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By Roshan pant MBM 2 nd semester NEPAL COMMERCE CAMPUS CHAPTER 2 SITUATIONAL ANALYSIS: Situation analysis refers to a collection of methods that managers use to analyze an organization's internal and external environment to understand the organization's capabilities, customers, and business environment.The situation analysis consists of several methods of analysis: The 5Cs Analysis , SWOT analysis and Porter five forces analysis . A Marketing Plan is created to guide businesses on how to communicate the benefits of their products to the needs of potential customer. The situation analysis is the second step in the marketing plan and is a critical step in establishing a long term relationship with customers. The situation analysis looks at both the macro-environmental factors that affect many firms within the environment and the micro-environmental factors that specifically affect the firm. The purpose of the situation analysis is to indicate to a company about the organizational and product position, as well as the overall survival of the business, within the environment. Companies must be able to summarize opportunities and problems within the environment so they can understand their capabilities within the market 5C ANALYSIS 1. Company The company analysis involves evaluation of the company's objectives, strategy, and capabilities. These indicate to an organization the strength of the business model, whether there are areas for improvement, and how well an organization fits the external environment 2. Competitors The competitor analysis takes into consideration the competitors position within the industry and the potential threat it may pose to other businesses. The main purpose of the competitor analysis is for businesses to analyze a competitor's current and potential nature and capabilities so they can prepare against competition. The competitor analysis looks at the following criteria: Identify competitors: Businesses must be able to identify competitors within their industry. Identifying whether competitors provide the same services or products to the same customer base is useful in gaining knowledge of direct competitors. Both direct and indirect competitors must be identified, as well as potential future competitors.

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By Roshan pant

MBM 2nd semester

NEPAL COMMERCE CAMPUS

CHAPTER 2

SITUATIONAL ANALYSIS:

Situation analysis refers to a collection of methods that managers use to analyze an organization's

internal and external environment to understand the organization's capabilities, customers, and

business environment.The situation analysis consists of several methods of analysis: The 5Cs Analysis,

SWOT analysis and Porter five forces analysis. A Marketing Plan is created to guide businesses on how to

communicate the benefits of their products to the needs of potential customer. The situation analysis is

the second step in the marketing plan and is a critical step in establishing a long term relationship with

customers. The situation analysis looks at both the macro-environmental factors that affect many firms

within the environment and the micro-environmental factors that specifically affect the firm. The

purpose of the situation analysis is to indicate to a company about the organizational and product

position, as well as the overall survival of the business, within the environment. Companies must be able

to summarize opportunities and problems within the environment so they can understand their

capabilities within the market

5C ANALYSIS

1. Company

The company analysis involves evaluation of the company's objectives, strategy, and

capabilities. These indicate to an organization the strength of the business model, whether there

are areas for improvement, and how well an organization fits the external environment

2. Competitors

The competitor analysis takes into consideration the competitors position within the industry and

the potential threat it may pose to other businesses. The main purpose of the competitor analysis

is for businesses to analyze a competitor's current and potential nature and capabilities so they

can prepare against competition. The competitor analysis looks at the following criteria:

Identify competitors: Businesses must be able to identify competitors within their industry. Identifying whether competitors provide the same services or products to the same customer base is useful in gaining knowledge of direct competitors. Both direct and indirect competitors must be identified, as well as potential future competitors.

Assessment of competitors: The competitor analysis looks at competitor goals, mission, strategies and resources. This supports a thorough comparison of goals and strategies of competitors and the organization.

Predict future initiatives of competitors: An early insight into the potential activity of a competitor helps a company prepare against competition

3. Customers

Customer analysis can be vast and complicated. Some of the important areas that a company

analyzes includes:[5]

Demographics

Advertising that is most suitable for the demographic Market size and potential growth Customer wants and needs Motivation to buy the product Distribution channels (online, retail, wholesale, etc...) Quantity and frequency of purchase Income level of customer

4. Collaborators

Collaborators are useful for businesses as they allow for an increase in the creation of ideas, as

well as an increase in the likelihood of gaining more business opportunities.The following type

of collaborators are:

Agencies: Agencies are the middlemen of the business world. When businesses need a specific worker who specializes in the trade, they go to a recruitment agency.

