Topic 1: Environmental Scanning Concept 1.

Societal Environment

●​ This is the outermost level in the business

Environmental Scanning
environment which may directly or indirectly
affect business operations.
Environmental scanning is the (A) monitoring, (B)
●​ It is composed of several factors namely:
evaluating, and (C) disseminating of information
○​ Socio-cultural Factors
from the external and internal environments to key
■​ These refer to characteristics
people within the organization. It is accomplished by
of the population, their
conducting research through surveys, observations,
cultural beliefs and values.
record keeping, checking and updating plus other
○​ Economic Factors
methods to gather information. Its purpose is to
■​ These factors refer to
identify strategic factors that will determine the
availability and distribution of
future of the organization. The identification of
factors of production, income
strategic factors affecting the organization enables
and expense patterns and
the company to prepare strategies that would allow
inflationary conditions
it to compete better with its rivals.
○​ Politico-legal
■​ Factors under these are the
Environmental scanning is done before strategy
laws, rules and regulations
formulation begins. Factors identified in this process
that may impact the
are considered inputs to the strategy formulation
operations of the firm.
process. However, environmental scanning factors
○​ Technological
should be monitored all throughout the strategic
■​ These are changes in
management process as these forces change
processes and methods used
overtime.
in production or provision of
services.
Levels of Business Environment ●​ The analysis of the societal forces is done
through STEEP or PESTLE analysis in
The business environment is composed of several
external scanning.
levels. Scanning should be done on all levels to
ensure that relevant factors are carefully
2. Task Environment
considered. An examination of these various levels is
done to identify trends and movements that may
●​ This is the level of the environment that is
influence the success of the firm. The figure below
directly outside of the firm.
shows the different levels in the business
●​ The firm also directly interacts with forces at
environment.
this level.
●​ Sometimes called the competitive
environment, this includes stakeholders of
the company such as suppliers, shareholders,
competitors, government, customers, special
interest groups and communities.
●​ The analysis of this level is performed under
external scanning through Porter's Five
Forces Framework of Industry Analysis

3. Internal Environment

●​ This is the company environment which

includes the structure of the organization,
the processes used, the policies implemented
and the resources utilized by the
organization.
●​ The analysis of this level is done using the
Seven-S Framework under internal scanning.
Components of Environmental Scanning The succeeding discussion presents the tools for
external environmental scanning and the levels of
Environmental scanning is performed in two parts the environment to which they apply.
which are presented below.
1. STEEP Analysis
External Scanning: the process of analyzing the
environment outside of the company/firm. This analysis is done for the outermost level of the
firm's environment which is the societal
●​ There are two levels of the external environment. STEEP stands for: Socio-cultural,
environment. These are the Technological, Ecological, Economic and
macro-environment or social environment Politico-legal analysis. It is performed to identify
and the competitive or task environments. opportunities and threats in this level of the
These shall be discussed in succeeding topics. environment. When you are doing this analysis, look
●​ The end result of this analysis is the into trends such as those in the following aspects of
identification of company opportunities and the environment presented below:
threats.
Socio-cultural
●​ Lifestyle changes
Internal Scanning: the analysis of the environment ●​ Career expectations
inside the organization. ●​ Consumer activism
●​ Rate of family formation
●​ Analysis of this part of the environment ●​ Growth rate of population
requires a deeper look into the structure of ●​ Age distribution of population
the organization, the processes used and the ●​ Regional shifts in population
resources utilized in producing products or ●​ Life expectancies
providing services to customers. ●​ Birth rates
●​ The end result is the identification of ●​ Pension plans
company strengths and weaknesses. ●​ Health care
●​ Level of education
Environmental scanning is a necessary step to the ●​ Living wage
strategic management process as it lays the
foundation or basis for the strategies to be Technological
formulated and implemented. ●​ Total government spending for R & D
●​ Total industry spending for R & D
Topic 2: External Scanning ●​ Focus on technological efforts
●​ Patent protections
●​ New products
External Scanning Concepts
●​ New developments in technology transfer
from lab to marketplace
External scanning is the process of analyzing the
●​ Productivity improvements through
environment outside of the organization. There are
automation
two levels in this environment, the macro or societal
●​ Internet availability
environment and the task or competitive
●​ Telecommunication infrastructure
environment. The goal in performing an external
●​ Computer hacking activity
scan is to determine trends in the external
​
environment that may influence the performance of
Ecological
the firm in the future. These trends are in the form
●​ Increase in renewable energy sources
of opportunities and threats. After performing an
●​ Reduction in energy consumption
external scan, you should be able to have a list of
●​ Regenerative agriculture
these significant factors that you should attend to in
●​ Replacement of plastic packaging
order for your company to be competitive.
●​ Human waste management
●​ Accelerated climate action
●​ Air travel and climate change
●​ Biodegradable material use
 ●​ Alternative resources for production pandemic. Those with online shops; however, found
●​ Biofuel this a very good opportunity to increase market
sales.
Economic
●​ GNP trends Remote work arrangements or the more popular
●​ Interest rates term "work-from-home" set up has also become a
●​ Money supply trend because of lockdowns. Companies with
●​ Inflation rates services that can be done online and away from their
●​ Unemployment levels physical offices adopted this set up to continue
●​ Wage/price controls business operations during the lockdown. Those
●​ Energy alternatives whose services depend on physical presence;
●​ Energy availability and cost though, were forced to stop operations. Examples of
●​ Disposable and discretionary income those that needed complete closure of operations
●​ Currency markets are salons, barber shops, dine-in restaurants and
●​ Global financial system hotels.

