social, technological, economic, political, legal, ecological
What is business environment analysis?
Businesses do not operate in a vacuum. In addition to your competitors who may be directly or indirectly aiming for the same customer base / market space, there are other entities that have a non-trivial influence on the goals and operations of your business.
Key stakeholders include other partner businesses such as suppliers, distributors, technology partners, contract manufacturers etc. As well as other entities such as: government oversight agencies, citizen’s groups, NGO’s, customer associations, and yes, the courts – who may be concerned about some aspect of your business – e.g. product quality, operating policies, information gathering and privacy issues, workplace conditions etc.
What are some best practices & tips for business environment analysis?
It is best to have a balanced attitude regarding the influence of these stakeholders – not all of it is negative. The next time you are in a hospital getting life-saving surgery, you will probably feel thankful for the verified quality of the medicines, the tested reliability of the equipment, the accredited qualifications and training of the doctors and staff, and the transparency and corrective actions on hospital errors – all of which contribute to a positive experience – making you a satisfied, healthy, & happy customer (though in this case, hopefully not a repeat customer!)
The best way to factor these market influences into your business and strategy is to proactively scan your environment along a number of dimensions to identify both favorable business drivers and potential challenges (to your business model, strategies, operations).
What are the key benefits of business environment analysis?
An acronym that has gained popularity is PESTLE Analysis – highlighting the following significant elements of your environment – Political, Economic, Social, Technological, Legal, and Environmental (Ecological).
By investing in a methodical and periodic review process, you can make sure that you are basing your key business & marketing decisions on a complete and up-to-date picture (to the extent practical) of your operating environment – minimizing post-launch surprises that can dent your sales, profitability, and if you are a small business, your very existence.
P.S. Speaking of acronyms, I prefer to call it LE STEP … to remind us that this is a critical step (even if it is not as exciting as working on product strategy or communications strategy!).
A humble but valuable step that helps the CEO / Founder / Head of Marketing aim (refine your business vision and goals) and lead your business (refine your strategies and operations) towards success and new heights!
Business Environment Analysis 101
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