Business environmental analysis
Business Environment Analysis
Environmental factors
Common environmental factors include new tax laws, tariff limits, export laws, consumer trends, developing technology, new replacement products (i.e., the iPod to the CD player), laws concerning emissions, or a new competitor.
Several popular frameworks exist to aid in identifying environmental factors. They are frequently used together. The first is PEST or PESTEL analysis, which looks at the political, economic, social and technological factors affecting a business; sometimes environmental and legal are included. Secondly, SWOT analysis is used. This is a framework that looks at the strengths, weaknesses, opportunities and threats affecting a business, both internally and externally. Lastly, the Five Forces are considered: internal forces, external forces, competitors, new entrants and producers of complementary products/services.
Then, those factors are analyzed for impact.
Only the most relevant environmental factors identified should be given further analysis. All factors are not equally relevant; for example, certain tax laws will affect the business but really require little additional analysis compared to the threat posed by a competitor. Further, it is important to try to quantify the effect of the environmental factors identified. Quantification will allow the true impact to be assessed and compared historically and in the future.
Lastly, scenarios are forecast based upon the environmental factors identified and strategies developed accordingly.
Strategic Position
After carefully identifying and quantifying those environmental factors most relevant to the future success of a company, assumptions are made regarding the future development of those factors and a strategy formed. Methods to accomplish this will vary, but all good plans will have the common feature of a monitoring/feedback mechanism and a system to update the strategy accordingly, such as a monthly review.
Environmental factors
Common environmental factors include new tax laws, tariff limits, export laws, consumer trends, developing technology, new replacement products (i.e., the iPod to the CD player), laws concerning emissions, or a new competitor.
Several popular frameworks exist to aid in identifying environmental factors. They are frequently used together. The first is PEST or PESTEL analysis, which looks at the political, economic, social and technological factors affecting a business; sometimes environmental and legal are included. Secondly, SWOT analysis is used. This is a framework that looks at the strengths, weaknesses, opportunities and threats affecting a business, both internally and externally. Lastly, the Five Forces are considered: internal forces, external forces, competitors, new entrants and producers of complementary products/services.
Then, those factors are analyzed for impact.
Only the most relevant environmental factors identified should be given further analysis. All factors are not equally relevant; for example, certain tax laws will affect the business but really require little additional analysis compared to the threat posed by a competitor. Further, it is important to try to quantify the effect of the environmental factors identified. Quantification will allow the true impact to be assessed and compared historically and in the future.
Lastly, scenarios are forecast based upon the environmental factors identified and strategies developed accordingly.
Strategic Position
After carefully identifying and quantifying those environmental factors most relevant to the future success of a company, assumptions are made regarding the future development of those factors and a strategy formed. Methods to accomplish this will vary, but all good plans will have the common feature of a monitoring/feedback mechanism and a system to update the strategy accordingly, such as a monthly review.