
and threats, based on which an informed plan of future actions can be
formulated.
2.2 Strategic Procurement
Strategic procurement means a continued
process of timely, flawless supply of goods and services that complements the
organization’s primary business objectives. It aims to keep the overall supply
chain uninterrupted while always seeking to minimize risks and maximize value
creation both at the supplier’s end and the customer’s end.
A modern procurement strategy is no
longer limited to traditional savings and compliance. Strategic procurement
today explores different creative ways of creating value for the organization-
and this value proposition goes far beyond the narrow purview of savings and
compliance.
For the study of strategic procurement,
here, I intend to employ the theoretical perspective of Dynamic capabilities
along with Barney’s (1991) Resource-based view (RBV).
The theory of Dynamic Capabilities (DC)
highlights an organization’s capability of coordinating its internal and
external resources, thus making the organization better placed and more
equipped to respond to the changing factors in its environment.
Dynamic
capabilities, proposed by Teece, Pisano, and Shuen
(1997), “analyzes
the sources and methods of wealth creation and capture by private enterprise
firms operating in environments of rapid technological change.” So,
under this theory, an organization’s competencies- both internal and external-
are intended to be well coordinated so that new avenues of opportunities can be
explored while avoiding impending threats posed by changing external forces.
J.B. Barney holds
quite a similar stance in his Resource-based view (RBV), a highly influential
theory in the domain of strategic management, emphasizing the identification of
a firm’s strategic resources that can be utilized for gaining a long-term
competitive edge in the market. Barney (1991) says, “... sustained competitive
advantage derives from the resources and capabilities a firm controls that are
valuable, rare, imperfectly imitable, and not substitutable. These resources
and capabilities can be viewed as bundles of tangible and intangible assets,
including a firm’s management skills, its organizational processes and
routines, and the information and knowledge it controls.”
However, one criticism that
can be labeled as RBV is that it primarily focuses on the internal resource
base of an organization. This is where dynamic capabilities (DC) theory seems to hold
a more holistic approach. Yet, there are many who view a strong evolutionary
connection between RBV and dynamic capabilities theory.
Nelson and Winter (1982) are of the
opinion that the theory of dynamic capabilities stems from RBV theory, a view
that cannot be discounted altogether, given how similar propositions they make
in terms of resource identification, maximization, and utilization of
organizational resources.
Dynamic capabilities (DC) theory can be
applied with great effect to the holistic nature of environmental scanning, in
which information management can be of great value to this theory. While DC
intends to integrate and exploit an organization’s internal and external
capabilities, to positively and progressively respond to the changing forces in
the external environment, scanning provides information about those forces.
Now, the organization can utilize its holistic resources to make informed
decisions on the basis of information collected through environmental scanning.
So, dynamic capabilities, if put into
practice with a well-planned and structured scanning program over a period of
time, can produce sustained competitive advantages for the organization. It can
now be fairly ascertained that a scanning project greatly complements the
dynamic capabilities theory.
A good example of how closely-knit they
can be comes from some of the garment factories in Asia, particularly in
Bangladesh and Vietnam. During the early stages of the COVID 19 pandemic, a lot
of garment factories in Asia suffered the cancellation of orders and delayed
payments from buyers, accounting for losses in the millions, while major
players like Vietnam and Bangladesh saw raw material imports from China- the
largest producer- completely halted.
However, some factories in Bangladesh
could still remain operational even during the high wave of COVID disasters. It
was possible because they shifted their focus to manufacturing personal
protective equipment (PPEs) and face masks, both of which were in high demand
in the domestic as well as international markets. (Bangladesh garment makers turn virus gloom into
boom 2022)
It shows that these garment
manufacturers utilized their internal competencies and external resources in
the form of their goodwill and a strong, loyal client base to respond to the
changing external forces. Scanning the environment, they must have identified
factors- not just negatives but some positives as well.
If lockdowns, order cancelations,
delayed payments, and shortage of raw materials were negative forces, the
management must not have overlooked opportunities like strong and
ever-increasing demands for PPEs and face masks, with some highly conducive
government schemes and policies like low-interest, subsidized credit loans for
the garment industry, and exemption of their factories from the country-wide
lockdowns and shutdowns.
But does it mean all the factories could
take such informed decisions and make progress? Or, may I inquire, were those
who were unable to make such fateful decisions capable of capitalizing on the
opportunities created; did they have a holistic scanning mechanism in place, or
did they lag behind at the level of competence; or did both play a role in
their relative misery?
However, it may not be entirely correct
to attribute their perceived inability to respond to changing forces to
incompetence and a lack of scanning mechanisms. A curious mind might wonder if
the industry had a level playing field and if socio-political and
socio-economic studies could provide additional information needed to determine
the true cause of their demise.
Now, coming back to strategic procurement,
this domain of knowledge now harbors more of a customer-centric approach,
clearly shifting away from its traditional supplier-centric narrow view. Modern
procurement strategies are now devised to collaborate with all the stakeholders
across the departments in an organization. Strategic procurement now intends to
have a more holistic view, integrating both the upstream and downstream
organizational operations.
