environmental analysis in business plan sample

A Comprehensive Guide to Business Environmental Analysis: What is It, and Why is It Important?

• Ossian Muscad
• August 28, 2022
• No Comments

Last Updated on January 3, 2024 by Ossian Muscad

Every business exists in an environment, and it’s important to understand that environment to be successful. Unfortunately, businesses sometimes tend to ignore this importance, leading to strategic planning failures. By getting to know the business environment and conducting regular environmental analysis, businesses can make the right decisions to stay ahead of the competition.

But what exactly is environmental analysis, and how do you conduct one? This article will discuss environmental analysis, its importance, and how to use it to improve your business’ strategic planning.

What is Business Environmental Analysis?

Business environmental analysis is studying the external factors that affect a business. This includes things like the political landscape, the economic conditions, the technological environment, and more. By understanding these factors, a company can develop strategies to optimize its performance within this context. 

This environmental analysis examines industry and organizational factors that positively or negatively affect the business. By determining short-term and long-term impacts, organizations can readily respond to them when they appear. 

Purpose of Environmental Analysis

An environmental analysis helps organizations define factors that can influence their business operations. Business leaders can make better decisions about moving forward by assessing and weighing these factors.

Additionally, environmental analysis can help business leaders anticipate changes in the market and adjust their strategies accordingly. Apart from that, here are other reasons why environmental analysis is essential for businesses:

• Identifying Opportunities: Environmental analysis can help businesses spot emerging trends and changes in the market. This allows them to seize new opportunities before their competitors do.
• Mitigating Threats: By understanding potential threats in the environment, businesses can design strategies to mitigate these risks, avoiding potential pitfalls.
• Formulating Strategies: Environmental analysis provides critical insights that can shape a company’s strategic planning process, ensuring alignment with the external environment.
• Enhancing Competitive Advantage: By understanding the external environment better than competitors, businesses can leverage this knowledge for a competitive advantage.
• Anticipating Change: Environmental analysis helps businesses anticipate and prepare for changes in the market, regulatory landscape, or technology trends.

Elements of Environmental Analysis

Two main elements of a business environmental analysis are internal and external factors.

Internal Factors

Internal factors are elements within a business that can influence its operation and success. These factors are primarily under the control of the business and can be altered or manipulated according to business needs. Here are some key internal factors:

• Resources: This includes all tangible and intangible assets a company has at its disposal to use in producing goods or services. Tangible resources include physical assets such as infrastructure, raw materials, and human resources. Intangible resources encompass elements like brand reputation, intellectual property, and corporate culture.
• Capabilities: A company’s capabilities are its skills or competencies in deploying resources to achieve business goals. It involves marketing effectiveness, production efficiency, technological innovation, customer service, etc.
• Management and Organization Structure: The organizational structure and quality of its management team can significantly impact a company’s operation. Effective leadership and a well-defined structure can facilitate smooth decision-making, coordination, and control, contributing to business success.
• Business Processes and Operations: These involve the methods and procedures for coordinating and conducting business activities. Efficient processes can enhance productivity and customer satisfaction, leading to higher profitability.

Identifying and evaluating these internal factors through an environmental business analysis can help businesses leverage their strengths, address weaknesses, exploit opportunities, and ward off potential threats.

External Factors

External factors are elements outside the control of a business that can significantly influence its performance. Recognizing and understanding these external factors can help a business to react and adapt to changing circumstances. Here are the key external factors:

• Political Factors: These include government policies, regulations, and legal issues that define formal and informal rules under which the firm must operate. Political stability, tax guidelines, trade regulations, and employment laws all influence the business environment.
• Economic Factors: Economic factors are determinants of a country’s economic performance that directly impact a company and have resonating long-term effects. These include inflation rates, interest rates, foreign exchange rates, economic growth patterns, and unemployment rates.
• Sociocultural Factors: These factors encompass the societal and cultural forces that shape consumer behavior. They include population growth rates, age distribution, attitudes towards health, and cultural trends.
• Technological Factors: Technological changes can create new industries and market opportunities. A company’s ability to manage its IT infrastructure might also affect its ability to compete and its efficiency.
• Environmental Factors: Environmental factors include weather, climate, and climate change. These factors can especially affect industries such as tourism, farming, and insurance.
• Legal Factors: These are related to the legal environment in which firms operate. They include consumer law, employment law, antitrust law, discriminatory law, and copyright law.

By evaluating these external factors during an environmental business analysis, businesses can develop effective strategies that align with their operating environment, thereby improving their chances of success.

Business Environmental Analysis Process

A business environmental analysis systematically uncovers factors affecting your business and its operations. When there aren’t any fixed and definitive rules on doing an environmental assessment, the following steps can guide you into making the most out of this process:

Step 1: Identify the Environmental Factors

Every environmental analysis will need a list of the factors that will undergo evaluation. These factors will depend on the business and its specific goals for conducting the analysis. This list should include micro- and macro-environmental factors that have short- and long-term effects on business.

For example, a company selling organic products might consider environmental factors such as changing consumer preferences, government regulations on organic labeling, and the availability of raw materials.

Step 2: Collect Further Information About These Factors

After outlining which factors will be included in the analysis, the next step is to conduct research and gather more information about each of these factors. This can be done through desk research, surveys, interviews, and focus groups . Again, you can utilize various sources to ensure accurate, relevant, and up-to-date information. 

For instance, organic product companies may gather data on consumer buying patterns through surveys and consumer behavior reports. They may also research government regulations and consult with suppliers to understand the availability of raw materials.

Step 3: Check the Competitors

When conducting an environmental analysis, your research isn’t limited to your organization’s business standing. It also involves understanding your competitors and how they’re faring in the business landscape. This will give you a better idea of where you stand and what you must do to stay ahead of the competition.

For example, the organic products company may analyze its competitors’ marketing strategies, product offerings, and financial performance to identify potential threats or opportunities.

Step 4: Determine the Impacts on the Organization

Once you’ve collected all the relevant information, it’s time to determine how these environmental factors will affect your business. This is where you need to weigh the risks and opportunities of each business situation. Doing so will help you develop strategies to take advantage of the opportunities and minimize the risks.

For instance, the organic products company may diversify its product offerings and invest in sustainable raw materials to capitalize on changing consumer preferences and government regulations. They may also implement cost-cutting measures to mitigate potential risks of rising production costs due to the limited availability of raw materials.

Step 5: Formulate an Effective Strategic Plan

The final step is creating a strategic plan to guide your business decisions and actions. This plan should be based on your insights from the environmental analysis. It should also be aligned with your business goals and objectives. Having a well-informed and strategic plan allows your organization to stay adaptable and competitive in the ever-changing business environment.

For example, based on their environmental analysis, the organic products company may decide to expand their market reach and invest in innovative technologies for sustainable packaging. They may also set goals for increasing sales and reducing costs.

Types of Environmental Analysis Techniques

There are two environmental analysis Techniques: PESTLE analysis and SWOT analysis. These methods help organizations assess their strategic positions based on the business environment and a wide range of internal and external factors. 

PESTLE Analysis

PESTLE analysis is a framework that helps organizations assess the factors that can influence their business on a larger scale outside the organization. It provides essential insights into the market status based on relevant trends concerning the market, technology, customers, and more. PESTLE has six key elements:

Political factors refer to government policies, regulations, and laws that regulate business operations. It is important to conduct business in any country. Other political factors include:

• Local, federal, and state policies.
• Tax regulations
• Trade rules
• Safety regulations
• Governmental stability

Economic factors are determinants of a country’s economic performance that directly impact the organization. By assessing the economic factors, organizations can anticipate potential opportunities and challenges. These include:

• Unemployment rates
• Inflation rates
• Economic growth rates
• Interest rates
• Foreign exchange rates

Social factors reflect the society in which an organization operates. It helps organizations to understand the evolving customer needs, preferences, and behaviors. These include:

• Attitudes and opinions towards health and work-life balance
• Key demographic trends
• Consumer buying patterns
• Cultural values
• Lifestyle trends 

Technological

Technology is a significant driver of change in the business environment. It has revolutionized how businesses operate, compete, and interact with customers. Key technological factors include:

• Research and development areas
• Technological incentives
• Up-and-coming technologies
• Disruptive technologies
• Technology transfer speeds

Legal factors are the laws and regulations that govern businesses. Organizations must comply with these laws to operate legally and avoid penalties. Legal factors include:

• Employment laws
• Product regulations
• Health and safety regulations
• Antitrust laws
• Environmental regulations

Environmental

Environmental factors encompass the natural environment in which an organization operates. These factors can impact industries such as tourism, agriculture, and energy. Environmental factors include:

• Energy consumption regulations
• Environmental policies
• Climate and weather conditions
• Sustainability efforts
• Natural disasters

SWOT Analysis

SWOT Analysis is a strategic planning tool organizations use to identify their Strengths, Weaknesses, Opportunities, and Threats – hence the acronym SWOT. The technique provides a framework to evaluate an organization’s competitive position and understand how the business can leverage its capabilities to succeed.

Strengths refer to the positive internal attributes of an organization, including resources, capabilities, and advantages that give it a competitive edge over others. This can range from strong brand recognition and skilled personnel to a robust financial position.

Weaknesses are the internal factors that prevent an organization from realizing its full potential and might hinder its performance. Examples could include poor infrastructure, lack of skilled labor, operational inefficiencies, or outdated technology.

Opportunities

Opportunities include the external factors that an organization could exploit to its advantage. These include market trends, shifts in customer behavior, technological advances, or changes in government policies.

Threats involve external factors that pose challenges or risks to an organization. These could include competitive rivalry, regulatory changes, unfavorable economic conditions, or technological disruptions.

Through a SWOT analysis, an organization can gain a comprehensive understanding of its internal and external environments. Consequently, it can develop strategies that leverage strengths, mitigate weaknesses, exploit opportunities, and defend against threats. This can ultimately lead to increased competitiveness and success.

Benefits of Environmental Analysis

Environmental analysis provides a strategic advantage to organizations by offering insights into the factors that might impact their business. By understanding the internal and external environments, a business can make informed decisions and develop robust strategies to respond to potential opportunities and threats. Here are three crucial benefits of conducting an environmental analysis:

Enhanced Market Understanding

Through an environmental analysis, businesses can comprehensively understand their market, including customer needs, competitor strategies, and current trends. This information can be instrumental in identifying viable market opportunities and potential threats, allowing businesses to make proactive decisions. Moreover, it helps define the market segment, understand the competitive landscape, and set realistic targets.

Risk Management

Environmental analysis also plays a vital role in risk management. By identifying potential threats in the business environment, organizations can develop contingency plans and mitigate the impact of adverse events. This includes changes in regulatory laws, economic downturns, technological disruptions, or social and political instability.

Strategic Planning

Conducting an environmental analysis can significantly inform the strategic planning process. The insights gained can help set realistic goals, strategize market entry or expansion, optimize resource allocation, and make informed investment decisions. It also facilitates the development of strategies that leverage organizational strengths and mitigate weaknesses, thereby enhancing business competitiveness and growth.

