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Analysing the Business Environment

An Introduction

Analysing the market your business operates in is crucial to ensure survival, competitive advantage and differentiation.
It is important to be able to recognise the soft signals in the environment through comprehensive and continuous analysis.

Effective organisational analysis will allow you to: –

  • Scan and monitor the business environment;
  • Keep the business flexible and adapt business to meet market needs and requirements;
  • Make better strategic decisions;
  • Underst and the environment your business operates in.

The business environment can be broken into three levels: –

  1. The Macro environment can be thought of as ‘big picture’ analysis considering factors out with direct control of the business.
  2. The Micro environment will consider what influences the business directly; buyers, suppliers, competition and stakeholders.
  3. The organisation or ‘internal environment’ includes analysis of internal decision making and change, mostly at the control of the organisation.

The Business Environment

The Macro Environment

By underst anding the potential conditions in the extended market you can make better strategic decisions.
The model that can be used to analyse the macro environment is PESTLE.

Pestle

The Micro Environment

Michael Porter’s five forces model can be used to better underst and your position of power and strength of your competitive position within your industry and market. With a better underst anding of your position you will be able to make better decisions to avoid taking wrongs steps and to ensure your organisation remains competitive and relevant.
This tool will also allow you to assess the competition, prepare you for entering new markets and the risks or opportunities that may face you.

5-Forces

The Internal Environment

SWOT analysis is a basic tool that can be used for making business decisions and change within the internal environment.
It can be combined with the PESTLE tool to create an advanced analysis of the macro environment.

SWOT

Although these tools are simple it must be understood that most types of analysis are static whilst the business environment remains dynamic; analysis must be a continuous process. These models are subjective and it is therefore a good idea to get a few people working on analysis independently. Due to the simplicity of these tools over analysis is a risk and must be managed by keeping analysis short, quick and simple. Also, it is important to realise that these tools will not provide an answer for you although the results will provide a platform to start from.

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