2.2.1 Customer-centric procurement
Customer-centrism as an approach has
swept across the field of business organizations, advancing and redefining
almost all the traditional theories and approaches across the board, keeping
customers at the core. Business literature has seen numerous studies by
renowned business experts all over the world.
Webster (1992) remarks that marketing’s
focus will be "managing strategic partnership and positioning the firm
between vendors and customers in the value chain." Duncan Jones (2017), VP
and Principal Analyst, Forrester, thinks that the next generation of procurement
will be customer-focused. Customer preferences will be playing an increasing
role in procurement decisions and solutions.
The ever-advancing landscape of
technology can be the driving force behind a customer-centric procurement
strategy. Technology-assisted strategic procurement will open up new and varied
avenues for the increasing role of customer preferences in the process of
procurement.
With the availability of an increasing
amount of digital data coupled with data analytics, modern technology can
foster the process of procurement and help the management make much more
informed and accurate decisions. Advanced communication technology can also
assist a procurement professional in maintaining coordination with a supplier
and the marketing personnel. Moreover, technology or digital procurement itself
has been a new area of study that deals with a structured analysis of digital
buying processes and solutions.
3. The Relationship between
Environmental Scanning and Strategic Procurement
Environmental scanning of a business
organization can play a significant role in modern strategic procurement, which
entails a holistic view of operations. Information coming through an effective
scanning program will provide vital knowledge of the potential opportunities to
explore and of possible threats to avoid. Early detection of a possible market
trend or identifying an untapped market opportunity could lead to a highly
successful procurement drive, providing the organization with a significant
competitive advantage in the market.
To further discuss the relationship
between environmental scanning and strategic procurement, let us take up a
real-life case study, in which we will explore how complementary environmental
scanning could be towards an organization’s strategic procurement.
3.1 A Case Study: High Penetration of
Broadband Internet in Bangladesh during Covid and Potential Business
Opportunities
Bangladesh, an emerging economy from
South Asia, has experienced almost a three-fold increase in economic growth
over the past 10 years, not an expendable feat by any standard. (Statista,
2022) The turnaround of its fortune began when the technology-driven project,
Digital Bangladesh, was launched back in 2008, and its implications started
becoming visible since 2010.
A countrywide digitization drive was
successfully undertaken, establishing more than 4,500 digital centers.
Government services were extensively made available online, and most
importantly, a significant reduction in internet prices, coupled with a
sustained high growth of mobile phone adoption, saw a whopping 60% internet
penetration. (Chowdhury 2020)
On the back of continuous
infrastructural development undertaken by the government in the communication
and technology sectors, industries like ICT and e-Commerce have experienced
tremendous growth. Moreover, the successful proliferation of mobile financial
services has turned it into a technology-driven economy in every sense of the
word. Even during the pandemic-forced lockdowns, people immensely benefited
from the digitized economy.
Bangladesh, a country of roughly 170
million people, currently has 181 million mobile phone subscribers and 123 million
internet subscribers, of which 113 million access the internet on their mobile
phones. (Mobile Phone Subscribers in
Bangladesh 2021; Internet Subscribers in Bangladesh 2021)
While broadband internet penetration
till the outbreak of the pandemic was not yet satisfactory, the scenario has
started changing over the last couple of years. The pandemic-forced extended
homestays, home offices, and online education have seen broadband subscriptions
getting doubled since 2019. (Broadband internet providers eye growth 2021)
The number of broadband users may still
be very small compared to mobile internet subscribers. But the increasing need
for high-speed broadband internet in everyday life- and that so not just in
cities- clearly indicates that the recent high penetration of broadband
adoption will continue in the coming years as well. In particular, online
education has been a pressing need that was deeply felt across the country
during the pandemic. So, a blended learning system has been in discussion in
the media over the past year, and the government is also working towards
introducing a blended approach to the education sector. Moreover, high-speed 5G
internet has been launched recently in the country. (Bangladesh enters 5G era
today 2021)
Realizing an imminent broadband boom,
Internet Service Providers (ISPs) are now moving towards semi-rural and rural
areas, a clearly untapped market for them to explore. Here, it is noteworthy
that more than 60% of the population still lives in rural areas in Bangladesh.
A well-planned environmental scanning
would clearly indicate that the increasing adoption of broadband internet
across the country would create a huge demand for affordable digital devices
like laptops, notebooks, and smartphones. Students will particularly require
learning-friendly devices with built-in education applications in them. The
high adoption of laptops and smartphones will also create a huge demand for
related accessories, especially those needed for online education.
So, upon acquiring the knowledge of this
relatively untapped market, local laptop and smartphone manufacturers can
undertake a strategic procurement drive, leading to potential strategic
partnerships with various suppliers.
4. Conclusion
Knowledge based on information is an
asset to an organization. The success of any organization largely depends on
taking informed decisions successfully. While collecting information about
internal factors looks less difficult and less complex because they can be controlled
to some extent, the same cannot be said about external forces. Various modes of
environmental scanning intend to provide valuable information about factors
external to an organization.
A procurement professional can create value for an organization in more
than one way. But for that, one requires knowledge coming from different
departments. As strategic procurement now takes into account the knowledge of
all the stakeholders of an organization, information about external factors can
be of immense value to procurement professionals.