Frequently Asked Questions (FAQs)

Q1: what is the importance of a business environmental analysis.

A business environmental analysis is crucial as it helps organizations understand both their internal and external environments. This understanding allows them to identify opportunities and threats and develop strategies to leverage them and mitigate them. It facilitates informed decision-making and proactive planning.

Q2: In what ways does technology impact business environmental analysis?

Technology significantly impacts business environmental analysis by revolutionizing how businesses operate, compete, and interact with customers. Upcoming technologies, research and development, and technology transfer speeds are all crucial factors that need to be considered in an environmental analysis.

Q3: How do legal factors affect a business’s environmental analysis?

Legal factors, including employment laws, product regulations, health and safety regulations, and environmental regulations, affect a business’s environmental analysis by determining the legal constraints an organization must operate within. Non-compliance can lead to penalties and can negatively impact a company’s reputation.

Q4: How does the SWOT analysis process fit into business environmental analysis?

SWOT analysis is a part of the business environmental analysis that focuses on the organization’s internal factors (Strengths and Weaknesses) and external factors (Opportunities and Threats). It helps organizations understand their competitive position and leverage their capabilities for success.

Q5: Why is understanding social factors important in a business environmental analysis?

Social factors are essential in a business environmental analysis because they help organizations understand evolving customer needs, preferences, and behaviors. This can include attitudes towards work-life balance, buying patterns, cultural values, and lifestyle trends.

Q6: Does the size of a business influence the need for a business environmental analysis?

Regardless of the size, every business can benefit from conducting a business environmental analysis. It provides insights into the market, aids in risk management, and informs strategic planning. However, the scale and depth of the analysis may vary based on the size and nature of the organization.

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While it may seem like a lot of work, business environmental analysis is crucial for any organization. With it, you can better understand your business’s strengths and weaknesses and the opportunities and threats of operating in a certain business environment. 

So, if you haven’t tried implementing this process in your business yet, now is the time. Use the information and insights gained from a business environmental analysis to make informed decisions, mitigate risks, and drive business growth. As the global marketplace continues to evolve, regularly conducting an environmental analysis will be essential for staying competitive and successful.

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Environmental Analysis, Types, Techniques, Importance, and Examples

Organizations can find internal and external factors that could have a positive or negative impact on their business by conducting an environmental study.

Through the examination of variables like technology and economics, firms can predict future opportunities as well as risks but developing your environmental analysis skills will enable you to create a corporate marketing plan that works.

This page defines an environmental analysis, explains its use, and walks readers through the environmental analysis procedure.

Table of Contents

What is Environmental Analysis?

A strategic tool for identifying and evaluating the internal and external components of a corporate environment is an environmental analysis, sometimes known as an environmental scan.

It looks at aspects of the industry and organizations that can have a good or bad impact on the company and its success. Anticipating both immediate and long-term effects allows the organization to be ready to react quickly when problems arise.

Organizations can identify elements that may have an impact on their business operations with the use of an environment study. They can predict the future course of their firm under the current conditions by evaluating these factors. They can create a plan that minimizes risks and seizes chances thanks to this method.

Strategic planning sessions benefit from the inclusion of an environmental study, which gives organizations a methodical approach to decision-making. In this manner, businesses can accomplish their objectives and raise the bar on their performance.

The two main parts of an environmental analysis are external variables and internal factors. They will be covered in detail in this section.

1. Internal Factors

These elements require organizations to examine themselves. Based on the organization’s goal and vision, they assess its strong and weak elements. These elements also enable companies to evaluate their goals and course of action after a predetermined amount of time, such as five or 10 years.

2. External Factors

Conversely, external variables are high-level influences that are not part of the organization. Businesses need to assess the potential and risks associated with the following areas, according to SHRM:

• Market and industry developments
• The advantages and disadvantages of the competition
• Clientele—both your clientele and your customer support
• Economic factors that can affect an organization
• Labor supply, labor markets in the regions of operation;
• Technology, technological breakthroughs that help expedite operations;
• Politics, and legal situations

Types of Environmental Analysis

PESTLE and SWOT analyses are the two most used forms of environmental analysis techniques. These methods assist companies in evaluating their strategic positioning in light of several internal and external variables. Continue reading to discover these techniques.

PESTLE Analysis

The PESTLE study, also known as the PEST analysis in short, looks at the external factors that can have a bigger impact on a firm. Based on broad trends in the market, consumers, technology, and other areas, it gives businesses insights into the state of the industry.

Six essential components make up the PESTLE approach, which provides a thorough understanding of the macro environment of the business:

• Technological
• Environmental

1. Political

Political factors examine the country’s current political situation. This frequently entails assessing whether the government is stable or likely to change shortly. Political elements to consider are as follows:

• Government policies
• Trade restrictions

2. Economical

Businesses frequently include economic issues, or the state of the economy at the time, when doing an environmental analysis. This enables them to formulate strategies according to the apparent trajectory of the economy.

For example, a business may believe the economy is doing well and contemplate building another branch if the unemployment rate is low. The following other economic elements should be considered in your review:

• Interest rate,
• Inflation rate,
• Foreign currency rate,
• Credit accessibility.

A nation’s social aspects are its attitudes, which can affect business. For example, people in some cultures follow a diet prescribed by their faith. The sales of particular foods in that area might be impacted by this. Among the social aspects are, for instance:

• Family structure
• Gender roles
• Distribution of wealth
• Education levels

4. Technological

Innovations and technological breakthroughs have the potential to alter how a firm operates. This could have a favorable effect on some businesses’ operations by using automation to expedite creation. But certain jobs may also be replaced by technology. The following technological aspects should be considered in your analysis:

• New product discoveries and launches;
• Rate of technological advancements;
• Consumer access to technology;
• Technology incentives.

Legislative changes that could affect a business’s environment are examined by legal aspects. An industry may be impacted when regulatory organizations impose new rules, as in the case of the healthcare sector. A few legal considerations are:

• Employment laws;
• Health and safety legislation;
• Patent infringements;
• Product restrictions;
• Employment Laws

6. Environmental

Environmental aspects consider the potential effects of a business’s location. A specific area’s conditions may affect trade. Things to take into account when reviewing the environment are:

• Weather conditions
• Waste disposal laws
• Energy consumption regulations
• Environmental policies

SWOT Analysis

The SWOT analysis evaluates an organization’s strategic position by taking into account both internal (strengths and weaknesses) and external (threats and opportunities) factors.

It reveals the benefits and drawbacks of a business based on its strong and weak characteristics. By doing this, businesses may create a plan that minimizes risks and optimizes opportunities.

The following components make up the 2×2 matrix used in the SWOT method:

• What advantages does your business provide?
• What special or affordable resources are available to you that are not available to others?
• In your market, what skills do clients think you possess?
• What qualities lead one to “win business”?
• What could you alter?
• What should you avoid doing?
• What shortcomings is your economy most likely to perceive in you?
• What factors are involved in the downturn of your business?

Opportunities

• What promising opportunities do you see?
• What intriguing patterns are you aware of?
• What difficulties do you face?
• What are your competitors doing?
• Is the rapid advancement of technology putting your employment at risk?
• Do you struggle with the financial flow or bad debt?

SWOT analysis can help a business challenge performance assumptions and reveal dangerous weaknesses. If a firm uses it carefully and cooperatively, it can offer new insights into where it is at and help it create the best plan of action for any situation.

Process of Environmental Analysis

While doing an environmental scan has no set guidelines, following these stages will help you get the most out of the process. An environmental analysis is a methodical approach to identifying the elements that impact your company and its operations.

• Identify the environmental factors
• Gather data regarding these variables
• Check the competitors
• Determine the impacts on the organization
• Create a tactical plan

1. Identify the environmental factors

A list of the variables to be assessed is the most important prerequisite for an environmental study. These variables will vary based on the industry and region of your company.

Micro- and macroenvironmental elements that affect their operations both temporarily and permanently should be on this list. A mining business, for instance, may describe the most recent developments in their sector and local environmental laws.

2. Gather data regarding these variables

The next stage is to collect data about the environmental factors that have been described. To ensure the material is current and relevant, you might consult a variety of sources.

You can look at your factors and conduct some studies here. Written and verbal information are the two primary categories of data that need to be gathered.

People read newspapers or magazines to receive written information, while they listen to radio broadcasts or other spoken forms of communication such as radio broadcasts.

Using the aforementioned example, this would entail looking up any updates to health and safety laws online and in medical periodicals to determine whether they would affect your medical facility.

3. Check the competitors

When doing an environmental scan, you look beyond the financial standing of your company. It’s also important to research the performance of your rivals. A competitor study can assist you in identifying potential risks to your company as well as chances to differentiate yourself from the competition.

4. Determine the impacts on the organization

You can now use the environmental data you’ve gathered to forecast potential effects on your business. By taking this step, you set your expectations and may be ready for whatever may happen should these variables materialize. When evaluating risks and their effects, it’s critical to consider the following:

• What effects does this factor have on your company?
• How much time will this last?
• Will this have a positive, negative, or no effect on the business?
• How significant is this component to the general operations of the business?

5. Create a tactical plan

You can come up with ideas and create strategies for potential changes resulting from these elements in the last phase. It entails evaluating the strategic plans you now have and making necessary adjustments in light of the knowledge you have gained about your company’s surroundings. In addition, you can list actions to reduce risks and increase possibilities.

Example of Environmental Analysis

Think of Mr. X as an analyst for the financial services company ABC Pvt. Ltd. Mr. X decided to perform an environmental analysis in response to the latest happenings in the financial business. Given that technology advancements drive the finance industry, Mr. X decided to conduct a PESTLE analysis.

Mr. X takes into account the political, economic, social, legal, and environmental elements in this analysis. He does, however, pay more attention to the technical details. He makes comparisons between the technological developments occurring in other businesses within the same industry.

The findings demonstrate the new developments in sound technological services. It reveals how reliable chatbots in the financial services industry boost company profitability. Mr. X decided to construct a strong chatbot because ABC Pvt. Ltd. does not currently have one.

According to the analysis’s answer, they must improve their after-sales services by advancing technology. After that is finished, the company’s revenue and profitability increase by 15%. The analysis is therefore considered successful.

Importance of Environmental Analysis

The following are some benefits of conducting environmental analyses for organizations:

• Identify opportunities: Organisations can identify emerging trends and opportunities to enter new markets or develop new goods or services by observing the outside world.
• Identify threats: It assists companies in identifying risks to their operations, such as emerging rivals, altered laws, or a faltering economy.
• Develop strategies that work: When organizations know how the external environment impacts their operations, they can develop strategies that work and align with their aims and objectives.
• Prepare for change: Environmental scanning assists companies in anticipating external changes and developing contingency plans for them.
• Make smarter decisions: By learning more about the external issues affecting their business, organizations can make more informed decisions.

An organization must do an environmental analysis if it hopes to succeed and remain competitive in the ever-evolving commercial world. It assists them in seizing opportunities, reducing risks, and formulating sound plans that result in expansion and prosperity.

