3 effective methods to analyse your business environment.

The business environment is a complex, uncertain and dynamic system.

Increasing globalisation and competition has resulted in the need for companies to adjust to their environments so as to sustain competitive advantage. Failing to innovate and adapt to changes in the business environment has led some companies to cease operations, familiar mishaps include Blockbuster, Kodak and Nokia.

Adaptation doesn’t come easy, but simple steps such as regularly analysing your internal and external (micro and macro) business environment help you to keep your business at par with the dynamic environment. Here are 3 essential methods for assessing your business environment for effective decision making.

  1. PESTLE Analysis

PESTLE analysis focuses on the external macro-environment of a business and identifies risks under the subgroups: political (P), economic (E), social (S), technological (T), legal (L) and environmental (E).

A PESTLE analysis will allow you to analyse factors that have a potential effect on your business or a project and its implementation, with this knowledge, you are able to develop viable strategies to achieve your goals.

2. SWOT Analysis

A technique used to identify the Strengths, Weaknesses, Opportunities and Threats of a business. Use your Strengths against your weaknesses and threats and seize opportunities so as to increase competitive advantage.

A SWOT analysis will help you analyse both your internal and external environment and is most effective after a thorough PESTLE analysis of the external environment!

3. Porters five forces framework

Developed by Michael Porter in 1970, this model focuses on the micro-environment of a business and the five forces that influence any industry, which include: intensity of rivalry, threat of new entrants, bargaining power of buyers, bargaining power of suppliers and threats of substitutes.

Porter’s framework bridges the gap between a PESTLE analysis and SWOT analysis and is worth incorporating with both analyses for best results!

We hope this helps! Remember to incorporate at least two-three of these techniques and you should have enough data for informed decision making.

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