Suppliers: Suppliers provide raw materials that are required to build products. There are 7 different types of Suppliers: Manufacturers, wholesalers, merchants, franchisors, importers and exporters, independent crafts people and drop shippers. Each category of suppliers can bring a different skill and experience to the company.

Distributors: Distributors are important as they are the 'holding areas for inventory'. Distributors can help manage manufacturer relationships as well as handle vendor relationships.

Partnerships: Business partners would share assets and liabilities, allowing for a new source of capital and skills.

Businesses must be able to identify whether the collaborator has the capabilities needed to help

run the business as well as an analysis on the level of commitment needed for a collaborator-

business relationship

5. Climate

To fully understand the business climate and environment, many factors that can affect the

business must be researched and understood. An analysis on the climate is also known as the

PEST analysis. The types of climate/environment firms have to analyse are:

Political and regulatory environment: An Analysis of how active the government regulates the market with their policies and how it would affect the production, distribution and sale of the goods and services.

Economic Environment: An Analysis of trends regarding macroeconomics, such as exchange rates and inflation rate, can prove to influence businesses.[5]

Social/cultural environment: Interpreting the trends of society,[5] which includes the study of demographics, education, culture etc...

Technological analysis: An analysis of technology helps improve on old routines and suggest new methods for being cost efficient. To stay competitive and gain an advantage over competitors, businesses must sufficiently understand technological advances.

SWOT ANALYSIS A SWOT Analysis is another method under the situation analysis that examines the Strengths

and Weaknesses of a company (internal environment) as well as the Opportunities and Threats

within the market (external environment). A SWOT analysis looks at both current and future

situations, where they analyze their current strengths and weaknesses while looking for future

opportunities and threats. The goal is to build on strengths as much as possible while reducing

weaknesses. A future threat can be a potential weakness while a future opportunity can be a

potential strength.[13]

This analysis helps a company come up with a plan that keeps it prepared

for a number of potential scenarios.

Porter's Five Forces Industry Analysis

The Porter models involves scanning the environment for threats from competitors and

identifying problems early on to minimize threats imposed by competitors. This model can apply

for any type of business, from small to larger sized businesses. It is important to take note that

the Porter’s five forces model are not just for businesses, but can also be applied to a country to

help gain insight into creating a competitive advantage in the global market.[14]

The ultimate

purpose of the Porter's five forces model is to help businesses compare and analyze their

profitability and position with the industry against indirect and direct competition.[15]

The threat of new entrant: New entrants affect the company’s profits as the consumers

have more variety to choose from.

Bargaining power of buyers: The companies influence on the buyer to purchase their

product or how much the buyer depends on the product being produced by the firm.

Threat of substitute product of services: more than one firm producing similar or the

same product or service.

Bargaining powers of suppliers: Company dependence on resources the suppliers provide

to create their product or services.

Rival among existing competitors: Rivals fighting to be dominant in the market, to stay in

business and maximize profit.

SCOPE OF SITUATIONAL ANALYSIS A situational analysis often is called the foundation of a marketing plan. A situational analysis

includes a thorough examination of internal and external factors affecting a business. It creates

an overview of the organization that will lead to a better understanding of the factors that will

influence its future.

The Facts

Utilizing market research, a situational analysis will define potential customers, projected

growth, competitors and a realistic assessment of your business. It involves targeting the specific

objectives in the business and identifying the factors that will support or hinder those objectives.

This assessment often is called a SWOT (strengths, weaknesses, opportunities and threats).

Strengths and weaknesses involve an internal analysis of the company, while opportunities and

threats are derived from an external analysis. A SWOT analysis usually is presented as a list of

information but also can fit into a matrix model.