Environmental Analysis in Marketing

Business developers and marketers utilize environmental analysis as a strategic tool to pinpoint the internal and external, controllable and uncontrolled aspects that affect an organization’s performance.

The term “marketing environmental analysis” refers to all non-marketing variables that have an impact on a company’s capacity to establish and preserve fruitful customer connections. A company can find opportunities and strengths and lessen threats and weaknesses by performing a marketing environment analysis.

In marketing, environmental study typically comes before any marketing strategy. The results of the marketing environmental study will be taken into account and used as a guide to help develop and improve the optimal business plan.

Through the continuous observation of the variables influencing the marketing landscape, marketers can anticipate shifts, seize opportunities, and fine-tune their business plans to achieve superior outcomes.

Analysis of the marketing environment is essential to a company’s success. This aids in recognizing every component linked to the enterprise and the functions that each of these components fulfills in the enterprise’s triumph.

For every business to succeed in the long run, environmental analysis in marketing is therefore not just necessary but also required.

Business Environmental Analysis

Analysis of a business’s external environment is the study of those external influences. This covers a variety of topics, such as the state of politics, the economy, the technology sector, and more. A business can create strategies to maximize its success in this environment by knowing these aspects.

The organizational and industrial elements that have a positive or negative impact on the firm are examined in this environmental analysis. Organizations can quickly address them when they arise by assessing the short- and long-term effects.

Understanding environmental analysis is a crucial skill for organizations. Businesses can make educated decisions and maintain their competitiveness by assessing external influences and recognizing opportunities and challenges.

Even if it’s not infallible, environmental analysis is nonetheless valuable for keeping up with trends and safeguarding companies against unanticipated disasters.

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A passion-driven environmentalist by heart. Lead content writer at EnvironmentGo. I strive to educate the public about the environment and its problems. It has always been about nature, we ought to protect not destroy.

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Environmental analysis (or PEST)—an element of your startup’s strategic plan

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An  environmental analysis , or PEST analysis, categorizes the changes and forces that affect your startup either directly or indirectly through your customers, suppliers and competitors. PEST is an acronym that stands for the Political, Economic, Social and Technological market forces. This type of analysis is usually conducted in the process of preparing a strategic plan, with the goal being to identify  threats and opportunities  for your business.

PEST is a common framework for conducting this macro-environmental scan that summarizes high-level trends as they relate to your  target customers ,  markets and technology. To perform an environmental, or PEST, analysis, answer the following questions:

1. What key political and regulatory developments are taking place now? How do these changes affect your market and customers? How do these trends affect your industry, suppliers,  partners  and customers? Focus your analysis on:

• tax regulations
• trade rules
• environmental legislation

2. Are economic changes affecting your company, your customers or your suppliers? Does this create opportunities, or does it threaten your market potential or your customers’ economy? Focus your analysis on:

• economic growth rate
• interest rates
• currency changes

3. What social and cultural changes are occurring? Focus on shifts in the demographic profile, any broad attitudinal changes, and any cultural trends that may impact the potential of your startup in the short and long term. Look for movement in:

• demographic trends such as birth rates, aging, and migration patterns
• attitudes towards healthy lifestyles, organic foods, the environment, and so forth
• attitudes on issues such as security, executive compensation, and anti-terrorism

4. What key technological trends impact your business? Consider also technology advances that affect your customers and suppliers. Do any of these changes create opportunities or threaten your potential? Focus your analysis on:

• specific technological breakthroughs
• the launch of innovative new products
• areas that undergo much research and development
• patents  that receive publicity

Schewe, C.D. & Hiam, A. (1998).  The Portable MBA in Marketing.  New York: Wiley.

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What is an Environmental Analysis? All Your Questions Answered

Lauren Christiansen

Because market research is based on ever-changing variables, businesses must always consider varying factors and the changing environment in their data analysis. Part of the challenge in adapting to changing variables is knowing how to adequately prepare for it and identify them. Mapping out a response to each potential external and internal environmental disuption by writing an optimized environmental analysis is an effective way to adapt to change. Here's what to know about the external environmental conditions businesses face and how they can cope by utilizing an e nvironmental assessment.

What is an External Business Environment?

An external environment is composed of all of the external factors that affect the operation of a business. Two aspects of an external environment are- The Operating Environment This refers to the company's suppliers and customers, as well as the marketers who promote or sell a company's products and services to customers and the public. The General Environment This includes an array of external influences that affect a company, such as technology, economic conditions, international trade agreements, demographics, politics, and the legal environment. The operating and general environment can either provide opportunities for increased growth and revenue, or they can generate uncertainties and risks that companies have to adapt to. Provided are some examples of how operating and general environmental factors can impact a business.

The Operating Environment

Positive - A retailer's marketing department ran a successful online advertising campaign for 6 months. The campaign targeted prospective and current customers, leading to an increased amount of online purchases, many from new users. Negative - A restaurant's change in management has lowered the quality of customer service, leading to a decreased level of customer satisfaction. Customers have made several complaints, and there have been fewer patrons frequenting the restaurant.

The General Environment

Positive - Strong economic conditions and lower property taxes have allowed an auto shop to open up an additional location. Negative- The FDA has issued a warning that a supplement is unsafe. Several states have banned the sale of that particular supplement. A vitamin shop that continues to sell it has lost many of its customers due to the FDA warning.

What is the Purpose of an Environmental Analysis?

An environmental analysis is a strategic analysis tool to identify all of the external and internal factors that can affect a company's performance. The purpose is to assess the level of risk various environmental factors pose as well as the business opportunities they present. The analysis considers the company's strengths and weaknesses and how they affect the ability to handle external threats/opportunities. Successful businesses can usually modify their internal business strategy and operating procedures to adapt to external circumstances. For example, Google is working with China on building a censored search app that could serve over 99% of queries. This move has been criticized by many who believe that it conflicts with Google's mission to organize the world's information and make it universally accessible and useful. However, it demonstrates that companies can find a way to expand even when confronted by political or legal challenges.

Environmental Analysis Process

Creating a strategic analysis is a 3-step planning process- 1. Identify Factors The company must first determine which internal and external factors may affect a business. More often than not, there is a combination of different elements at stake. For example, Toys R Us went out of business due to increasing competition from discount stores such as Target and Amazon. They were also saddled with debt from a buy out in 2005. The two environmental factors that affected Toys R Us were internal financial problems and external competing markets. 2. Gather Information The company then gathers information about the identified internal and external conditions that impact business operations. For example, some localities regulate or prohibit the usage of digital billboards due to environmental concerns. A company that utilizes digital billboards to run advertisements across many locations has heard that new regulations may affect their ability to run ads during certain hours. The company would then review the local ordinances and regulations to see if they can continue running their campaigns in each of their locations, or if they need to change their advertising strategy. 3. Determine Impact The gathered information predicts how environmental factors will affect the business. Internal operational and financial processes need to be reviewed to determine how the company will be able to respond to each risk. For instance, a company has an opportunity to sell their products in another country. However, that country is currently experiencing poor economic conditions which might affect sales. The company can then determine whether the number of sales would exceed the cost of expanding its market to another company and whether they could take the financial hit if the endeavor failed.

Common Framework for Measuring Environmental Risk

Environmental scanning is frequently utilized to help organizations scan the landscape of competitors, customers, economic conditions, market conditions, etc. before implementing a new product/service. A commonly utilized project management tool to perform environmental scanning is PESTEL, which refers to the political, economic, social, and technological factors affecting a company. Here are the different components of a PESTEL analysis, by letter. Political Political issues refer to the government's level of intrusion in an organization's operations. Particular issues of concern are taxation, tariffs, regulations, elections, and political stability. For example, different political parties have different stances on increasing the minimum wage. Small businesses may pay attention to an election where one candidate proposes an increase in the minimum wage because it can affect their product/service prices and ability to maintain current employees. Economic Businesses who operate within the United States first focus on the health of the American economy as a whole, including growth, employment, inflation, and interest rates. Organizations that operate outside of the U.S. will focus on exchange rates. For example, a startup may evaluate the current health of the economy to determine whether or not they will be able to sustain themselves, as economic conditions affect a company's long-range revenue and expenses. Social Social issues involve shifts in age, demographical changes, changing attitudes towards safety and health, consumer preferences and technological advancements, or population growth. For example, 86% of millennials utilize social media. As a result, companies who see millennials as their target audience are more likely to run promotional advertisements on social media platforms. Technology Technology includes research and development, robotics, automation, or any type of technological change. Technological disruption refers to innovations that completely change the cast of leading competitors. For example, Facebook's popularity was a technological disruption for Myspace, who was considered a dominating social media platform back in the early 2000s. Environmental Climate change, weather, air quality, and natural disasters are all environmental factors. Some industries are especially at risk from changes in the environment, including agriculture or tourism. To illustrate, farmers may watch the Weather channel or read the Farmer's Almanac because the weather can affect pesticide application, irrigation scheduling, planting dates, or fungicide application. Legal Legal factors include employment, health, and safety policies. Discrimination and consumer protection laws can also affect a company's ability to operate. For example, the 2009 Dodd-Frank Act was passed by Congress after the Great Recession to place strict regulations on banks to protect consumers. Many larger banks were able to cope with the regulations imposed on them, but 90% of small banks claimed that compliance costs increased too dramatically and 81% said Dodd-Frank was too financially burdensome.

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What Is an Environmental Analysis for a Business?

by Billie Nordmeyer MBA, MA

Published on 5 Aug 2019

Business leaders can control aspects of the internal environment that can positively or negatively affect a company's operating and financial results. However, the greatest challenges to business success may be a consequence of the external environment over which company leaders have little, if any, control. To address these challenges, business leaders often conduct an environmental analysis and develop policies and processes that adapt company operations and products to this environment.

An environmental analysis looks at the industry and the political, economic, technical, cultural and other environments in which the business operates. The aim is to identify challenges facing the business, and opportunities it could exploit.

What is an External Environment?

The external environment consists of a general environment and an operating environment. The general environment consists of the economic, political, cultural, technological, natural, demographic and international environments in which a company operates.

The operating environment consists of a company's suppliers, customers, market intermediaries who link the company to its customers, competitors and the public.

Both the general and operating environments provide business opportunities, harbor uncertainties and generate risks to which a business must adapt.

For example, countries with large populations may coincide with a large market size for particular products. However, to offer its products in these markets, a company may be required to contend with a government that erects obstacles to trade in the form of tariffs, product standards and customs procedures.

Purpose of Environmental Analysis

Successful businesses adapt their internal environment – including human and financial resources, policies, technologies and operations – to the external environment. The company performs an environmental analysis to identify the potential influence of particular aspects of the general and operating environments on business operations.

This analysis identifies the opportunities and threats in a business environment in terms of a company's strengths and weaknesses.

For example, a company may consider the impact of operating in a communist country and the threats posed by government-controlled resources. A company might also consider the opportunities of a government-controlled market in terms of competing products, the implications of well-educated and well-paid consumers to product development and sales and the impact of the location of its primary suppliers in a country in economic crises.

