Environmental Scanning Practices in an Emerging Market: A Case in Malaysian Hotels
Citation: Environmental Scanning Practices in an Emerging Market: A Case in Malaysian Hotels.American Research Journal of Business and Management. V4, I1; pp:1-10.
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The purpose of this study is to investigate how hotels in Malaysia conduct Environmental Scanning activities in order to manage changing market structures. Environmental Scanning activities offer a strategic information approach whereby the organisation will be able to store information, recognize prospects for growth and discover ways to improve operational competence. A qualitative approach was adopted using in-depth interviews on eight 5-star hotels in Malaysia. The finding provides a better understanding of the environmental scanning activities and the types of information collected by hotels in Malaysia. It was evident from the findings, the type of industry affects the content of what was scanned. With this understanding of the environmental scanning in the hotel industry, the top-level management is able to enhance their decisionmaking capabilities in strategic planning.
Keywords: Environmental Scanning, Business Environment, Scanning System, Malaysian Hotels, Emerging Market
Malaysia’s drive to develop a world-class infrastructure driven it to be one of the top five in a closely watched leading emerging markets (New Straits Times, 2016). Tourism industry is the third highest Gross National Income (GNI) contributor to the country’s Gross Domestic Production (Lean and Tang, 2010). In order for Malaysia to sustain its economic well-being, it has to continue to attract tourist arrival to the country.
Accommodation sector in particular hotels in Malaysia has played a vital role in generating income for the country. Hotel sectors are the drivers of growth for travel and tourism industry in Malaysia. In Malaysia, the hospitality industry has experienced a positive increase consistent with the growth of global hospitality industry in recent years(Ministry of Tourism Malaysia, 2009). Despite the slower growth of Malaysia economy due to global economic crisis, the tourism industry has rebounded quickly. The performance of hotel operational system can have strong influence on the firms, the employee, and the customers (Tsaur and Lin, 2004; Barros, 2005). Therefore, the hospitality firms shouldbe in touch with the markets in terms of recent trends and changes (Dupre and Lane, 1997). They need to have thorough understanding of hospitality industry so that they can build competitive strategy(Claver and Pereira, 2006).
The research objective is to find out how hotel organisations conduct environmental scanning activities in collecting, compiling, cataloguing, storing, retrieving and disseminating information for decision making purposes. The research further explores the possible patterns of environmental scanning process among the hotels. This would answer how hotels conduct their environmental scanning process.
In a related study by Hough and White (2004), who viewed environmental scanning as a process of (i) identifying, (ii) collecting, (iii) processing, and (iv) translating information about external environmental influences into useful plans which could then be used to support decisions for the organisation. Iadele (2006) defined environmental scanning as the process of dealing with the measurement, forecasting and evaluation of changes in the different environment variables. Thompson (1967), also mentioned that environmental scanning was a process by which the executives assessed the trends and events outside the organisation. Thus, the environmental scanning process would be an important step towards the strategic planning process; whereby emerging trends, changes and issues are regularly monitored and evaluated so as to identify the impact on business decisions (Preble et. al, 1988).
Lester and Waters (1989), defined environmental scanning as the management procedure of using information from the environment to assist in decision making through the process of obtaining, analysing and using relevant information. This is in support of Aguilar’s (1967) landmark study which proposed that the process of environmental scanning had to be integrated into the organisation’s information management system in order to be effective.
Many organisations today are developing different types of strategies that would allow them to be increasingly sustainable in the dynamic business environment, and one way of ensuring that, would be though the establishment of a proper environmental scanning process followed by a systematic analysis of the environmental information.Information is considered important for decision-making, as it represents a bridge between the organisation and its environment and is the means by which an image of the changing environment is built up within the organisation (Babalhavaeji and Farhadpoor, 2013).
The strategic environmental scanning information system comprised of the 7 steps as defined and depicted in the following table:
This research is considered as an exploratory study since there is little research previously done on the Malaysia hospitality (Jennings, 2001). The method used in this research is qualitative method. Jennings (2001) has suggested that qualitative method is applied in exploratory study because of the flexibility of data collection approaches. Furthermore, this type of study is not based on random sampling and representation of a study’s population. Moreover, qualitative method is used to explore the perspectives, experiences, attitudes, and belief of the respondents (Holloway, 1997).
The unit of analysis in this study is made up of the hotelas a whole and the specified unit/department that would be involved in the environmental scanning activities of the hotel. At the hotel level, the respondent is the general manager or the chief executive officer, who are the highest authority in determining the scope and magnitude of the external environment forces that could have an impact on the hotel’s internal system, structure and processes. At the unit/department level, the general manager or chief executive officer indicates which unit or department would directly be involved in the environment scanning activities. Thus, the second respondent would be determined by the general manager or chief executive officer.
Before the process of selecting the hotels to be investigated, the following criteria were established: (i) two groups of hotels based on the location would be required (resorts and city hotels): (ii) the hotels had to be rated 5-star; (iii) had been in operation for at least 2 years; (iv) and had a minimum of 100 rooms; and that each group had to consist of at least 3 hotels.
The study has adopted an in-depth interview supported by a set of semi structured questions composed of open ended questions. The interview sessions were tape recorded after securing permission to do so. The questions were in the form of semi-structured questions composed of open ended questions to allow the researcher to collect and probe further, so as to ascertain the accurateness of the data/information.
