Strategic Plan, Part 1: External Environmental Scan
External Environmental Scan
The business environment is transforming significantly every day. It is important that managers are ready to face challenges that may inhibit the performance of their organizations. Hence, a timely environmental scanning is essential for managers and business owners because it allows them to gather and analyze information which will help them in creating strategies. The company that will be discussed in this paper is Allete Inc. This paper outlines how environmental scanning can create value and sustain a competitive advantage for Allete, evaluation of the external environment of the firm, assessment of the general environment of the company, and evaluation of the industry operating environment of the company.
Using Environmental Scanning to Create Value and Sustain Competitive Advantage
Environmental scanning is a strategic activity which assumes greater importance in the face of today’s complex and uncertain trading environments (Fabbe-Costes et al, 2014). Allete can use environmental scanning to create value and sustain a competitive advantage in the industry. Due to the high competition that Allete faces in delivering energy, environmental scanning can be used by the firm to gather statistics regarding the weaknesses, strengths, opportunities, and threats that the firm can face or explore to beat the competitors. For example, the strengths of Allete lies in its ability to deliver energy at affordable costs and in a very reliable manner. This will play a major role in creating value for the firm by mitigating the impacts of competition. The company will thus sustain competition through environmental scanning.
Another way that environmental scanning will be used to create value for the firm is by playing a crucial role in management. The data collected and analyzed can then be used to influence decision-making by the management, greatly shaping the way it operates. For example, Allete could use the environmental scanning strategy to determine a trended analysis of the current historical events in order to make informed decisions when addressing future events. This will help the management review the appropriate action plans in order to properly appropriate the resources to the plans. This will play a fundamental role in creating value for Allete as a company.
Company’s External Environment
The external environment for is characterized by competition with other industry giants. Competition comes about as other industry giants bring about better technologies, innovation, better customer service, better market understanding, and reduced prices as a factor that has enhanced competition among companies from the same industry. This has led to competitive prices and disloyal customers who shift between companies easily. Competition is thus the main external environment factor affecting the company.
Another factor from the external environment surrounding Allete is customer demands. According to Musa et al (2015), customer demands play a vital role in determining the success and survival or the failure of a firm. This is because the demands of the customers are mandatory to be fulfilled, failure to which the firm will fail terribly in the market. For instance, Allete has dedicated its resources to the production of both clean and renewable energy but the management needs to figure out the other needs of its customers. This will help in meeting and sustaining the needs of its customers, increase and maintain its customer base, as well as increase sales for the company.
Company’s General Environment
The general environment for Allete Inc. includes the demographic and legal forces surrounding the firm. For instance, Allete Inc. is highly favored by the rules and regulations from the local, state, and the federal government. This has played a critical role in supporting the delivery of affordable and reliable clean and renewable energy to the people. The rules and regulations surrounding Allete Inc. promote such move as the world has endeavored to preserve the world from global warming and other negative implications from using fossil fuel energy.
Demography is also another great factor when considering the general environment surrounding Allete Inc. For instance, Allete Inc. provides reliable and affordable clean and renewable energy to 16 municipalities, more than 145,000 residents in Minnesota, and most of the nation’s largest industrial clients (Allete Inc., n.d.). Due to the population and the demography of the region, the company is surrounded by a region in dire need of the services the company offers. This has played a crucial role in creating value and competitive advantage. For example, many industries and a high population imply that clean and renewable energy is required to run appliances and industries, making the firm to be strategically located to meet the needs of its customers.
Industry Operating Environment
Allete Inc is in the utility-electric power industry. The industry continues to transform rapidly, and electric companies today are providing new energy solutions to meet customers’ changing needs and expectations (Bradley & Associates, 2017). The industry is being challenged with numerous issues. First of all, the depletion of resources like energy-producing resources compromises and puts the whole industry under uncertainty. This implies that all the major investments required in the development of energy distribution resources are under jeopardy. Hydrocarbons have been attributed to the high levels of atmospheric gases and global warming. Therefore, the industry is fighting against the use of hydrocarbons, making firms like Allete Inc. adopt to invest their resources into clean and renewable solar, wind, and water energy among other forms of clean and renewable energies. Such risks are known as policy risks. Clean and renewable energy can be used for electric vehicles, making it hard to forecast future demand for hydro-carbon-derived energy.
With the entry of new players and increasing competition, the business environment of the electricity industry has changed dramatically (Kishimoto, Goto, & Inoue, 2017). The operating environment is also faced with the threat of technological and investor risks. For instance, the current advances in technology have contributed to improved economies and competitiveness among manufacturing industries in the production of electric vehicles and renewable energy. On the other hand, investor risks occur due to increasing concerns over the sustainability currently being deployed with the other companies’ conventional energy models. Technological and investor risks are thus a common phenomenon in the energy industry.
Environmental scanning plays a very significant role in the operations and general success of any firm. From marketing to management, environmental scanning strategy cannot be ignored. Allete Inc. faces competition and the need to meet customer needs as the main factors in its external environment while demographic and legal forces are predominant in the firm’s general environment. Stakeholders should take note of the over-reliance on hydrocarbons and the subsequent policy risks, the technological and investor risks facing the industry’s operating environment.
Allete Inc. (n.d.). Allete Inc. Retrieved from http://www.allete.com/
Bradley, M. J., & Associates. (2017). Powering America: The Economic and Workforce Contributions Of The U.S. Electric Power Industry. Electric Perspectives, 42 (5), 32-39. Retrieved from https://mjbradley.com/sites/default/files/PoweringAmerica.pdf
Fabbe-Costes, N., Roussat, C., Taylor, M., & Taylor W.A. (2014). Sustainable supply chains: a framework for environmental scanning practices. International Journal of Operations and Production Management, 34(5), 664-694. Retrieved from https://bradscholars.brad.ac.uk/bitstream/handle/10454/5656/ijopm_2014.pdf;jsessionid=AC6FAB7860AFCCB8F0D5DAFE0BAB063B?sequence=4
Kishimoto, J., Goto, M., & Inoue, K. (2017). Do Acquisitions by electric Utility Companies Create Value? Evidence from Deregulated Markets. Energy Policy, 105, 212-224. Retrieved from http://eds.a.ebscohost.com/eds/detail/detail?vid=4&sid=6a72b73f-1463-4b15-85a3-42891de548b3%40sessionmgr4007&bdata=JkF1dGhUeXBlPXNoaWImc2l0ZT1lZHMtbGl2ZSZzY29wZT1zaXRl#AN=1654547&db=eoh
Musa, M. M., Bin Amirudin, R., Sofield, T., & Mus, M. A. (2015). Influence of external environmental factors on the success of public housing projects in developing countries. Construction Economics and Building, 15(4), 30.