Environmental Analysis Process

An organization relies on strengths to capture opportunities and recognize weaknesses to avoid becoming a victim of environmental threats. A company performs an environmental analysis to gain an understanding of these strengths, weaknesses, opportunities and threats.

The environmental analysis then influences corporate planning and policy decisions.

An environmental analysis is a three-step process in which a company first identifies environmental factors that affect its business. For example, the company might consider if a market is “difficult” because of its remote geographic location or the area's unfavorable economic conditions.

The company then gathers information about the selected set of environmental factors that are most likely to impact business operations. For example, the company might review government and industry reports and surveys that relay information about trade barriers that companies face in particular countries.

This information serves as input to a forecast of the impact of each environmental factor on the business. For instance, a company might project the volume of products likely to be sold in a country in light of existing poor economic conditions and significant trade barriers.

Limitations of Environmental Analysis

An environmental analysis reviews current environmental conditions to forecast a future business environment.

The static nature of the analysis ensures that unexpected environmental changes cannot be considered in a company's business projections. In addition, the environmental analysis is but one source of information that's evaluated as a company develops a strategic plan.

The benefit of the analysis is also limited by the reliability and timeliness of data used in the analysis. As a result, the analysis does not guarantee business success.

More Like this

PESTLE Analysis Examples

Before We See PESTLE Analysis Examples, Let’s Recap on the Basics.

A PESTLE analysis looks at the macro trends in the surrounding environment of a certain business or organization. It examines the political, economic, social, technological, legal, and environmental elements of the operating market that may have either positive or negative effects on your company or organization.

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A PESTLE analysis is often used as an extension of a SWOT analysis . Remember that the external matrix of the SWOT evaluates and creates awareness about the opportunities an organization should take advantage of, as well as the threats it should avoid. This external analysis is part of evaluating your organization’s strategic position within its market, industry, and larger operating environment.

Here, we will take a deep dive to examine what you should feature in your own PESTLE analysis. We’ll examine some PESTLE analysis examples from some of the most successful companies of our time.

Definitions and General PESTLE Analysis Examples:

A PESTLE analysis will look different for each industry, and it must be approached differently as well. Consider your organization’s unique position, market, and needs when conducting a PESTLE analysis.

It is easiest to begin with a SWOT analysis and then use your PESTLE as a companion piece to dig deeper into the external megatrends—both threats and opportunities—that the market and operating environment will present to your organization.

From our PESTLE analysis examples, here are some factors you may consider using:

Examples of Political Forces

These are the external forces affecting your organization that are brought on by government. They may include laws, policies, regulation or de-regulation trends, governing bodies and leadership, foreign trade and foreign relations, political issues and trends, tax policy—any political factors that could influence your organization’s opportunities or threats.

Examples of political forces include:

• Changes in government/election cycles: Will the possibility of shifting party majorities in upcoming or recent elections affect regulation or de-regulation in your industry or a related industry? Does this create a threat or an opportunity?
• Fiscal policies: How might changes in tax codes affect your budget and profits? How can you prepare for this?
• Wars and conflicts: What recent or current conflicts might affect foreign relations and/or trade in your industry? What can you do to create stability?
• Legislation changes: Is there legislation (proposed or passed) that would substantially affect your operations or your customers?
• Trade agreements: Do you see any upcoming opportunities in the form of new foreign markets? Or conversely, do you see any threats to your foreign markets?
• Political movements: What issues are becoming increasingly important to the people in your target audience? How does this affect their relationship with your brand?

Examples of Economic Forces

The economic environment you operate in includes several factors to consider, such as general economic climate, taxation, and globalization. Inflation rates, shifts in consumer spending, supply chain issues, demand curves, and global economic health may all be a part of your economic analysis.

Examples of economic forces include:

• Employment rates and compensation: Do you have a ready labor market, or are good team members hard to come by? Which direction is the trend heading? What do you need to consider in terms of compensation to bring on and keep talent in your industry?
• Inflation: How is inflation affecting the price of your materials? How is it affecting your customers and their spending?
• Currency devaluations: How is your currency—and the currency of your customer base—performing? How might this affect your costs and revenue?
• Stock market and market values: What recent or predicted trends in the stock market do you see impacting your industry and your organization?

Examples of Social Forces

Social forces focus on the opinions and attitudes of consumers that relate to your product, as well as the changing population and demographics of your operating market. Your analysis might consider social justice movements and other trends, both in your immediate environment and in the broader environment your customers are coming from.

Examples of social forces include:

• Demographic changes: What are the ages, experiences and backgrounds, and racial and gender identities of your customer base? Have any of these shifted or are they projected to shift? If so, how and why? What do you need to do to accommodate customers coming in?
• Religious beliefs: Are there religious or spiritual beliefs that intersect with your organization or your product? How can you be sensitive to those?
• Consumer opinions: How do consumers feel about your product (or products like yours)? Are there positive or negative changes in this general sentiment?
• Purchasing patterns: Due to economic or other factors, are your customers spending less in your market? More?
• Popular media: What current events, celebrity opinions, or other media influences will your consumers be tuned into? Are there any that might affect thoughts, ideas, and feelings about your organization, product, or brand?

Examples of Technological Forces

This focus area considers how technological forces may be impacting your organization. Changes in technology can affect your positioning as an organization. Some recent examples are the rise of cryptocurrency, the emergence of work-from-home technology, AI developments, and even concerns over cyber security.

Examples of technological forces include:

• Increased emergence of AI: What capabilities do you see as opportunities for your organization?
• Energy usage: What new technologies would allow you to save on energy costs (both to your organization and to the environment)?
• Cloud software: What developments have been made to cloud storage to make it more effective, and are you taking advantage of those developments? Conversely, are there security threats to be aware of in this software for your organization’s data?
• Internet: What improvements are available to maximize speed and reliability for the online work of your team?
• Technology usage incentives: Are there incentives available to encourage certain technology use?
• New machinery or tech: Are there emerging industry-specific technologies or equipment that would improve the quality, cost, or efficiency of your organization’s work?

Examples of Legal Forces

While similar to the political aspects, the legal elements in your PESTLE analysis examine the practical application of those political factors into rules and regulations that impact your organization’s business or customers. Depending on your business, you may need to consider local and state laws as well as federal laws.

Examples of legal forces include:

• Patent and intellectual rights laws: How might developments or decisions in intellectual property law affect you and/or your competitors?
• Protection laws: Are there consumer protection laws that would affect the way you interact with and do business with your customers?
• Occupational safety laws: What occupational safety laws do you need to be aware of to conduct business in a way that protects both your employees and your organization?
• Import and export laws: What legal parameters are there for ordering goods from other countries, as well as for selling your product in other countries?
• Licenses: What licenses do you, your employees, and your organization need in order to fill the roles that are needed?

Examples of Environmental Forces

Environmental factors are affected by weather, geography, climate change, and health crises. In addition to the public health crisis caused by the pandemic, the world has also been impacted by wildfires and other natural disasters across the globe. As an organization, you ought to consider the short-term and long-term impacts of these accelerating changes.

Examples of environmental forces include:

• Climate change: How might short- and long-term effects of climate change, including rising sea levels and increasing frequency of extreme weather, impact your organization and customers?
• Consumption of non-renewable resources: What necessary resources could become limited or depleted in the future that would impair your business?
• Energy alternatives:
• Gas emissions: How does your organization contribute to, and how is it affected by, gas emissions? What steps could be taken to reduce emissions and to prepare against the effect of emissions?
• Natural disasters: What natural disasters pose a threat in your area, or in the areas where many of your customers are located? How can you be prepared for these threats?
• Environmental hazards: What other hazards in your environment could prove threatening to your organization?

*Bonus: Ethical Factors to Consider

Over the last few years, business and marketing strategy experts have added a third ‘E’ to the PESTLE analysis – the ethical factor . This can include things such as fair-trade practices, child labor issues, increasing demand for conscious business models, and corporate social responsibility. As these issues come to your attention, examine the megatrends and take the opportunity to evaluate them within your organization’s environment.

Examples of ethical forces include:

• Workers’ rights: What strides can your organization make (or what strides is your organization already making) to take care of those who work for you?
• Fair trade laws: Especially concerning overseas trade, what issues do you need to be aware of in order to promote ethical and responsible practices?
• Human rights issues: How far have you followed the organizations you partner with, contract with, buy supplies from, and do other business with? Are there any organizations whose relationships need to be reconsidered due to human rights violations?
• Corporate social responsibility:
• Diversity, equity, and inclusion: What practices and attitudes are being adopted successfully to promote diverse, equitable, and inclusive workplaces? Conversely, are there practices and attitudes that are backfiring? Which might you best adapt for your organization?

6 Real-World PESTLE Analysis Examples from 8 Successful Companies:

Food and beverage industry pestle analysis examples:, starbucks pestle analysis example.

For Starbucks, lowering costs and staying aware and sensitive to the issues that are important to its customer base are two courses of action that become clear after an environmental analysis.

• Sourcing raw materials and following fair trade practices , which has gained a lot of attention from politicians in the West.
• Keeping up with laws and regulations in other countries from which Starbucks buys its raw materials.
• Economic recession , which has led many customers to seek cheaper alternatives.
• Rising labor and operational costs due to inflation.
• Retiring of the Baby Boomer generation, along with changing family patterns and lowered birth rates leading to fewer spending customers.
• Changing workstyles and lifestyles, including increased remote work .
• Enabling mobile payments , which increases the potential customer base.
• Agricultural developments that might impact raw material production.
• Introduction of caffeine consumption-related policies by health organizations.
• Industry licensing regulations.

Environmental

• Natural disasters in countries that produce coffee beans .
• Environmental laws and regulations related to packaging and waste .

Beyond Meat PESTLE Analysis Example

A California-based producer of plant-based meat substitutes, Beyond Meat is poised to take advantage of many environmental trends that could provide an opportunity to expand.

• Animal farming is receiving political pressure to cut back on expansion.
• Laws and regulations about greenhouse gas emissions.
• Vegan meat is projected to grow from 1% to 10% of meat consumption by the end of the decade.
• Vegan meat has the potential to be cheaper than animal meat , but would need drastic changes to its efficiency to realize this.
• Rise of veganism in developed countries.
• Increasing awareness and vocality of environmentally conscious citizens.
• An extensive amount of technology in R&D for this industry.
• Social media and other technological platforms for advertising and brand-building .
• New food safety standards to classify plant-based meat products.
• Soy farming has raised some concerns about deforestation and soil degradation.
• Plant-based products shown to be much more environmentally friendly than animal meats.

Retail Industry PESTLE Analysis Examples:

Walmart pestle analysis example.

Due to its size and profitability, Walmart has a uniquely competitive edge , yet its growth and continued profitability are sensitive to several external factors .