Politico-legal 2. SWOT Analysis

●​ Environmental protection laws
●​ Global warming legislation You are probably familiar with SWOT Analysis as this
●​ Immigration laws has been introduced to you in senior high school
●​ Tax laws management or entrepreneurship courses; or if not,
●​ Special incentives probably during your NSTP classes. For
●​ Foreign trade regulations environmental scanning purposes; however, this tool
●​ Attitudes toward foreign companies is used as a basis for strategy formulation and the
●​ Laws on hiring and promotion outputs are divided between external and internal
●​ Stability of government scanning. The following video presents SWOT
●​ Outsourcing regulations Analysis in a comprehensive manner, including both
internal and external components. Please take note
These trends could be derived from news reports, that only the external component will be used for
publications found on the internet or by specific external scanning.
agencies such as the International Monetary Fund,
the World Bank, the Asian Development Bank, SWOT stands for Strengths, Weaknesses,
World Health Organization and other Opportunities and Threats. The figure below shows
non-governmental organizations. some examples of these.

Examples of current trends are the use of online

banking facilities, online sales, and remote work
arrangements arising from the presence of
COVID-19 and the subsequent lockdowns instituted
by many countries. The pandemic itself is a trend
considered as a threat to many organizations
whether for profit or not for profit.

Online banking facilities may have been in place for

quite some time now, but it has never been more
popular until now when payments could not be
facilitated physically in banks or other From the framework above, it can be seen that there
establishments. Companies with online banking are two sets of factors, internal and external. For
facilities find this as an opportunity for increasing external scanning purposes, only the external factors
sales. will be considered. These external factors are :

Online selling has also become a trend in consumer Opportunities - these are factors found in the
goods and food items. Companies relying on sales external environment that may offer advantages to
from physical stores suffered losses during this the firm. In the discussion above regarding trends in
the societal environment, online banking facilities
and online selling were cited as opportunities for
companies that already have internet-based
payment and marketing systems.

Threats - these are factors found in the external

environment that may pose as hindrances to
profitability of the firm or may prevent companies
from achieving competitive advantages. The
presence of Covid-19 is an example of a threat to
most businesses, and even households.