Internal Analysis

The internal analysis is a thorough knowledge and understanding of the strengths and

weaknesses within an organization. These factors are seen in company culture and image,

organizational structure, staff, operational efficiency and capacity, brand awareness, financial

resources, etc. Strengths are positive attributes, which can be tangible or intangible, and are

within the control of the organization. Weaknesses are factors that may hinder the achievement

of the desired goal.

External Analysis

Opportunities and threats are measured as part of an external analysis. Both can occur when

things happen in the external environment that may require a change within the business. These

external changes can be attributed but not limited to market trends, suppliers, partners,

customers, competitors, new technology and economic environment. Opportunities present

themselves as attractive factors that can propel or positively influence the organization in some

way. Threats are external factors that could place the organization’s goal at risk. These often are

classified by their level of severity and probability of occurrence.

Function

A SWOT profile is used to create goals, strategies and implementation practices. It aids in

decision-making across the organizational board and creates an understanding of the

organization. The four categories are used in relation to one another. For example, a business

may decide to build up a weak area to pursue an upcoming opportunity. A SWOT can be used in

problem solving, future planning, product evaluation, brainstorm meetings, workshop sessions,

etc.

Considerations

Multiple perspectives are required to thoroughly investigate the internal and external influences

on a business. A SWOT can oversimplify a situation when factors are forced into categories in

which they may not apply. Also, the classification of strengths, weaknesses, opportunities and

threats can be somewhat subjective; certain factors could qualify as an opportunity and a threat.

ORGANIZATION INTERNAL AND EXTERNAL FACTORS

If there is anything that is steadfast and unchanging, it is change itself. Change is inevitable, and

organizations that don't accept change and that make adjustments to their business model based

on changes are doomed to fail. There are events or situations that occur that affect the way a

business operates, in a positive or negative way. These events or situations can have either a

positive or a negative impact on a business and are called 'environmental factors.'

There are two types of environmental factors: internal environmental factors and external

environmental factors.

Internal environmental factors are events that occur within an organization. Generally

speaking, internal environmental factors are easier to control than external environmental factors.

Some examples of internal environmental factors are as follows:

Management changes

Employee morale

Culture changes

Financial changes and/or issues

External environmental factors are events that take place outside of the organization and

are harder to predict and control. External environmental factors can be more dangerous for an

organization given the fact they are unpredictable, hard to prepare for, and often bewildering.

Some examples of external environmental factors are noted below:

Changes to the economy

Threats from competition

Political factors

Government regulations

The industry itself

ORGANIZATION INTERNAL/ EXTERNAL ANALYSIS(SWOT)

SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and

Threats that are strategic factors for a specific company. A SWOT should represent an

organizations core competencies while also identifying opportunities it can not currently use to

its advantage due to a gap in resources.

The SWOT analysis framework has gained widespread acceptance because of its simplicity and

power in developing strategy. Just like any planning tool, a SWOT analysis is only as good as

the information that make it up. Research and accurate data is vital to identify key issues in an

organization’s environment.

Assess your market:

What is happening externally and internally that will affect our company?

Who are our customers?

What are the strengths and weaknesses of each competitor? (Think Competitive

Advantage)

What are the driving forces behind sales trends?

What are important and potentially important markets?

What is happening in the world that might affect our company?

What does it take to be successful in this market? (List the strengths all companies need

to compete successfully in this market.)

Assess your company:

What do we do best?

What are our company resources – assets, intellectual property, and people?

What are our company capabilities (functions)?

Assess your competition:

How are we different from the competition?

What are the general market conditions of our business?

What needs are there for our products and services?

What are the customer-market-technology opportunities?

What are the customer’s problems and complains with the current products and services

in the industry?

What “If only….” Statements does a customer make?

Opportunity an area of “need” in which a company can perform profitably.

Threat

A challenge posed by an unfavorable trend or development that would lead (in absence of a

defensive marketing action) to deterioration in profits/sales.