• Global differences in government regulations , such as banned products in some countries.
• Emergency curfews closing stores early.
• Inflation raising costs; brand appeal is based on low prices.
• Supply chain issues. Continued pressure on the supply chain and inflation is causing increased overhead costs.
• Business model rejected in some places, such as Germany.
• Increased trend toward online shopping , especially post-pandemic.
• Consumer push for same-day delivery of products.
• Adoption of automation for basic tasks.
• Expansion of mobile app and online services.
• Expansion of available technology in distribution and warehouse centers.
• Proposed legislation to raise minimum wage .
• Recent labor lawsuits open doors for further litigation.
• Call to reduce waste and use of nonrenewable energy.
• Weather and climate considerations in a wide number of locations.

Amazon PESTLE Analysis Example

The technology and online retail giant has many opportunities to capitalize on , with a few threats to monitor .

• Government pressure on anti-trust and monopolies for major corporations.
• Pressure from the federal government and local government about employment practices .
• Governmental regulations on cybersecurity and privacy protection.
• Increasing disposable incomes in developed countries.
• Inflation and supply chain issues impacting online stock.
• Macro-trend for organizations to seek and purchase cloud computing products and solutions.
• Increasing consumerism in developed economies and emerging economies.
• Increasing demand for same-day delivery of products to consumers.
• Increasing dependence on technology , cloud computing, and AI.
• Expansion of robotic automation for picking, packing, and delivery of the product.
• Expansion of AI to serve Amazon Web Services.
• Unionization and labor laws impact Amazon’s workforce.
• Changing import and export regulations .
• Import and export tax on goods sold.
• Increasing energy costs increase the cost of supply chain delivery.
• Environmental impact of plastic and plastic packaging .
• Carbon emissions and new fuel options as an organization.

Tech Industry PESTLE Examples:

Apple pestle analysis example.

Like other big tech companies, Apple stands to gain from growing reliance on digital technologies and movement toward energy efficiency—but so do its competitors .

• Trade disputes , especially between the U.S. and China.
• Pressure from federal regulators on antitrust .
• Increasing political pressure on consumer privacy protection and data.
• Changing economic tides and changing economic forecasts create uncertainty in the tech sector.
• Supply chain scarcity and resource constraints on product production.
• Stagnant changes to income of Apple’s buyer pool for luxury products.
• Rapid growth in emerging markets for entry-level products.
• Rising global use of mobile access across the globe.
• Increasing global dependence on digital ecosystems.
• Anti-Apple sentiment due to exclusivity and price.
• Growing technological and development capabilities of the competitive set .
• Pressure from cybercriminals threaten the data security of Apple products.
• Increasing privacy regulations and protections.
• Legal challenges to Apple’s policies and practices related to the app store .
• Ethically and efficiently recycling broken and unused electronic devices , especially those containing lithium batteries.
• Environmental impacts of manufacturing products in China.
• Climate change impacting shipping and supply chain routes .

Airbnb PESTLE Analysis Example

The unique matchup business model of Airbnb, as well as companies like Uber and Lyft, have taken the market by storm—but have also incurred significant legal battles .

• Housing laws and vacation rental bans in some markets conflict with business model.
• Varying tax rates from counties and countries.
• The housing crisis and crunch in the housing market.
• Varying prices and availability of hotels as a primary competitor.
• Increase access and desirability of travel .
• Resistance from locals about the impact of vacation rentals in residential areas .
• Social acceptance of ridesharing and travel sharing business model.
• Increased reliance on mobile apps and other digital solutions .
• Increasing security of online payment systems.
• Legal challenges in some states and countries.
• Environmental impact of single-use products for hospitality .

What is the purpose of conducting a PESTLE analysis? 

A PESTLE analysis can help you understand where your organization stands in the external market and assess the macro-trends that could potentially affect your business/product.

What are all the components of a PESTLE analysis?

A PESTLE analysis looks at six aspects of the environment that could impact your organization: Political, Economic, Sociological, Technological, and the two newly added — Legal and Environmental. Some PESTLE analyses even incorporate ‘ethics.’

What does PESTLE stand for?

Two things you should always consider as you’re going through each aspect of the PESTLE analysis are: where am I now, and where do I want to go? These two questions will guide you in figuring out your current state in the macro environment and your ideal state. Next, it’s important that with each factor or event you outline in your PESTLE, you also consider whether they pose an opportunity or a threat.

Thanks for sharing….extremely useful

Thank you for sharing ..it has helped

Thanks very helpful for understanding the concept of PESTLE analysis.

Very insightful and pratical. Helpful indeed Thank you

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How to Prepare a Marketing Environmental Analysis

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How to Monitor & Control Your Business Plan

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• How Do the Functions of a SWOT Analysis Work Together?
• How to Conduct an Impact Study

Preparing a marketing environmental analysis is an essential step in understanding the external local, national or international forces that might affect your small business. These factors are largely outside your direct control, but you can adapt your business and marketing strategy to take advantage of the opportunities they present while minimizing the potential threats. A PESTLE analysis is the most common way of undertaking such a review; PESTLE stands for the Political, Economic, Social, Technological, Legal and Environmental factors you need to consider.

Political Factors Impacting Business

Political factors refer to governmental actions or policies that have an impact on your business and its ability to trade. For example, restrictions on the import or export of certain goods might limit your market or hamper your ability to obtain raw materials. At a local level, restrictions on the types of businesses permitted in certain districts or the kinds of services available might impact your ability to run your business in these areas.

Economic Factors Affecting Business

Economic factors include all the various taxes and duties you are obliged to pay, as well as wider fiscal decisions on things like central bank interest rates and international exchange rate volatility. A thorough analysis of each of the economic factors that impact on your business will help you plan the financial strategy for your business.

Social and Demographic Impacts

The way society changes and adapts over time, and the differences in communities across the country and the world, are all important considerations when planning your business. Aspects to consider and explore include religion, lifestyle expectations, housing standards and population demographics such as age, gender and ethnic origin.

Technological Advances and Opportunities

Technological change has wiped out old businesses and created new businesses over the years. Understanding the impact of the next technological advances could give you a market advantage over your competitors if you are better placed to exploit the opportunities they present. Look at how communications are changing, and try to find a way in which you can take advantage of any emerging channels to reach new or more customers. Don't forget to explore how your business could be more efficient and productive by using new technologies in production or distribution, for example.

Legal and Regulatory Impacts

Every business operates within a strictly controlled legal environment. Identify, and be aware of the impact of, all legislation relating to your business. These might include regulatory obligations, environmental restrictions, import/export limitations and basic health and safety laws.

Ecological and Environmental Factors

Economies across the world are increasingly aware of the environmental factors of their operations. Even as a small business owner, you should consider the environmental aspects relating to your activities, such as its impact on the local and wider environment.

Be aware that attitudes to themes such as ecology and renewable energy can affect consumer behavior. Some believe global warming is changing weather patterns, affecting tourism and farming. Showing that you are a "green" business might attract new customers.

Analysis of Opportunities and Threats

Your PESTLE analysis should provide you with a useful tool to determine the major opportunities and threats facing your business as you plan for its future growth. When taken together with an internal review of your business' strengths and weaknesses, you should be in a strong position to develop a robust strategy and business plan based on well-balanced research.

• RapidBI: PESTLE Analysis Tool
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Scanning the Environment: PESTEL Analysis

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There are numerous macro-economic factors that can have a profound impact on the performance of a company aside from the company’s internal resources and industry factors. It is especially important to conduct careful research of these factors in order to assess the scale of their impact on the company’s success in the situations when you just launch a new product or venture.

One of the most commonly used analytical tools for assessing external macro-economic factors related to a particular situation is PESTEL Analysis, an acronym for Political, Economic, Social and Technological, Environmental and Legal factors. PESTEL is a framework used for monitoring and analysing external environmental factors that may influence the future development of the business. These factors may influence the business, industry or economy. These factors should be considered prior to implementing any marketing strategy.

Advantages of using PESTEL analysis for your business plan:

• Provides a cost-effective method and simple structure to conduct a systematic and thorough evaluation of the external macro environment.
• Facilitates an understanding of the wider business environment .
• Allows an organisation to anticipate future business threats and take action to avoid or minimise their impact.
• Creates a better understanding of your small business’ position now and in the future within the external environment and whether your business is weak or strong to cope with it.

Let’s look at the steps for conducting a PESTEL analysis.

STEP 1: Preliminary research

It is advisable to spend some time and do some preliminary research prior compiling the list of the PESTEL analysis factors. Your research can include reviewing general business trends and reading industry news publications and reports, attending industry conventions, and discussing with your staff, suppliers and customers. As you do this, make some notes of possible changes that are forecast by business and economics commentators, social researchers and other leading opinions in related fields.

STEP 2: Identify and List the PESTEL Factors

Brainstorm the PESTEL factors and identify and evaluate those that impacts your small business. List only those factors, and the change in them, in PESTEL analysis under the appropriate PESTEL headings. Consider both the present situation and likely future changes.

STEP 3: Rate PESTEL Factors Level of Impact

Individually rate the level of impact of each of the PESTEL factors on your business as ‘positive’, ‘negative’ or ‘unknown’.

STEP 4: Take Action

Moving forward, actions are needed to implement the results of the PESTEL Analysis. In general, the PESTLE Analysis should be distributed to the relevant employees/stakeholders. In addition, update your SWOT Analysis, business plan, or other strategic documentation. If there are any significant risks or threats, take appropriate steps to mitigate or eliminate them.

Here is a concise list of external factors.

Political factors

Governmental factors often include legislative bills, regulations, and laws about tax structures, tariffs, changes to government and policies, trade considerations, or red tape. Any business could be subject to them on a local, state, federal and national level. Legal factors can play a positive or negative role when new legislation is passed. These factors can impact company’s operation such as changes to trade restrictions will impact the cost of a product, – increasing or decreasing tariffs will affect the cost of products or raw materials and affect a business. Besides, political factors may even help determine the location of corporate headquarters.

Some of the political factors you need to watch are:

• Tax policies
• Stability/instability of government
• Entry mode regulations
• Funding, grants and initiatives
• Home market lobbying/pressure groups
• Freedom of press
• Government regulation and deregulation
• Social policies (social welfare etc.)
• Trade regulations (the EU & NAFTA)

Economic factors

This includes the macroeconomic factors that can affect your business directly or through your products and services, and they usually represent the metrics that measure the health of an economic region. The economic state is something that constantly evolves and will change a lot of times during the firm’s lifespan.

Examples of economic factors may include:

• Fall in consumer spending
• Housing boom
• Change in interest rates or inflation
• Unemployment rate changes
• Changes in economic growth rate
• Changes in exchange rate
• Government subsidies
• Effects of globalisation

Social factors

Social factors consider the ethical, cultural, and demographic aspects that affect the demand for a small business’s products/services and how it operates. These factors are especially important for marketers when targeting certain customers. In addition, it represent some information about the local workforce and its willingness to work under certain conditions.

The most obvious form of social change to emerge from the coronavirus crisis will be the way people feel about events, large gatherings, and returning to public spaces such as high street shops. Even after restrictions are lifted, attitudes towards close social contact are likely to see long-lasting change. How will this affect your marketing plans?