The goal in performing SWOT analysis, whether for Let us take a deeper look into the following forces.
internal or external purposes, is to develop a definite
list of factors affecting the company for which the 1. Bargaining power of customers
analysis is done. One caution that should be
observed when doing this analysis is that there may Customers have the power to influence how
be numerous trends and factors. As an analyst, it is companies price their products. This is what
your duty to determine which of the factors have or bargaining power is all about - the ability of one
do not have an impact on your business. For party to influence the decisions of another. In this
consideration in strategy formulation, only those case, customers may either have a strong or weak
that have impact should go into the list of bargaining power against the companies in an
opportunities and threats. industry. Customers are deemed to have strong
bargaining power against an industry when they
3. Porter's Five Forces Framework for Industry have the capacity to drive prices of products or
Analysis services down; or when they can dictate their own
terms against the industry. The following are
Michael Porter, a Harvard University Professor, indicators of strong bargaining power:
developed a framework for analyzing the task or
competitive environment of the firm. The a)​ A buyer purchases a large portion of the
competitive environment is also referred to as the seller’s product or service ( ex. Oil filters
company's industry environment as the forces purchased by a major auto maker)
affecting it are those affecting all players in the
industry where it operates in. Porter identifies five b)​ A buyer has the potential to integrate
major forces in this environment: backward by producing the product itself (
1. The bargaining power of customers; ex: a newspaper chain could make its own
2. The bargaining power of suppliers; paper)
3. The threat of new entrants;
4. The threat of substitutes; and c)​ Alternative suppliers are plentiful because
5. Competitive Rivalry. product is standard or undifferentiated ( ex:
motorists can choose among many gas
According to Professor Porter, the interplay of these stations)
forces and the relative strength each of them have
on the industry determines how profitable an d)​ Changing suppliers cost very little ( ex: office
industry is. After determining profitability of the supplies are easy to find)
industry, the company may determine whether it has
better or poorer performance compared to the e)​ The purchased product represents a high
industry performance. percentage of a buyer’s cost, thus providing
an incentive to shop around for a lower price
A recent development in Porter's framework is the (ex; gasoline purchased for resale by
addition of another force, which is the relative power convenience stores makes up half their total
of other stakeholders. The resulting figure from the cost)
addition of this force is as follows:
 f)​ A buyer earns low profits and is thus very industry you are doing an analysis for. An example of
sensitive to costs and service differences (ex. new entrants would be Tesla for cars, Ala Ehxpress
Grocery stores have a very small margins) Delivery Services and J&T for logistics
(delivery/courier services) and Jet Hotel for hotel
g)​ The purchased product is unimportant to the services.
final quality or price of a buyer’s products or
services and thus can be easily substituted New entrants are considered threats to existing
w/o affecting the final product adversely ( ex. firms in an industry when they are able to match the
Electric wire bought for use in lamps) offerings of the existing firms. This means they can
sell similar products at comparable prices and similar
For an industry to be profitable, the bargaining or even better quality. In response to the threat
power of buyers should be low. Thus, companies posed by the new entrants, firms in an industry may
should find a way to prevent customers from attempt to put up entry barriers.
influencing prices.
Entry barriers are obstructions that prevent
2. Bargaining power of Suppliers newcomers from entering the industry. These may
include:
Suppliers refer to companies or entities providing
inputs to the industry. Their bargaining power a. capitalization requirements - some industries
comes from their ability to influence the quality and require huge initial capital to start up a business.
quantity of the inputs used by companies, as well as This discourages new players from joining the
the quality of the products produced by the industry. competition when they have limited capital
Suppliers have a strong bargaining power against the resources.
industry when the following conditions exist:
b. economies of scale - this refers to the ability of
