External environmental analysis involves looking into the environment within which the organization operates and identifying the opportunities and threats that are evident within that business environment. The analysis composes of four components;
Scanning: This is the process of looking into any early signals that mark the existence of emerging trends and environmental changes. Once these are identified the organization then moves on to the next step.
Monitoring: Once the trends and environmental changes are identified, monitoring helps in identifying what they could mean to the organization and its activities. This is done through constant observation of the various patterns and changes that take place in relation to the identified particulars.
Forecasting: Once the trends and environmental changes have been singled out and monitored over time, forecasting is applied as the organization articulates the outcome that could be experienced within both the organization and the business environment.
Assessing: Finally, the organization analyzes these probable outcomes with focus being on the possible influence they could have on the organization’s predetermined strategies.
Once the environmental scanning is done, it is then up to the management to come up with possible measures to counter identified threats or take advantage of any opportunities that have presented themselves.