• Lifestyle trends
• Demographics – birth rates, death rates, number of marriages, number of divorces
• Shift in educational requirements and changing career attitudes
• Population growth rate
• Wealth distribution
• Immigration and emigration rates
• Family size and structure
• Buying habits
• Ethical concerns
• Cultural norms and values

Technological factors

This step implies recognising the potential technologies that are available. Technological advancements can optimise internal efficiency and help a product or service from becoming technologically obsolete. The role of technology in business is increasing each year. This trend will continue because R&D drives new innovations. This area can be very hard to predict because it is very fast-moving. The best strategy is to scan the technical press for predictions of likely disruption in the next year or so and adapt according to the changes.

One big example of a technological factor making a big impact over the past 25 years is the rise of the internet. These days many businesses worldwide have already moved to digital ways of working as a result of the lockdown, and are relying more heavily on e-commerce.

• Government expenditure on research and development
• The level of innovation
• Access to new technologies
• Disruptive technologies
• Maturity of technology
• Innovation potential
• Intellectual property issues

Environmental Factors

This section takes into account the effect of the external environment on operations. These factors have attracted attention only relatively recently. They have become important due to the increasing scarcity of raw materials, pollution targets and carbon footprint targets set by governments. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer. This has led to many companies getting more and more involved in practices such as corporate social responsibility (CSR) and sustainability as both consumers and governments penalise firms for having an adverse effect on the environment. The consumers are willing to switch brands if they find a business is ignoring its environmental duties.

• The availability of natural resources (raw materials, mineral resources)
• Environmental pollution (emissions, waste)
• Environmental awareness
• Pressure from NGOs (Non-Governmental Organisations)
• Adoption of sustainable products
• Recycling standards

Legal factors

Legal factors can overlap with political issues, but they are focused on the effect of legislation, rather than government actions more generally. These factors cover all the legal aspects of operation, including health and safety law, discrimination laws, antitrust laws, labour and employment laws, contract laws, and elements like money-laundering laws.

Using a variety of tools

A PESTLE analysis is a useful addition to your business plan, because it gives a very precise and structured analysis of the external environment. But it is just one of several components that should go into your full marketing plan. Performing PESTEL analysis can be particularly helpful in identifying opportunities and threats to feed into a SWOT analysis , Porter’s Five Forces, competitor analysis , or scenario planning.

We recommend that the PESTEL should not, however, be used as the only analysis tool for your business plan, otherwise you will get a very one-sided picture.

For more information on how to implement and structure your marketing plan and PESTEL analysis in particular, you can get a 14-day free trial, or email us at [email protected] if you have any questions.

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How To Write a Business Plan for Environmental Impact Assessment in 9 Steps: Checklist

By henry sheykin, resources on environmental impact assessment.

• Financial Model
• Business Plan
• Value Proposition
• One-Page Business Plan

Welcome to our blog post on how to write a business plan for environmental impact assessment (EIA) in 9 steps! In today's rapidly evolving world, businesses and government organizations are increasingly recognizing the importance of sustainability. As environmental concerns continue to grow , the demand for comprehensive EIA reports is higher than ever. In fact, according to recent statistics, the global environmental consulting services market is projected to reach $58.62 billion by 2027 , with a compound annual growth rate of 5.9% . With our digital platform, EcoAssess, we are dedicated to helping businesses and government organizations enhance their sustainability initiatives through comprehensive environmental impact assessments.

So, let's dive into the 9 essential steps that will guide you in writing an effective business plan for an environmental impact assessment:

• Identify the purpose and scope of the Environmental Impact Assessment (EIA)
• Conduct a preliminary environmental review
• Define the legal and regulatory requirements
• Engage stakeholders and establish communication channels
• Create a project timeline and set clear objectives
• Determine the methodology for conducting the assessment
• Gather relevant data and conduct field investigations
• Analyze the data and assess potential environmental impacts
• Prepare an outline and structure for the EIA report

By following these steps, you'll be well-equipped to create a comprehensive and insightful EIA report that addresses the environmental impacts of your business operations or projects. Let's get started!

Identify The Purpose And Scope Of The Environmental Impact Assessment (EIA)

Before embarking on the process of conducting an Environmental Impact Assessment (EIA), it is crucial to clearly identify the purpose and scope of the assessment. This step sets the foundation for the entire process, ensuring that the assessment focuses on the specific objectives and goals.

The purpose of the EIA is to evaluate and analyze the potential environmental impacts that a project or activity may have. This assessment helps identify any adverse effects on the environment, human health, and overall sustainability. By understanding the purpose, you can direct the assessment to address specific concerns, minimize negative impacts, and enhance the overall environmental performance of the project.

The scope of the EIA defines the boundaries and extent of the assessment. It outlines which aspects of the project will be included in the assessment, such as the site selection, construction, operations, and potential decommissioning phases. The scope also determines the key environmental factors that will be considered, such as air and water quality, biodiversity, land use, and social and cultural aspects. By clearly defining the scope, you can ensure that the assessment addresses all relevant environmental aspects.

Identifying the purpose and scope of the EIA should involve consultation with all stakeholders, including project proponents, regulators, and potentially affected communities. This collaborative effort enables the inclusion of diverse perspectives and ensures that the assessment encompasses all concerns and interests.

• Clearly define the objectives and goals of the EIA before proceeding with the assessment.
• Engage in dialogue with stakeholders to gather their input and recommendations.
• Consider the project context and specific environmental concerns when establishing the scope of the assessment.
• Ensure that the determined purpose and scope align with legal and regulatory requirements.

Conduct A Preliminary Environmental Review

Before diving into the full Environmental Impact Assessment (EIA) process, it's essential to conduct a preliminary environmental review. This step lays the foundation for a successful assessment by gathering initial information about the project and its potential environmental impacts.

To conduct a thorough preliminary environmental review, consider the following:

• Identify the project's location, including nearby areas of ecological or cultural significance.
• Research any previous environmental studies or assessments conducted in the area.
• Gather information on the project's objectives, scope, and potential environmental hazards.
• Identify any requirements or considerations outlined in relevant environmental policies or regulations.
• Assess the potential impacts on environmental factors such as air, water, soil, biodiversity, and cultural heritage.
• Consider any potential indirect or cumulative impacts that may arise.
• Identify any known environmental sensitivities or concerns expressed by stakeholders.

Tips for conducting a preliminary environmental review:

• Engage with local communities, environmental organizations, and experts to gather valuable insights and local knowledge.
• Consider conducting site visits or field investigations to gain a firsthand understanding of the project's potential impacts.
• Utilize available technologies and data sources to enhance your understanding of the project's environmental context.
• Document and organize all the gathered information in a systematic manner for easy reference throughout the EIA process.

By conducting a comprehensive preliminary environmental review, you will be better equipped to determine the appropriate scope and methodology for your EIA. It will also help you identify potential mitigation measures to address any adverse environmental impacts that may arise during your assessment.

Define The Legal And Regulatory Requirements

When conducting an Environmental Impact Assessment (EIA), it is crucial to understand and adhere to the legal and regulatory requirements that govern the assessment process. These requirements vary from country to country and sometimes even within different regions or states. Failure to comply with these requirements can result in potential legal and financial consequences for your business or organization.

To ensure compliance, the first step is to thoroughly research and identify the specific laws, regulations, guidelines, and policies that apply to your EIA. This may involve consulting with environmental agencies, government bodies, and legal experts who specialize in environmental regulations. It is important to consider both national and local laws, as they may differ in their requirements and criteria.

Once you have identified the applicable regulations, create a checklist of the key requirements that need to be addressed in your EIA. This checklist will serve as a guide throughout the assessment process and help you ensure that nothing is overlooked.

• Include a detailed description of the project and its potential environmental impacts
• Specify the necessary permits, licenses, or approvals that need to be obtained
• Outline the timelines and deadlines for submitting documents or conducting assessments
• Identify any specific reporting requirements, such as the format for the EIA report or the need for public disclosure
• Ensure that the assessment process complies with relevant environmental legislation and policies
• Keep a record of all the relevant legal and regulatory requirements to refer to throughout the assessment process.
• Regularly check for updates or changes in environmental regulations to stay up-to-date with compliance.
• Seek expert advice or legal counsel if you are uncertain about any specific requirements.

By clearly defining the legal and regulatory requirements at the beginning of your EIA, you can ensure that your assessment process is in line with the applicable laws and regulations. This not only helps you avoid any potential legal repercussions but also demonstrates your commitment to responsible and sustainable business practices.

Engage Stakeholders and Establish Communication Channels

Engaging stakeholders and establishing effective communication channels is crucial for a successful Environmental Impact Assessment (EIA). Stakeholders include individuals, organizations, and communities who may be directly or indirectly affected by the proposed project. Their involvement in the process ensures that their opinions, concerns, and suggestions are considered in decision-making.

Here are some important steps to follow when engaging stakeholders and establishing communication channels:

• Identify the key stakeholders relevant to the project. This may include local communities, environmental NGOs, government agencies, industry representatives, and other interested parties.
• Reach out to the identified stakeholders and explain the purpose of the EIA. Clearly communicate how their input and participation will contribute to the assessment process.
• Organize stakeholder meetings, workshops, or public consultations to facilitate discussions and gather feedback. These interactions provide an opportunity for stakeholders to express their concerns, suggestions, and expectations.
• Establish effective communication channels, such as regular email updates, dedicated project websites, or social media platforms, to keep stakeholders informed about the progress of the EIA.
• Listen attentively to stakeholders' perspectives and concerns. Take notes and document their input to ensure that their viewpoints are considered throughout the assessment process.

Tips for Engaging Stakeholders:

• Be transparent and open in your communication to build trust and credibility with stakeholders.
• Provide clear and concise information about the project and the EIA process, using non-technical language whenever possible.
• Ensure that stakeholders have sufficient time to review relevant documents and provide feedback.
• Consider diverse perspectives and prioritize inclusivity by engaging with stakeholders from various backgrounds and interests.
• Document stakeholder engagement activities and outcomes to demonstrate compliance with regulatory requirements and best practices.

By engaging stakeholders and establishing robust communication channels, you create an inclusive and collaborative environment for the EIA process. This ensures that the environmental concerns and interests of all stakeholders are taken into account, leading to a more comprehensive and credible assessment.

Create A Project Timeline And Set Clear Objectives

Creating a project timeline and setting clear objectives is essential for the successful implementation of an Environmental Impact Assessment (EIA). This step helps to organize the assessment process, allocate resources efficiently, and ensure that all necessary tasks are completed on time.

When creating a project timeline, it is important to consider the scope and complexity of the EIA. Break down the assessment into smaller tasks and assign specific timelines to each task. This will help in tracking progress and identifying any potential delays or bottlenecks.

In addition to setting a timeline, it is crucial to establish clear objectives for the EIA. Define what you aim to achieve through the assessment process and outline the specific goals that need to be accomplished. This will provide a clear direction and focus for the assessment.

