Before you can start a business, you not only need to look at your business capability and resources but also the environment in which you are going to set up and run the firm. In business language, environmental analysis refers to all the factors and changes that occur and have a bearing on the success of your business.
As such, an omission to carefully conduct a business environment analysis automatically leads to loss of your resources, efforts and your entrepreneurial motivation level. In fact, research has shown that entrepreneurs who set up their business after a careful analysis of the environment are 96% more likely to succeed that those who just jump into business without any analysis.
In conducting your business environmental analysis, you will basically be evaluating external and internal factors that have a bearing on your firm. In simpler language, you will be conducting a SWOT (Strength, weakness, opportunities and threats) analysis for your business.
The first two components, strength and weakness are referred to as the internal (micro) business environmental. They are firm specific and managers have direct control over them. On the other hand, the last two elements (opportunities and threats) are macro factors that apply equally to all firms. In practical terms, this means that business managers have no control over these factors and they just have to plan on how to make the most out of them. Normally, a SWOT analysis is necessary before one can actually develop a viable strategic plan.
In internal business environmental analysis, you will be conducting a detailed review of all factors which you have direct control over such as company’s mission, operations, internal control and means of financing.
It also entails review of factors such as marketing strategy, company leadership, production capacity, nature and quality of labor employed. All these factors are carefully analyzed with an aim to uncover areas that provide strength and synergy to the firm and those that pose weakness. A point that should be noted is that business environment analysis is also beneficial to even non-profit organizations.
An Internal analysis also covers issue related to a firm’s workplace culture and how they may have shifted over time from its original goals and mission. In most cases, firms find it’s prudent to engage the assistance of consultancy firms in conducting micro analysis. This is because it offers more objectivity as opposed to a review done by individuals within the firm.
Under external environment analysis, you assess effects of factors that apply the same in the whole industry. This entails a detailed analysis of economic, political, social-cultural, technological, competition, demographic and social cultural changes.
These factors pose opportunities such as new markets, positive trade agreements and beneficial alliances. They also pose thereat such as negative regulations, natural disasters and internal conflicts. However, you cannot change these factors and the only way out is for you to chat out a strategy that will enable you make the most within them. That is the key purposes of business environment analysis. Hope you will conduct one and give your business a new future, growth and opportunities.
It’s the key to success.