a)​ The supplier industry is dominated by a few existing companies to maximize production with
companies, but it sells to many ( ex. The minimal costs. New entrants usually cannot produce
petroleum industry) as much as existing firms because they still have to
know whether the market will patronize their
b)​ Its product or service is unique and/or it has products. Thus, the new entrant usually spends
built up switching costs (ex. Word processing higher costs in producing the products.
software)
c. switching costs- These are costs that may be
c)​ Substitutes are not readily available ( ex. associated with shifting from one seller to another.
Electricity) A customer has switching costs when changing
brands. To be more specific, a customer may find it
d)​ Suppliers are able to integrate forward and costly to change brands when benefits that can be
compete directly with their present derived from the previous brand are not present in
customers ( ex. A microprocessor producer the current brand. For example, when changing from
such as Intel can make PCs) Iphone to Samsung, the customer may pay less but
may give up enjoying the apps and convenience
e)​ A purchasing industry buys only a small provided by an Iphone.
portion of the supplier group’s goods and
services and is thus unimportant to the When applying switching costs to the concept of the
supplier ( ex. Sales of lawn mower tires are threat of new entrants, it is viewed that often,
less important to the tire industry than are customers find it costly to switch to the brand of the
sales of auto tires.) new entrant because they have experienced benefits
from the brands of existing firms in the industry.
3. Threat of New Entrants Therefore, in this case, the switching cost becomes a
barrier to entry.
New Entrants are new players in the industry. They
may not necessarily be newly established companies. d. access to distribution channels - Another
Some of them are existing companies competing in advantage of existing firms that new entrants do not
other industries and then decided to compete in the have is the access to distribution channels such as
malls, grocery stores, dealer connections and the chocolate drinks or tea may be substitutes for
like. Relationships with distribution channels have coffee; and the bicycle may be a substitute for a car.
been established by existing firms They become a threat to the industry when they can
satisfy customers the same way as the products of an
e. Cost disadvantages independent of scale - This industry or when they can be sold at more
exists when a company has advantages that cannot competitive prices and perform better than the
be replicated by the competition, such as proprietary products of an industry.
technology
For an industry to be profitable, the threat of
f. Government policies - These may refer to controls substitutes should be low.
the government has placed on the market, such as
licensing requirements. When existing companies 5. Competitive Rivalry
have complied with these requirements but new
entrants cannot avail of such, then there is a high Competitive rivalry or the degree of competition
barrier to entry. among firms in an industry is considered the heart of
the five forces framework. Firms compete in terms
g. Product differentiation - This is the brand of market share or the percentage share in the sales
strength of the product as a result of effective of the industry. Intense rivalry can limit profits and
communication of its benefits to the target market. lead to competitive moves including price cutting,
More specifically, this pertains to how different each increased advertising expenditures, or spending on
brand is from other brands in the industry. When service/product improvements and innovation.
there is little product differentiation, the barrier to Several factors affect the intensity of rivalry among
entry is high or the threat of new entrants is low. firms in an industry. These are:
When brands find it difficult to establish their
differences from one another, there is little product a. Costs - Costs that could increase rivalry include
differentiation. For example, in the salt industry, high fixed costs, high storage expenses, and low
brands are fairly the same. No salt brand can claim switching costs. Fixed costs are expenses that are
their product is saltier than other brands. paid by the firm even when it is not operating. They
Differentiation only comes in the form of size of the include utilities (electricity, water, phone bills), rent
salt granules or the presence of iodine in the salt expense and depreciation. High fixed costs will
product. Product differentiation is low in the salt encourage firms to lower their prices. However, once
business, thus the barrier to entry is low as well. the prices decrease, the competition will intensify.

