Strategic Business Planning: Analysis of the external business environment
External business environment analysis is a crucial part of a strategic business planning process. It identifies opportunities and threats presented by the factors outside of the company’s control, and provides insights into how the company can take advantage of this knowledge given its capabilities and aspirations. This analysis includes the following major components:
Macro environmental analysis
Macro environmental external factors, factors affecting the society as a whole, have a great impact on an industry’s growth and thus opportunities for businesses in the industry to thrive. PESTEL (political, economic, social, technological, environmental and legal factors) analysis is often used as a framework for scanning of the macro environment.
Micro environmental analysis
Micro environmental external factors, factors within an industry, affect industry profitability. Porter’s five forces model, the major strategic tool for micro-environmental industry analysis, considers the threat of new entrants, the power of suppliers, the power of buyers, the power of product substitutes and the intensity of industry rivalry to evaluate profitability of an industry.
Another factor to consider in a micro environmental analysis in the industry life cycle. Operating in a startup, growing, mature, shakeout or declining industry present different challenges and opportunities for businesses.
Market analysis
It is important for businesses to understand what markets (groups of customers with similar needs) they target, what are the major characteristics of these markets, how big the markets are now and into the future.
Customer analysis
Businesses exist to satisfy customers. Understanding the target customers, what they want and can afford, their behaviour helps provide maximum value to them.
Competitor analysis
To compete successfully, organisations need to understand what their competitors do to survive and prosper. What are the competitors’ strengths and weakness? What are the key factors which make businesses in the industry to succeed?
Julia Podgorbunskaya, CPA, Head Planner at Professional Business Plans
April 2017
(61) 02 4295 0079
[email protected]
www.ProfessionalBusinessPlans.com.au
Macro environmental analysis
Macro environmental external factors, factors affecting the society as a whole, have a great impact on an industry’s growth and thus opportunities for businesses in the industry to thrive. PESTEL (political, economic, social, technological, environmental and legal factors) analysis is often used as a framework for scanning of the macro environment.
Micro environmental analysis
Micro environmental external factors, factors within an industry, affect industry profitability. Porter’s five forces model, the major strategic tool for micro-environmental industry analysis, considers the threat of new entrants, the power of suppliers, the power of buyers, the power of product substitutes and the intensity of industry rivalry to evaluate profitability of an industry.
Another factor to consider in a micro environmental analysis in the industry life cycle. Operating in a startup, growing, mature, shakeout or declining industry present different challenges and opportunities for businesses.
Market analysis
It is important for businesses to understand what markets (groups of customers with similar needs) they target, what are the major characteristics of these markets, how big the markets are now and into the future.
Customer analysis
Businesses exist to satisfy customers. Understanding the target customers, what they want and can afford, their behaviour helps provide maximum value to them.
Competitor analysis
To compete successfully, organisations need to understand what their competitors do to survive and prosper. What are the competitors’ strengths and weakness? What are the key factors which make businesses in the industry to succeed?
Julia Podgorbunskaya, CPA, Head Planner at Professional Business Plans
April 2017
(61) 02 4295 0079
[email protected]
www.ProfessionalBusinessPlans.com.au