An evaluation needs to be completed drawing conclusions about how the opportunities and

threats may affect the firm.

EXTERNAL: MACRO- demographic/economic, technological, social/cultural, political/legal

MICRO- customers, competitors, channels, suppliers, publics INTERNAL RESOURCES: the

firm

Competitor analysis is a critical aspect of this step.

Identify the actual competitors as well as substitutes.

Assess competitors’ objectives, strategies, strengths & weaknesses, and reaction patterns.

Select which competitors to attack or avoid.

The Internal Analysis of strengths and weaknesses focuses on internal factors that give an

organization certain advantages and disadvantages in meeting the needs of its target market.

Strengths refer to core competencies that give the firm an advantage in meeting the needs of its

target markets. Any analysis of company strengths should be market oriented/customer focused

because strengths are only meaningful when they assist the firm in meeting customer needs.

Weaknesses refer to any limitations a company faces in developing or implementing a strategy

(?). Weaknesses should also be examined from a customer perspective because customers often

perceive weaknesses that a company cannot see. Being market focused when analyzing strengths

and weaknesses does not mean that non-market oriented strengths and weaknesses should be

forgotten. Rather, it suggests that all firms should tie their strengths and weaknesses to customer

requirements. Only those strengths that relate to satisfying a customer need should be considered

true core competencies. (Marketing and Its Environment, pg 44)

The following area analyses are used to look at all internal factors effecting a company:

Resources: Profitability, sales, product quality brand associations, existing overall brand,

relative cost of this new product, employee capability, product portfolio analysis

Capabilities: Goal: To identify internal strategic strengths, weaknesses, problems,

constraints and uncertainties

The External Analysis takes a look at the opportunities and threats existing your organizations

environment. Both opportunities and threats are independent from the organization. You can

differenciate between strengths/weakness and opportunities/threats is to ask this essential

question: Would this be an issue if the organization didn’t exist? If yes, it is an issue that is

external to the organization. Opportunities are favorable conditions in an organization’s

environment that can produce rewards if leveraged properly. Opportunities must be acted on if

the organization wants to benefit from them. Threats are barriers presented to organization which

prevent them from reaching their desired objectives.

The following area analyses are used to look at all external factors effecting a company:

Customer analysis: Segments, motivations, unmet needs

Competitive analysis: Identify completely, put in strategic groups, evaluate performance,

image, their objectives, strategies, culture, cost structure, strengths, weakness

Market analysis: Overall size, projected growth, profitability, entry barriers, cost

structure, distribution system, trends, key success factors

Environmental analysis: Technological, governmental, economic, cultural, demographic,

scenarios, information-need areas Goal: To identify external opportunities, threats,

trends, and strategic uncertainties

The SWOT Matrix helps visualize the analysis. Also, when executing this analysis it is important

to understand how these element work together. When an organization matched internal

strengths to external opportunities, it creates core competencies in meeting the needs of its

customers. In addition, an organization should act to convert internal weaknesses into strengths

and external threats into opportunities.

Focus on your strengths. Shore up your weaknesses. Capitalize on your opportunities. Recognize

your threats.

Identify

Against whom do we compete?

Who are our most intense competitors? Less intense?

Makers of substitute products?

Can these competitors be grouped into strategic groups on the basis of assets,

competencies, or strategies?

Who are potential competitive entrants? What are their barriers to entry?

Evaluate

What are their objectives and strategies?

What is their cost structure? Do they have a cost advantage or disadvantage?

What is their image and positioning strategy?

Which are the most successful/unsuccessful competitors over time? Why?

What are the strengths and weaknesses of each competitor?

Evaluate competitors with respect to their assets and competencies.

Size and Growth What are important and potentially important markets? What are their size and

growth characteristics? What markets are declining? What are the driving forces behind sales

trends?