The primary data that was used for this study comprised of information from the in-depth interview on the: (i) profile background of the respondent, (ii) profile background of the organisation, (iii) environmental scanning system, (iv) environmental scanning structure, (v) environmental scanning process, and (vi) strategic environment scanning information system. The secondary data that was used for this study comprised of information on each hotel that was derived from published research surveys (thesis and journal articles), unpublished dissertation reports, published data on statistical economic reports and information on the hospitality industry by Tourism Malaysia, Ministry of Tourism Malaysia, and the Malaysian Association of Hotels.
Based on the findings from the in-depth interviews, patterns were identified for all 7 steps of environmental scanning process among hotels in Malaysia. The following explain all the process:
The following table shows that all the factors in this category that are significant as identified by both the City and Resort hotel groups. Both groups scanned the task environment rather than the general environment and specific environment at the national/local levels. Both groups used formal and informal sources for scanning. All departments, especially the Level 1 (General Manager, Directors) employees were responsible for identifying the information needed. Both groups were in the Reactive Phase in the scanning mode. Both groups adopted the Investigation scanning approach. More than 5 hours per week were spent on the selection of information needed, which was conducted on a continuous basis.
The following table shows that all the factors in this category were significant as identified by both the City and Resort hotel groups. Both groups generally used formal sources, however when identifying the types of sources used, the informal information sources appeared to be more significant. Types of informal sources used were family and friends, personal networking and, competitor friends, and social media. The relevant departments, especially the Level 1 (General Manager, Directors), Level 2 (Head of Departments, Managers) and Level 3 (Assistant Managers, Coordinators, Supervisors) employees were responsible for identifying information sources. There was no proper sequence in the steps taken in the selection of information sources.
The following table shows that all the factors in this category are significant as identified by both the City and Resort hotel groups. Both groups had no dedicated system to compile information; the hotels mainly used inhouse application software. Reports were the preferred method of compiling. Sales and Marketing departments, especially the Level 2 (Head of Departments, Managers) and Level 3 (Assistant Managers, Coordinators, Supervisors) employees were responsible for compiling information. Steps in compiling were based on the identification of topics. There was no proper sequence in the steps taken in compiling information. More than 5 hours per week were spent on compiling information.
The following table shows that all the factors in this category are significant as identified by both the City and Resort hotel groups. Both groups did not carry out the cataloguing of information. There were no activities related to catalogue information conducted.
The following table shows that all the factors in this category are significant as identified by both the City and Resort hotel groups. Both groups did not use any system to store information. Hard copy and Soft copy documents were used to store information. Staff Passwords to access into the in-house systems were used as the security system to store information. Relevant departments, especially the Level 2 (Head of Departments, Managers) and Level 3 (Assistant Managers, Coordinators, Supervisors) employees were responsible for storing information. There were two significant steps involved in storing of information: i) Key-in soft copy documents and ii) Filing-in hard copies.
The following table shows that all the factors in this category are significant as identified by both the City and Resort hotel groups. Both groups had no system set in place to retrieve information. Verbal and Non-verbal communication were used as a method to retrieve information via hard copy and soft copy formats. Information retrieved was mainly used for Budget meetings and Sales Promotions. Relevant departments, especially the Level 1 (General Manager, Directors), Level 2 (Head of Departments, Managers) and Level 3 (Assistant Managers, Coordinators, Supervisors) employees were responsible for retrieving information. Channels for Retrieving Information were Face-to-face during briefings and meetings. Steps in retrieving were only carried out via requests through e-mails or during briefings.
The following table shows that all the factors in this category were significant as identified by both the City and Resort hotel groups. Both groups have no system in place to disseminate information. Verbal communication was used as a method to disseminate information via reports, hard copies and soft copies. Information retrieved was mainly used for Budget meetings and briefings. Relevant departments, especially at Level 1 (General Manager, Directors) and Level 2 (Head of Departments, Managers) employees were responsible for disseminating information. Oral communication during briefings and meetings were used to disseminate information. Channels for disseminating Information were face-to-face briefings and meetings. There were three significant steps involved in disseminating information: i) Determine information required, ii) Identification of the person who requested for the information and iii) Identification of channels to disseminate information
Environmental changes, such as changing market structures, opportunities and increasing political instability are forcing executives and organisations to collect, analyse, interpret and act on environmental information fast (Huber, 1984; Huber and McDaniel, 1986, Eisenhardt, 1989). Based on this statement, the recognition of changes’ in the market, competition, technology, innovation, and customers’ behavioral patterns, and the prediction of future trends are essential for healthy competition (Gabbar, 2007).
The goal of environmental scanning activity is to provide the systematic use of information and actionable intelligence that will provide a competitive edge to the organisation (Kahaner, 1997). This research is to enlighten hotel organisations of their Reactive strategy on environmental scanning practices and to assist them to upgrade their practice of information gathering which will in turn assist in strategic decision-making. Scanning systems are also known as systems that are created in response to the organisation’s degree of inventiveness. These systems are intended to give a competitive edge to the organisation. These organisations could then possibly generate better products or services at a lower cost, is differentiated, and focuses on a particular market segment which is also innovative in nature.
The research has also answered the questions about how environmental scanning conducted in hotel organisations, what are process of environmental scanning involved and why hotel organisations scan the external environment. It was evident from the findings, the type of industry affects the content of what was scanned. With this understanding of the environmental scanning in the hotel industry, the top-level management is able to enhance their decision-making capabilities in strategic planning.
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