The bottom line in this force, the threat of new b. Concentration in the Industry - If a particular
entrants, is that the threat is low: industry has a very high number of firms offering
identical goods or services, this will lead to more
●​ when the barriers to entry are high intense competition among rivals. However, in a
●​ when new entrants cannot sell at prices monopoly or oligopoly market structure that is
lower or at par with existing companies in the dominated by just one or a few firms, there will be
industry; and; less rivalry. As such, the extent of concentration in an
●​ when new entrants could not sell products industry plays a huge role in competition intensity.
with the same or better quality than the
existing firms in the industry. c. Rate of Market Growth - The rate at which the
overall industry is growing is another aspect that
For an industry to be profitable though, the threat of influences competitive rivalry. For instance, if the
new entrants should be kept low. market is growing rapidly, the rivalry between firms
will be less intense.
4. Threat of Substitutes
Slow growth rate, however, increases competitive
Substitutes are products of another industry that intensity. With slow growth, the industry is very
may take the place of the products of the industry close to saturation – there aren’t many new
you are making an analysis of. For example, customers to attract. But if the market is strong,
evaporated milk is a substitute for coffee creamer; there’s room for new entrants and new clients. There
contact lenses are substitutes for eyeglasses;
could even be untapped opportunities that firms can The industry should also find ways to satisfy the
take advantage of. claims of these stakeholders. For an industry to be
profitable, the relative power of these stakeholders
d. Product Differentiation - The degree of to influence the decision of firms in the industry
differentiation also determines how intense the should be low.
competition will be. With competing goods, such as
food products and clothing, there’s very little room After determining the level of industry profitability
for differentiating the items offered by a particular using Porter's Five Forces Framework +1, your next
company. This means that companies will be task should be to compare your company's level of
competing for the same consumers, and this profitability with that of the industry. Is it higher or
increases rivalry. However, if a firm is offering highly lower? This next task; though, would be done in the
differentiated products, which other organizations next section, the Internal Scanning.
cannot easily imitate or copy, then it will face
relatively less competition. In relation to the previous tool, SWOT analysis, the
five forces framework can also be a source of
e. Switching Costs - Apart from fixed costs, opportunities or threats.
switching costs also influence the extent of rivalry
between companies. If an organization decides to go
for a different supplier from the one it has been Topic 3: Internal Scanning
using, it will incur switching costs. High switching
costs lead to a decrease in competition. The
Internal Scanning Concept
switching costs arise from the fact that customers
have invested a lot of their resources in learning how
Internal Scanning is the second component of
to use a particular product.
environmental scanning. The purpose of performing
this is to identify the strengths and weaknesses of a
However, if there aren’t any switching costs involved,
company which may be considered inputs in the
then industry competition will be pretty intense.
strategy formulation stage.
Markets that deal with common consumer goods are
often the ones that have low switching costs.
Internal scanning is the process of analyzing the
internal environment of the firm. This is possible
Rivalry is not exactly bad for an industry. It drives
through observation of company premises, people,
companies to perform better and ensure customers
relationships and structures. Records of the
receive satisfaction from the products sold.
company such as employee files, policies and
However, too much competition can lead to firms
procedures, existing plans and strategies,
taking unnecessary steps to achieve higher market
organizational hierarchy, financial reports and
share.
customer files are among the sources of information
for this analysis.
For an industry to be profitable; though, competitive
rivalry should be moderate.
When conducting internal analysis, you must
understand the following:
6. Relative power of other stakeholders
●​
●​ The role of resources, capabilities, and
Other stakeholders from a company's task
distinctive competencies in the process by
environment may affect the profitability of the
which companies create value and profit.
industry. These are as follows:
Resources refer to all inputs used including
materials, funds, technology and people.
●​ Governments
Capabilities are the skills possessed by
●​ Local communities
current manpower. Distinctive
●​ Creditors
competencies refer to business
●​ Trade associations
characteristics that set it apart from its
●​ Special interest groups
competitors. The distinctive competencies of
●​ Unions
an organization arise from its resources and
●​ Shareholders
capabilities.
 ●​ The importance of superior efficiency, Weaknesses - are areas where the business needs to
innovation, quality, and responsiveness to improve on. These may be characteristics or
customers. Superior efficiency enables a resources that are considered important for
company to lower its costs; superior quality achieving competitive advantage in the industry but
allows it to charge a higher price and lower the company may be lacking in. Thus, these
its costs; and superior customer service lets characteristics prevent the company from
it charge a higher price. Superior innovation maximizing profitability or reaching optimum
can lead to higher prices, particularly in the performance. Examples of weaknesses include poor
case of product innovations, or to lower unit location, overpriced products, poor quality among
costs, particularly in the case of process products, weak brand image and sustained financial
innovations. losses.
●​ The sources of their company’s competitive
advantage (strengths and weaknesses). The Similar to the external component of SWOT analysis,
four building blocks of a company's your goal is to develop a definite list of strengths and
competitive advantage are efficiency, quality, weaknesses of the company. Not all strengths
innovation, and customer responsiveness. matter to the industry and not all weaknesses would
lead to competitive disadvantage. To determine
Internal Scanning Tools which factors or strengths and weaknesses to
include in the list, look for the key success factors in
1. SWOT Analysis the industry.