Profitability For each major market consider the following: Is this a business are in which the

average firm will make money? How intense is the competition among existing firms? Evaluate

the threats from potential entrants and substitute products. What is the bargaining power of

suppliers and customers? How attractive/profitable are the market now and in the future?

Cost Structure What are the major cost and value-added components for various types of

competitors?

Distribution Systems What are the alternative channels of distribution? How are they changing?

Market Trends What are the trends in the market?

Key Success Factors What are the key success factors, assets and competencies needed to

compete successfully? How will these change in the future?

Environmental Analysis An environmental analysis is the four dimension of the External

Analysis. The interest is in environmental trends and events that have the potential to affect

strategy. This analysis should identify such trends and events and the estimate their likelihood

and impact. When conducting this type of analysis, it is easy to get bogged down in an extensive,

broad survey of trends. It is necessary to restrict the analysis to those areas relevant enough to

have significant impact on strategy.

This analysis is divided into five areas: economic, technological, political-legal, sociocultural,

and future.

Economic What economic trends might have an impact on business activity? (Interest rates,

inflation, unemployment levels, energy availability, disposable income, etc)

Technological To what extent are existing technologies maturing? What technological

developments or trends are affecting or could affect our industry?

Government What changes in regulation are possible? What will their impact be on our

industry? What tax or other incentives are being developed that might affect strategy

development? Are there political or government stability risks?

Sociocultural What are the current or emerging trends in lifestyle, fashions, and other

components of culture? What are there implications? What demographic trends will affect the

market size of the industry? (growth rate, income, population shifts) Do these trends represent an

opportunity or a threat?

Future What are significant trends and future events? What are the key areas of uncertainty as to

trends or events that have the potential to impact strategy?

Internal Analysis Understanding a business in depth is the goal of internal analysis. This

analysis is based resources and capabilities of the firm.

Resources A good starting point to identify company resources is to look at tangible, intangible

and human resources.

Tangible resources are the easiest to identify and evaluate: financial resources and physical

assets are identifies and valued in the firm’s financial statements.

Intangible resources are largely invisible, but over time become more important to the firm than

tangible assets because they can be a main source for a competitive advantage. Such intangible

recourses include reputational assets (brands, image, etc.) and technological assets (proprietary

technology and know-how).

Human resources or human capital are the productive services human beings offer the firm in

terms of their skills, knowledge, reasoning, and decision-making abilities.

RESOURCE MAIN CHARACTERISTICS KEY INDICATORS

Tangible

Financial The firm’s borrowing capacity and its

internal funds generation determines

its capacity to weather fluctuations in

demand and profits overtimes.

Debt to equity ratio

Ration of net cash to capital

expenses

Credit rating

Physical The physical resources related to

plan, equipment, assets, technology,

raw materials.

Resale value of assets

Age of capital equipment

Flexibility of PPE

Intangible

Technological Stock of technology in the form of

proprietary technology (copyright,

patents, trade secrets) and expertise in

the application of technology (know-

how).

Reputation Reputation with customers through

the ownership of brands, established

relationships with customers,

reputation of the firm’s products and

services.Reputation of the company

Brand recognition

Price premium over

competing brands

Percent of repeat buying

Level and consistency of

with suppliers, employees, etc. company performance

Human Resources Training and expertise of employees

determine the skills available to the

firm.Adaptability of employees

determines key aspects of strategic

flexibility of the firm.Commitment

and loyalty of employees determines

the capacity of the firm to attain and

maintain competitive advantage.

Educational, technical and

professional qualifications of

employees

Compensation relative to

industry

Record of labor disputes

Employee turnover

Capabilities

Resources are not productive on their own. The most productive tasks require that resources

collaborate closely together within teams. The term organizational capabilities is used to refer to

a firm’s capacity for undertaking a particular productive activity. Our interest is not in

capabilities per se, but in capabilities relative to other firms. To identify the firm’s capabilities

we will use the functional classification approach. A functional classification identifies

organizational capabilities in relation to each of the principal functional areas.

