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A 'Smart' Question indeed! Thanks.
I fully endorse Your Astounding/Constructive submission Mr. Emmanuel Wamweta.
Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization’s performance. The analysis entails assessing the level of threat or opportunity the factors might present. These evaluations are later translated into the decision-making process. The analysis helps align strategies with the firm’s environment.
Our market is facing changes every day. Many new things develop over time and the whole scenario can alter in only a few seconds. There are some factors that are beyond your control. But, you can control a lot of these things.
Businesses are greatly influenced by their environment. All the situational factors which determine day to day circumstances impact firms. So, businesses must constantly analyze the trade environment and the market.
There are many strategic analysis tools that a firm can use, but some are more common. The most used detailed analysis of the environment is the PESTLE analysis. This is a bird’s eye view of the business conduct. Managers and strategy builders use this analysis to find where their market currently. It also helps foresee where the organization will be in the future.
PESTLE analysis consists of various factors that affect the business environment. Each letter in the acronym signifies a set of factors. These factors can affect every industry directly or indirectly.
The letters in PESTLE, also called PESTEL, denote the following things:
Often, managers choose to learn about political, economic, social and technological factors only. In that case, they conduct the PEST analysis. PEST is also an environmental analysis. It is a shorter version of PESTLE analysis. STEP, STEEP,STEEPLE, STEEPLED, STEPJE and LEPEST: All of these are acronyms for the same set of factors. Some of them gauge additional factors like ethical and demographical factors.
I will discuss the 6 most commonly assessed factors in environmental analysis.
The political factors take the country’s current political situation. It also reads the global political condition’s effect on the country and business. When conducting this step, ask questions like “What kind of government leadership is impacting decisions of the firm?”
Some political factors that you can study are:
Economic factors involve all the determinants of the economy and its state. These are factors that can conclude the direction in which the economy might move. So, businesses analyze this factor based on the environment. It helps to set up strategies in line with changes.
I have listed some determinants you can assess to know how economic factors are affecting your business below:
Countries vary from each other. Every country has a distinctive mindset. These attitudes have an impact on the businesses. The social factors might ultimately affect the sales of products and services.
Some of the social factors you should study are:
Technology is advancing continuously. The advancement is greatly influencing businesses. Performing environmental analysis on these factors will help you stay up to date with the changes. Technology alters every minute. This is why companies must stay connected all the time. Firms should integrate when needed. Technological factors will help you know how the consumers react to various trends.
Firms can use these factors for their benefit:
Legislative changes take place from time to time. Many of these changes affect the business environment. If a regulatory body sets up a regulation for industries, for example, that law would impact industries and business in that economy. So, businesses should also analyze the legal developments in respective environments.
I have mentioned some legal factors you need to be aware of:
The location influences business trades. Changes in climatic changes can affect the trade. The consumer reactions to particular offering can also be an issue. This most often affects agri-businesses.
Some environmental factors you can study are:
There are many external factors other than the ones mentioned above. None of these factors are independent. They rely on each other.
If you are wondering how you can conduct environmental analysis, here are 5 simple steps you could follow:
It is true that industry factors have an impact on the company performance. Environmental analysis is essential to determine what role certain factors play in your business. PEST or PESTLE analysis allows businesses to take a look at the external factors. Many organizations use these tools to project the growth of their company effectively.
The analyses provide a good look at factors like revenue, profitability, and corporate success. If you want to take the right decisions for your firm, employ environmental analysis. The analysis you should conduct depends on the nature of your company.
An organizational environment is the way employees perform their tasks, report their performance within an organization, let it be centralized or decentralized hierarchy, which depends on the vision of that Organization.
Organizational Environment entails to let the employees explore and continuously look for creativity and innovation or to follow the rules and regulations to perform their duties....
Environmental Anaysis looks at the critical assessement of both the external, Internal and other important factors that influence the performance of the organisation.
It covers the External environment (political, legal, social, economical,technological factors).
It covers the Operating environment (customers, competitors, shareholders, suppliers, marketing intermediaries, publics).
It covers the Internal environment (employees, management, directors, ambience, functional areas)