• Identify key milestones: Break down the EIA process into key milestones and set deadlines for each milestone. This will help in tracking progress and ensuring that the assessment stays on schedule.
• Allocate resources: Determine the resources required for each task and allocate them accordingly. This includes personnel, budget, and any necessary equipment or software.
• Define deliverables: Clearly define the deliverables for each task or milestone. This includes reports, data analysis, stakeholder engagement plans, and any other relevant output. This will help in maintaining clarity and accountability throughout the assessment process.
• Consider contingencies: Anticipate any potential challenges or risks that may arise during the assessment process. Develop contingency plans to mitigate these risks and ensure that the project stays on track.
• Involve key stakeholders and team members in the timeline and objective-setting process to gain their input and ensure buy-in.
• Regularly review and update the project timeline as needed to account for any changes or unforeseen circumstances.
• Use project management tools or software to track progress, set reminders, and communicate with team members efficiently.
• Break down tasks into smaller, manageable sub-tasks to make the timeline more realistic and achievable.

By creating a comprehensive project timeline and setting clear objectives, you lay the foundation for a well-structured and successful EIA. This step sets the stage for effective planning, execution, and reporting, ultimately contributing to the overall sustainability goals of your organization or business.

Determine The Methodology For Conducting The Assessment

Once you have established the purpose and scope of the Environmental Impact Assessment (EIA), the next crucial step is to determine the methodology for conducting the assessment. This involves selecting the appropriate methods, tools, and techniques to gather and analyze the necessary data to evaluate the potential environmental impacts of your business or government project.

Here are some important considerations when determining the methodology for conducting the assessment:

• Identify the key environmental parameters: Begin by identifying the specific environmental factors that are likely to be affected by your project. This could include air quality, water resources, biodiversity, and soil composition. By focusing on these key parameters, you can develop a targeted methodology that addresses the specific environmental impacts relevant to your project.
• Choose appropriate data collection methods: Select the most suitable methods for gathering the necessary data. This could involve a combination of desk research, on-site surveys, interviews with experts, and data aggregation from relevant sources. Ensure that the chosen methods are reliable, accurate, and capable of providing the required information.
• Consider the scale and timeline of the project: Depending on the size and duration of your project, you may need to adjust the methodology accordingly. For large-scale or long-term projects, it may be necessary to conduct extensive field investigations, while smaller projects may require a more focused approach. Take into account any specific time constraints or seasonality factors that could impact data collection and analysis.
• Include qualitative and quantitative assessments: To ensure a comprehensive evaluation of the potential environmental impacts, incorporate both qualitative and quantitative assessments into your methodology. Qualitative methods, such as expert opinions and surveys, can provide valuable insights, while quantitative methods, such as data analysis and modeling, help to quantify the impacts and assess their significance.
• Consult environmental experts and professionals to gain insights into the most appropriate methodology for your specific project.
• Consider using standardized assessment frameworks or guidelines, such as those provided by governmental or international organizations, to ensure consistency and credibility in your methodology.
• Regularly review and update your methodology throughout the assessment process to incorporate any changes or new information that may arise.

By carefully determining the methodology for conducting the assessment, you can ensure that your Environmental Impact Assessment is conducted in a systematic and rigorous manner, resulting in accurate and reliable findings that support your sustainability initiatives.

Gather Relevant Data And Conduct Field Investigations

Gathering relevant data and conducting field investigations is a critical step in conducting an environmental impact assessment. This step involves collecting information and conducting on-site visits to assess the potential environmental impacts of a project or activity. Here are some important considerations:

• Identify the data needs: Determine the specific data you need to collect to assess the environmental impacts of the project. This may include information on air quality, water quality, soil composition, biodiversity, and habitat suitability, among others.
• Develop a sampling plan: Create a plan to collect representative samples of the environmental parameters you need to assess. This may involve selecting appropriate sampling locations and determining the frequency and duration of data collection.
• Conduct field investigations: Visit the project site and conduct field investigations to gather the necessary data. This may involve conducting habitat surveys, water quality sampling, air pollution monitoring, and other field-based assessments.
• Ensure that data collection methods comply with relevant standards and adhere to ethical guidelines.
• Use appropriate equipment and techniques to collect accurate and reliable data.
• Incorporate multiple data sources and use cross-validation techniques to minimize biases and uncertainties in the data.
• Consider engaging local experts or consultants familiar with the project site and its environmental characteristics.
• Document field investigations thoroughly, including relevant observations, measurements, photographs, and any potential limitations or challenges faced during data collection.

Gathering relevant data and conducting field investigations play a crucial role in assessing the potential environmental impacts of a project. By ensuring accurate and comprehensive data collection, you can provide a solid foundation for the subsequent analysis and evaluation stages of the environmental impact assessment process.

Analyze The Data And Assess Potential Environmental Impacts

Once you have gathered all the necessary data from your field investigations, it is time to analyze it thoroughly. This step is crucial in determining the potential environmental impacts of your proposed project or initiative.

1. Data Analysis: Begin by reviewing all the data collected during your field investigations. Look for patterns, trends, and any significant findings that may arise. It is important to approach this analysis objectively and scientifically, using appropriate methods and tools to draw accurate conclusions.

2. Impact Assessment: Based on the data analysis, identify and assess the potential environmental impacts of your project. Consider both the direct and indirect effects it may have on the surrounding ecosystem, air quality, water resources, biodiversity, and other relevant aspects. This assessment should be comprehensive and take into account all phases and activities associated with the project.

• Ensure that the data analysis and impact assessment are carried out by qualified professionals with expertise in environmental sciences or relevant fields.
• Consider involving external experts or consultants if necessary to ensure accuracy and impartiality of the assessment.
• Use appropriate models and tools to aid in the analysis and assessment process, such as environmental impact matrices or risk assessment frameworks.
• Consider the potential long-term and cumulative effects of your project on the environment, rather than focusing solely on immediate impacts.

3. Mitigation Measures: Based on the identified environmental impacts, develop measures to mitigate or minimize any negative effects. These measures should aim to protect and conserve natural resources, reduce pollution and waste, promote sustainable practices, and enhance overall environmental stewardship.

4. Evaluation: Finally, evaluate the effectiveness of the proposed mitigation measures in addressing the potential environmental impacts. This evaluation should consider the feasibility, practicality, and projected outcomes of the proposed actions. It is important to monitor and review the effectiveness of these measures throughout the project lifecycle to ensure continuous improvement.

By thoroughly analyzing the data and assessing the potential environmental impacts of your project, you can develop effective strategies to mitigate any negative effects and enhance the sustainability of your business or organization. This step is crucial in aligning your operations with environmental best practices and contributing to a more sustainable future.

Prepare An Outline And Structure For The EIA Report

Once all the relevant data has been gathered and analyzed, it is time to prepare an outline and structure for the Environmental Impact Assessment (EIA) report. This report will serve as a comprehensive document outlining the findings and conclusions of the assessment, as well as the potential environmental impacts of the proposed project.

• Start by creating a clear and logical structure for the report. This will help ensure that the information is organized and easy to navigate for readers.
• Include an executive summary at the beginning of the report, which provides a brief overview of the project and the key findings of the assessment.
• Divide the report into sections based on the different aspects of the assessment, such as the project description, the methodology used, the data analysis, and the conclusions.
• Within each section, further divide the information into subsections to provide a clear and organized presentation of the data and analysis.

Additionally, it is important to clearly and succinctly summarize the key findings and conclusions of the assessment in the report. This will allow readers to quickly understand the potential environmental impacts of the proposed project and the measures that can be taken to mitigate these impacts.

A visually appealing and well-formatted report can also help enhance the readability and understanding of the information presented. Consider using headings, subheadings, bullet points, and tables to make the content more accessible and visually appealing.

• Use clear and concise language throughout the report, avoiding jargon or technical terms that may be difficult for readers to understand.
• Include relevant charts, graphs, or visuals to help illustrate the data and findings.
• Proofread the report thoroughly to ensure that there are no typos or grammatical errors that could detract from the professionalism and credibility of the document.

By following these steps and tips, you can prepare an outline and structure for the EIA report that effectively communicates the findings and conclusions of the environmental impact assessment. This report will play a crucial role in informing decision-makers and stakeholders about the potential environmental implications of the project and guide them in making sustainable and environmentally responsible choices.

Writing a business plan for environmental impact assessment is a crucial step in promoting sustainability and ensuring the well-being of our planet. By following the nine steps outlined in this checklist, organizations can effectively identify and address potential environmental impacts, while also engaging stakeholders and meeting legal requirements.

• Identify the purpose and scope of the assessment
• Define legal and regulatory requirements
• Determine the assessment methodology
• Prepare a structured EIA report

With the support of tools like EcoAssess, businesses and government organizations can streamline the process and achieve their sustainability goals more efficiently. Together, we can make a positive environmental impact and contribute to a healthier and greener future.

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Helping you build & grow your brand!

A practical introduction to Marketing Environmental Analysis

The development of your overall marketing strategy has to start with an assessment of your business environment. In order to cover all bases, you can use a mix of several marketing frameworks. You can also use applied theories to evaluate different factors that affect your marketing strategy. So this is what marketing environmental analysis is all about. It can be broadly classified under external and internal factors. A marketing environmental analysis will highlight critical factors. You can use this to your advantage. But it also presents elements that are a risk to your planning and implementation.  

Before you look into the “How”, let’s establish the “Why”. The benefits of doing a marketing environmental analysis vary. Generally speaking, the analysis:

• helps in setting and attaining marketing or organizational objectives
• indicates internal strengths and weaknesses of the organization
• highlights external threats and opportunities
• provides an understanding of trends and insights to gain advantage or improve offering
• clarifies expectations by considering capabilities and resources
• prepares organizations for adversity and changes within their industry
• forecasts possibilities for the future of the offering, brand or organization

There are 2 widely accepted divisions to the marketing environmental analysis. External & Internal environments. The external is split into macro-environment and micro-environment forces. So, let’s take a deeper dive into each of the main classifications. We will be using some popular models and theories to explain them.

Macro-Environment – Marketing Environmental Analysis

The macro-environment factors are external forces indirectly affecting the growth of your business. These affect both the micro and internal factors. Thus, leaving an impact on your brand and organization. One of the most popular models for inspecting the macro-environment is a PESTLE/PESTEL analysis. PESTLE/PESTEL is a business analysis tool that is also useful for marketing strategy. There are 6 major elements to explore here. These are:

• Sociological
• Technological
• Environmental

By examining each of the 6 forces, you will have a clear understanding of external factors that provide opportunities for you, your brand, or your business. It will also prepare you to plan against threats and challenges.

Let’s look at each of the 6 factors of PESTLE/PESTEL now:

The political situation of the region/country you are marketing to needs to be considered. Most industries have regulations in place for trade, taxes, quality, and labor. These and other government policies make up the political external factors that affect you and your business.

The pricing of your offering could be severely affected by demand/supply imbalance. Thus, it is important to analyze economic factors. Some inclusions are direct like interest rates and inflation. There are complex ones too. Such as purchasing power of consumers or regional economic growth.