As mentioned in Topic 2 of this module, SWOT Key success factors are those elements considered
analysis is also done for internal scanning. The study important in achieving success in the industry. These
of the internal environment or factors inside the are factors that would lead to competitive
company is performed to determine the strengths advantage. These are areas where a company must
and weaknesses of the company. For a quick perform well. For example, in the food business, key
reference, let us take a second look at the SWOT success factors include:
Analysis framework:
●​ clean facilities
●​ delicious food products
●​ courteous staff
●​ affordable prices
●​ excellent location

When you're doing an internal analysis of a food

business, the condition of the company under
analysis in terms of these factors give you an idea
about its strengths and weaknesses.

2. McKinsey's 7S Framework
From the figure above, it can be seen that the
strengths and weaknesses are part of the internal This is a concept used as a measure of the quality of
factors considered in the analysis. These factors are the performance of a firm, as indicated by seven
examined to identify characteristics of the firm that factors so interrelated that changing any factor may
may affect their future performance. affect changes in other six factors. The seven factors
are divided into hard and soft, enumerated below:
Strengths - describe what an organization excels in
or is good at. These are what make the firm better > 'hard' factors: strategy, structure, and system
than competitors. They refer to resources,
capabilities and characteristics of the firm that other "Hard" elements are easier to define or identify and
competitors do not have or cannot copy. Examples management can directly influence them: These are
of strengths are stable financial position, strong strategy statements; organization charts and
market share, customer loyalty, exceptionally skilled reporting lines; and formal processes and IT systems.
manpower, and advanced or proprietary technology.
> 'soft' factors: style, shared values, skills, and staff and skills all stem from why the organization was
originally created, and what it stands for. The original
"Soft" elements, on the other hand, can be more vision of the company was formed from the values of
difficult to describe, and are less tangible and more the creators. As the values change, so do all the
influenced by culture. However, these soft elements other elements.
are as important as the hard elements if the
organization is going to be successful. Let's look at each of the elements specifically:

The concept was developed in the early 1980s by ●​ Strategy: the plan devised to maintain and
Tom Peters and Robert Waterman, two consultants build competitive advantage over the
working at the McKinsey & Company consulting competition.
firm. The basic premise of the model is that there are ●​ Structure: the way the organization is
seven internal aspects of an organization that need structured and who reports to whom.
to be aligned if it is to be successful. ●​ Systems: the daily activities and procedures
that staff members engage in to get the job
The 7S model can be used in a wide variety of done.
situations where an alignment perspective is useful, ●​ Shared Values: called "superordinate goals"
for example to help you: when the model was first developed, these
are the core values of the company that are
●​ Improve the performance of a company. evidenced in the corporate culture and the
●​ Examine the likely effects of future changes general work ethic.
within a company. ●​ Style: the style of leadership adopted.
●​ Align departments and processes during a ●​ Staff: the employees and their general
merger or acquisition. capabilities.
●​ Determine how best to implement a ●​ Skills: the actual skills and competencies of
proposed strategy. the employees working for the company.

The McKinsey 7S model can be applied to elements The model is based on the theory that, for an
of a team or a project as well. The alignment issues organization to perform well, these seven elements
apply, regardless of how you decide to define the need to be aligned and mutually reinforcing. So, the
scope of the areas you study. model can be used to help identify what needs to be
realigned to improve performance (or the
The way the model is presented in the figure below weaknesses that need to be worked on), or to
depicts the interdependency of the elements and maintain alignment and performance (the strengths
indicates how a change in one affects all the others. that need to be perpetuated) during other types of
change.