Functional Area Capability

Corporate Financial management

Expertise in strategic

control

Effectiveness in

motivating and

coordinating business

units

Management of

partnerships

Overall company

management/ resource

management

Information Management Comprehensive and

effective information

system that can be used

for managerial decision

making

Research and Development Capability in basic

research

Product Design Design capability

Marketing Brand management and

promotion

Promotion and

exploiting reputation for

quality

Understand of and

responsiveness to market

trends

Sales and Fulfillment Effectiveness in

promoting and executing

sales

Efficiency and speed of

fulfillment

Quality and effectiveness

of customer service

SCANNING THE ENVIRONMENT

What is Environmental Scanning?

Environmental scanning is a review of external sources to discover factors that impact a

business. The main goal is to identify and consult sources outside the business. Although these

sources are uncontrollable from the business' perspective, it is important to consider them in the

decision-making process.

One popular method of environmental scanning is SWOT analysis. Each letter stands for one

area to review: strengths, weaknesses, opportunities, and threats. The strengths and opportunities

are factors within the company, and the weaknesses and threats come from sources outside the

company.

To remain competitive, businesses need to scan the competition.

What External Sources Should be Scanned?

When companies are putting resources and time toward an environmental scan, they want the

results to be as comprehensive as possible. Most scans include a thorough look at the

competition, economics, technology, legal issues, and social/demographic factors. Let's dive a

little deeper into each of these areas using The Pool Stop, an imaginary small business that sells

and services swimming pools.

Competition

Businesses should scan the competition to find out how they stack up to competitors and how

they can earn a customer's business. It's vital to know what the competition is doing so that a

business can be in touch with trends and issues.

Our example company, The Pool Stop, has been the only pool company in the area for 20 years,

but a competitor crept into the market this year. The Pool Stop may have to change the way it

does business now that consumers have another option. It should look closely at the competitor's

services, products, pricing, location, customer service, and customer feedback. Comparing what

the company offers versus the competition opens doors for improvement and opportunities to

grow and change.

Economics

Businesses need to study the economy to discover the current trends, buying power, and strength.

Are people losing their jobs and cutting back on spending? This may be a sign to re-evaluate the

pricing strategy, because there are times it may be better to take a 20% profit rather than a 50%

profit. Staying on top of what is going on in the economy will save the business from a negative

surprise in its finances. It is better to make gradual adjustments with the economy than a big

change that scares away customers.

Technology

Technology has had a dramatic impact on small businesses. Specifically, the use of social media

and the Internet has never been more vital to a business' success. Years ago, a business only used

technology in the office to take care of finances and maintain the cash register and customer

information. Fast-forward a few years, and businesses were paying $500 and up to have a

website built to attract customers. Now, the Internet has evolved to the point that a business can

maintain multiple free accounts on different websites to connect with a huge number of

customers.

In addition to using technology to share information, businesses are using it to sell to customers

around the world. Why is this scary to a small business? These customers can often get a much

better price than you can give them. They simply have to be willing to wait for it. Each business

must review how much the Internet impacts sales and how to make the Web work for them

instead of against them.

The Pool Stop is a small business that does not need a lot of bells and whistles. The company

does not want to sell products online, but it does want to keep customers up-to-date on sales,

specials, and current products. A scan of available technology reveals that The Pool Stop could

accomplish these goals with a free social media page. Promoting what is in the store and

available for quick pick-up is ideal for a marketing campaign.

Legal

The legal environment includes health, safety, taxes, and advertising regulations. Not knowing is

not an excuse--every business is required to research, understand, and meet these regulations.

What would happen if a restaurant kept a filthy kitchen? It would be shut down. What would

happen if a construction company had numerous injuries? It would be reviewed to find out if the

company is following safety precautions. Businesses should know regulations to train employees

and move forward successfully. Not only will this help the company avoid fines, but it will keep

it in business for the long haul.