SOCIOLOGICAL

Also referred to as Social factors. These forces include but are not limited to, demographics by region, and general sentiment towards the industry. These also consider the lifestyle, culture, and values of society and individuals.

TECHNOLOGICAL

The innovation revolution today means an ever-changing technological landscape. Consequently, this can affect Research & Development, resource utilization, and costs. It is important to study the way technology changes industries. Also, to understand the way consumers interact with a brand. As a result, it can exponentially help growth.

ENVIRONMENTAL

Besides general sustainability practices, there are government policies and initiatives. They all hold everyone responsible for their own environmental impact. These factors include climate change and best practices. But there is also alignment with regional and international norms. Finally, corporate social responsibility (CSR) initiatives are a part of these as well.

Despite commonalities between legal and political factors, it is necessary to look at these separately. Since there are international and local government laws that could affect you and your brand. The legal factors may include patents and intellectual property. Or occupational health & safety protocols too. But it’s important to also consider employment and consumer protection laws among others.

There are great examples of how to conduct a PESTEL/PESTEL analysis on pestleanalysis.com . Check these out to gain a better understanding of the model. And surely implement its application!

Micro-Environment – Marketing Environmental Analysis

Unlike macro-environmental external factors, these forces have a direct impact on your organization or brand. There are several classifications for these. But the simplest is Competitors, Partners , and Customers . A thorough analysis of micro-environmental factors is necessary. Since the application of strategy and the success of its execution is connected to these forces. Let’s take a closer look at elements of each category now:

Competitors

In 1980, Harvard Business School’s Michael E. Porter outlined his 5 forces theory. He highlights major forces that shape marketing and organizational strategy. Undoubtedly, he did it in a competitive environment. This we can see in all industries now. These 5 forces can be further explored by looking for answers to the questions under each force below:

COMPETITIVE RIVALRY

Who are your competitors? And, how many of them are there? How do their products compare to yours? Besides, what advantages or disadvantages do you have on them? Lastly, how does your pricing, strategy, marketing, and market share match up to these competitors?

SUPPLIER POWER

How many suppliers do you deal with? Furthermore, what are the benefits and risks of dealing with them? If not them, what are your alternatives? And, how much do they charge you? Finally, how much control do you have in the relationship? 

BUYER POWER

How many buyers do you have? Also, what is the nature of your relationship with them? Are they distributors or direct customers? Moreover, what is the size and frequency of their orders? Because that shows who dictates the terms of the relationship. Consequently affecting… Will they go to a competitor’s offering? And the all-important, what will make them stay?

THREAT OF SUBSTITUTION

Is there another way… to do what you do? Are there alternatives? Or new options coming to the market? Besides, can what you do be outsourced for cheaper? Lastly of course, is there an easier solution to the problem you aim to solve?

THREAT OF NEW ENTRANTS

How easy is it for new brands to enter your domain? Is there a way to protect your market share? How are your brand and its identity positioned in your industry? Are you prepared for new entrants?

Without a doubt, analyzing your prospective and current customers is an essential undertaking. It has the biggest impact on your success. Performing consumer research will help you understand how the “public” feels about your brand. This research can be done with surveys. But also through feedback and analytics. It will aid decision-making for you or your business, as a result.

Successful analysis of your customers will help you:

• Connect with your customers to create meaningful relationships.
• Target high-value segments
• Meet service expectations
• Improve your offering
• Shape your brand image.

Once you have completed an analysis of your customers, you have to channel this into successfully creating Customer Personas. You can use these to serve segments better. And, you can check out how to create Customer Personas in this blog post here. Furthermore, Alexa’s blog has 10 great examples of personas that you can use to understand the inputs you may need to take in. Obviously, by adding value to your customers, you will position your brand as an effective solution to their needs!

Your partners could include a host of affiliates or agencies. Even service providers or consultants. The actual number depends on the nature of your business. It’s vital for these partners to be aligned with your goals. If so, you can be assured of their commitment to mutual success. For example, you could have agencies for your branding needs that uphold your brand image. They do this with quality signage. Additionally, you could be using third-party delivery partners for your e-commerce products. They need to ensure the delivery process is as seamless as an online purchase.

You have to take a deep look at every partnership that can benefit you. Then plan the terms within which you will operate. You have to maintain control processes to uphold your values and standards. Forming the right partnerships propels growth. It can add value for your customers. Further, it can revolutionize the way you and your industry do business. So a periodic examination of your partners will benefit you, your brand, your customers, and all marketing efforts.

Managing Partnerships

According to a 2015 McKinsey survey on managing strategic partnerships , the top 3 essential elements for shared success with partners are:

• Alignment on objectives
• Effective communication and trust
• Constructive leadership and processes

While looking at causes of failure in the same survey above, the factor that replaces leadership and processes is restructuring and evolution. How does this affect a constantly changing business landscape? It is always necessary to be prepared for the future! And ensuring your partners are positioned to join you. As you inevitably grow together. Despite this, do not forget to be agile enough. You have to be able to adapt too. There will be changes that your partners may be experiencing. Obviously, all relationships benefit from mutual understanding. And the way through is to have empathy!

Internal Environment – Marketing Environmental Analysis

Lastly, you have to take a closer look at all internal forces affecting how you operate. Your core mission and vision will address why you are in business, Consequently, it clarifies what you want to achieve. The McKinsey 7S framework is one of the most popularly used methods to analyze the internal environment. Being used since the late 1970s, it helps in assessing the functioning of organizations. It contains tangible elements such as Staff, Systems, Skills, and Structure. It also includes others like Shared Values, Strategy, and Style. Let’s take a look at these now:

Your goal helps you plan how you establish and grow. You do this to remain competitive within your industry. Your strategy has to be readily adaptable to changes in the environment. That’s how you meet your objectives.

Before, hierarchy defined the structure. Things are a little complex now with fluid work teams. But the shape and composition can evolve. The difference is made by communication and the ability to work together. This leads to an ideal situation where you work towards goals together.

Visibly, processes are in place everywhere. It includes all functions such as HR, Finance, IT, Sales, and Marketing. Other procedures also constitute systems like SOPs and guides. This undeniably contributes to how everyone in the organization plans to achieve set goals. Proper allocation of resources is important. But, constant tracking is vital.

The core competencies and capabilities of the entire team equal its skills. It is important to ensure new skills are taught. As well as the development of current skills. This will increase output. Thus making it easier to reach targets.

You have to take a look at each of your employees. Assess their behavior and motivations. Track their progression. Provide training. And engage them to earn their commitment. You have to constantly gauge them to have the best possible group of people. They will help you achieve your goals.

How the heads and managers chose to lead is crucial. It becomes a part of its style. Patterns of behavior will help in the formation of a culture. This culture brings employees together. They are in sync. In turn, this creates alignment with broader goals.

Shared Values

Culture is an accumulation of beliefs and values. Also, includes standards and behaviors. They shape how everyone conducts themselves. This applies to teams and organizations as well. It determines how staff treat each other. The shared values boost work ethic. Corporate culture leads to a direct effect on employee output and agility.

Critically, the framework relies on the integration of the 7Ss. You have to set the right goals. You can follow the SMARTER goals framework to do this. Check out this blog post that sheds light on it. Align your goals with your vision and mission. Your values and culture affect how your team performs. This changes the way your organization works and how others perceive your brand.

It’s directly connected to success for a brand. Assessment of your capabilities will help you play to your strengths. Additionally, the systems and processes you have in place optimize efficiency. This directly affects your bottom line. Your resource management and investment into R&D help you chart a way forward. Lastly, your employees, their capabilities, and continued growth are vital to achieving your goals, so keep that in mind always! This is much like running a content audit for your content strategy ! It is immensely useful and effective.

Above all, understanding how external factors affect your internal environment is crucial. It determines where you stand. You can’t expect to plan for the future without fully grasping your current position. Listing all the forces, directly and indirectly, is essential. It affects you and your business. But it is only part of the process. And connecting the dots to form patterns and trends in the next step. It will show you a way forward. Using the insights gained from the marketing environmental analysis makes the difference. You have to then turn it into an actionable plan in the next step.

A SWOT analysis is the most common, tried-and-tested method to utilize the information from marketing environmental analysis. You can see more about SWOT analysis, which is discussed here, in another blog post.

Clearly, there are several other frameworks, models, and applied theories in marketing. These are often interconnected. You can connect findings from the marketing environmental analysis to: – Choosing your Marketing mix – Selecting a broader marketing strategy such as the Ansoff matrix – Setting and deriving SMARTER goals or establishing OKRs – Understanding internal factors affecting change like the 7S McKinsey framework

Though, all can help you achieve similar results. The takeaway should be that your marketing environmental analysis is essential. How you do it, is up to you. It would be based on your resources and capabilities. Just remember that this isn’t a one-off exercise. You have to repeat it periodically. This is how you prepare for continued growth and success.

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Q&A: Environmental Analysis

I answer ‘Ask the Expert’ questions at www.bplans.com and occasionally I get a question that merits a special comment. This morning I had the following question:

Question: What is the Environmental Analysis for this type of shoe business?

Comment: This is probably a homework assignment. For the record, I’m not leaving anything out, the question is as shown here, with no additional information. “ This type of shoe business ” could be anything from manufacturing to retail to repair to whatever, and in any market, in any country, and with any mix of strategy and resources. So of course actually answering the question is impossible.

That, however, is not the point. That’s not why I’m choosing to post this on this blog. What’s interesting here is that this question illustrates a very common misunderstanding. It assumes that there is a “ right ” answer; that there exists “ the environmental analysis ” and the person asking the question wants to acquire that one right answer by asking an expert.

This is the same underlying world view that has created the strange proliferation of trade in sample business plans, as if there could be a right business plan for some generic kind of business, like a restaurant business plan or shoe manufacturer business plan. People ask for “the business plan” for a type of business as if it were a recipe. It isn’t.

If the question is homework, then the benefit the student is supposed to gain from it isn’t finding the supposed right answer, but rather going through the exercise of doing the thinking.

Answer: The environmental analysis in the context of business planning normally refers to conditions and factors external to your company, outside of your company’s control, that might affect its sales, market, costs, and so forth. These are often grouped into kinds of factors, such as the common PEST, which stands for political, economic, social, and technological factors that might affect your company. They might be worldwide trends, or specific local market trends, or anything in between.

A good analysis looks at the specific individual context of your company, in your market, with your strategy and resources, and guesses how these factors might affect your company in the future.

— Tim

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com.

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BUSINESS ENVIRONMENT ANALYSIS

2018, LECTURE NOTE FOR COMPETITIVE MANAGEMENT STRATEGIES

An analysis of the external environment is undertaken in order to discover the opportunities and threats that are evolving and that need to be addressed by the organization. A study by Diffenbach (1983) identified a number of positive consequences that stem from carrying out an organized environmental analysis. An analysis of the external environment can be broken down into three key steps, each becoming more specific to the organization. The first step is an analysis of the macro-environmental influences that the organization faces. This is followed by an examination of the competitive (micro) environment the organization operates within. Finally a specific competitive analysis is undertaken

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