Environmental scanning yields greater anticipatory management that provides important inputs for aquitision and use of information for planning and designing organization strategies. Apart from this, effective environmental scanning activities are likely to deal with threats and grasp the opportunities to finally link with enhancing organizational effectiveness. In fact this relationship matrix has led the researchers to conduct an environmental scanning through an examination of the existing status the components of the macro-environment vis-a-vis their relationship with the organizational effectiveness. There are a number of approaches, which describe the macro-environment, of which PEST analysis is regarded as the most common approach for considering the external business environment. Thus, the present study applies PEST analysis to scan the existing business environment. Jammu and Kashmir due to its peculiar political, geographical, economic, and socio-cultural features, had led its cost mountain economy become a distinctive identity. Despite the fact that the state has rich endowments, international relations with its neighbours vis-a-vis its impact on political environment also pose developmental challenges for the business units operating in the state. This has provided valid rationale for conducting the present. The environmental scanning is done through the perception of the select entrepreneurs operating MSMEs in the state of J & K. An impact analysis of environmental factors (PEST) on the organizational effectiveness is also done in the study. The findings of the study show that the political environment of the state that is not favourable for entrepreneural development whereas the rest of the other drivers of PEST i.e. economic environment, socio-cultural environment, and technological environment show a favourable response of the entrepreneurs. In terms of cause and effect relationship, it is found that the first two drivers of the PEST i.e. political and economic dimension impacts OE positively whereas the other two dimensions namely socio-cultural and technological impacts OE negatively but it is pertinent to mention that the impact is very less and is insigninificant. The study also suggests some of strategic options for developing and creating an enabling environment for successful entrepreneurial development to achieve integrated development of the state.