Thus Environmental scanning can be defined as ‘the study and interpretation of the political,

economic, social and technological events and trends which influence a business, an industry or

even a total market’.[2] The factors which need to be considered for environmental scanning are

events, trends, issues and expectations of the different interest groups. Issues are often

forerunners of trend breaks. A trend break could be a value shift in society, a technological

innovation that might be permanent or a paradigm change. Issues are less deep-seated and can

be 'a temporary short-lived reaction to a social phenomenon'.[3] A trend can be defined as an

‘environmental phenomenon that has adopted a structural character

Factors influencing the market can be categorized under 6 different titles, demographic,

economic, ecology, technology, regulatory-political and society-culture.

1. Demographic factors: are associated with changing nature and volume of population. It

follows how people are conducting themselves in the new world, increasing per capita

income, urban migration, ethnically diverse cities and mega cities. These are some

demographic factors companies are monitoring. For example, a country like India and

China are showing highest concentration of youth population where as Japan is showing

high number of retired workers. Therefore, demand and consumption of product will also

be different.

2. Economic factors: deals with function like purchasing power parity, income level,

savings level and interest rates among many other. For example, countries with a high

income level are more likely to afford luxury items compare to a low income level

country. Savings level and interest rate determine the borrowing power as well as

spending power of consumer.

3. Ecological factors: consist of natural resource composition in a given county. For

example, demand for fossil fuel has sky rocketed in recent years there by increasing

general price level in the market. Companies, therefore, are looking forward to designing

products which eco-friendly design that is they are less fuel dependent and give out less

pollution.

4. Technology factors: like internet and connectivity are changing the face of business.

More and more people are doing business online. Science and medicine are also part of

technology factors. Challenge for the company is to keep up with innovation and offer

products, which are not obsolete.

5. Political environment: is also changing with more and more market based system rather

than the socialist system. Furthermore, regulatory requirements like competition policy,

investment policy, tax policy, etc. companies should investigate before taking their

business to a particular country.

6. Culture environment: deals with factors like opinion people have towards themselves,

others, organization and society in general. People have become more eco conscious,

contributing one or many causes they can relate to, want organization to be responsible

for their action and are looking to open society with meaningful co-existence.

All this 6 factors define any market environment and companies must understand them before

developing their business plan.

Finally An environmental scan includes an industry analysis where you will

discuss the external environmental factors that have, or could have, an impact

on business operations. Information for conducting an environmental scan can

be found in the sources below.

Competitive Environment

What to investigate

Who are your leading competitors? What are their products or services and how do they compare to your product? What market segment do they target? How easy is it for new competition to enter this market? What are your competitors' strengths and weaknesses – and how this can help you distinguish your company? What can you learn from watching your competition?

Economic Environment

What to investigate:

What economic indicators are most relevant for your company? What economic

trends might affect your business? What is the buying power of your target market?

Technological Environment

What to investigate

Internet, e-commerce, and social media trends. How technology has/will have an impact on your product or service.

Political and Legal Environment

What to investigate:

Legal factors such as health and safety, product safety, advertising regulations, product labeling and legal laws.

Political factors such as trade regulations, taxes, and government stability.

Social/Demographic Environment

What to investigate

Factors such as education levels, age distribution, consumerism, income level, population growth, expectation of society from the business.

NOTE: PESTEL analysis is done by Environmental Scanning

The six environmental factors of the PESTEL analysis are the following:

Political factors

Taxation Policy Trade regulations Governmental stability Unemployment Policy, etc.

Economical factors

Interest rate

Inflation rate Growth in spending power Rate of people in a pensionable age Recession or Boom Customer liquidations Balances of Sharing

Socio-cultural

Values, beliefs language religion education literacy time orientation lifestyle

Technological factors

Internet E-commerce Social Media Electronic Media Research and Development Rate of technological change

Environmental factors

Competitive advantage Waste disposal Energy consumption Pollution monitoring, etc.

Legal factors

employment law Health and safety Product safety Advertising regulations Product labeling labor laws etc.