Whatever the type of change - restructuring, new

processes, organizational merger, new systems,
change of leadership, and so on - the model can be
used to understand how the organizational elements
are interrelated, and so ensure that the wider impact
of changes made in one area is taken into
consideration.

Whole books and methodologies are dedicated to

analyzing organizational strategy, improving
performance and managing change. The 7S model is
a good framework to help you ask the right
questions - but it won't give you all the answers. For
Placing Shared Values in the middle of the model that you'll need to bring together the right
emphasizes that these values are central to the knowledge, skills and experience. When it comes to
development of all the other critical elements. The asking the right questions, there’s a Mind Tools
company's structure, strategy, systems, style, staff checklist and a matrix to keep track of how the seven
elements align with each other. Supplement these 5.​ Style:
with your own questions, based on your
organization's specific circumstances and ●​ How participative is the
accumulated wisdom. management/leadership style?
●​ How effective is that leadership?
Here are some of the questions that you'll need to ●​ Do employees/team members tend to be
explore to help you understand your situation in competitive or cooperative?
terms of the 7S framework. Use them to analyze ●​ Are there real teams functioning within the
your current (Point A) situation first, and then repeat organization or are they just nominal groups?
the exercise for your proposed situation (Point B).
6.​ Staff:
1.​ Strategy:
●​ What positions or specializations are
●​ What is our strategy? represented within the team?
●​ How do we intend to achieve our objectives? ●​ What positions need to be filled?
●​ How do we deal with competitive pressure? ●​ Are there gaps in required competencies?
●​ How are changes in customer demands dealt
with? 7.​ Skills:
●​ How is strategy adjusted for environmental
issues? ●​ What are the strongest skills represented
within the company/team?
2.​ Structure: ●​ Are there any skill gaps?
●​ What is the company/team known for doing
●​ How is the company/team divided? well?
●​ What is the hierarchy? ●​ Do the current employees/team members
●​ How do the various departments coordinate have the ability to do the job?
activities? ●​ How are skills monitored and assessed?
●​ How do the team members organize and
align themselves? Using the information you have gathered, now
●​ Is decision making and controlling examine where there are gaps and inconsistencies
centralized or decentralized? Is this as it between elements. Remember you can use this to
should be, given what we're doing? look at either your current or your desired
●​ Where are the lines of communication? organization.
Explicit and implicit?
Steps:
3.​ Systems:
1.​ Start with your Shared Values: Are they
●​ What are the main systems that run the consistent with your structure, strategy, and
organization? Consider financial and HR systems? If not, what needs to change?
systems as well as communications and
document storage. 2.​ Then look at the hard elements. How well
●​ Where are the controls and how are they does each one support the others? Identify
monitored and evaluated? where changes need to be made.
●​ What internal rules and processes does the
team use to keep on track? 3.​ Next look at the other soft elements. Do
they support the desired hard elements? Do
4.​ Shared Values: they support one another? If not, what needs
to change?
●​ What are the core values?
●​ What is the corporate/team culture? As you adjust and align the elements, you'll need to
●​ How strong are the values? use an iterative (and often time consuming) process
●​ What are the fundamental values that the of making adjustments, and then re-analyzing how
company/team was built on? that impacts other elements and their alignment.
The end result of better performance will be worth
it.

Key points

> The McKinsey 7Ss model is one that can be applied

to almost any organizational or team effectiveness
issue.

> If something within your organization or team isn't

working, chances are there is inconsistency between
some of the elements identified by this classic model.

> Once these inconsistencies are revealed, you can

work to align the internal elements to make sure
they are all contributing to the shared goals and
values.

> The process of analyzing where you are right now

in terms of these elements is worthwhile in and of
itself. But by taking this analysis to the next level and
determining the ultimate state for each of the
factors, you can really move your organization or
team forward.

The output of the 7S Framework may be integrated

with the internal component of SWOT analysis by
categorizing identified factors into strengths and
weaknesses. Thereafter, such factors may be
combined with the outputs of external scanning, that
is, the list of opportunities and threats, to create
strategies for the organization.