Thursday 16 February 2023

Environmental analysis

Similar to the competitor analysis, the environmental analysis helps us understand the broader competitive environment. However, the distinction is that environmental analysis's focuses more on trends that are impacting the industry or market, such as:

  • Direction of consumer demand within a particular sector.
  • What is the potential of some disruptive technology,
  • what is the impact of change in government regulation.
There are many different types of environmental analyses, that are sometimes referred to as environmental scans.  However six categories that one should factor into their environmental analysis are:

  • Demographic trends: This refers to what is happening in the population. 
    • Is there an aging population, and how might that maybe affect demand within the industry segment?

  • Social-Cultural influences: How are people's outlooks and beliefs influencing the sector
    • What are some trends in fashion that may be influencing the industry? 
    • How does the rise of social media, and the willingness of people to share intimate details about their life online, in various networks?

  • Technological developments: How are technological advances affecting or will affect your business.
    • What new technologies are coming about?
    • How are they impacting this sector and this business?

  • Macroeconomic impacts: Is this an industry that is impacted greatly by the business cycle? 
    • Where is the business cycle right now? growth phase, or contraction phase?  
    • How does that affect demand, and ultimately affect competition, within the industry?

  • Political-Legal pressures: are there any regulation, or by-laws which influence our industry.
    • Where are those laws today? 
    • How might they be changed in the future? 
    • How does that then, ultimately, impact competition?

  • Global trade issues: what are the global trade trends in general. 
    • How might they impact competition moving forward. 
    • Do we need to be concerned about global entry from other competitors, in the near future. 
    • Are there an changes in trade agreements or trade restrictions, that will impact the industry.
Typically, in an environmental analysis, you simply create bullet pointed lists, for each of the above six categories and begin to paint a broad picture of the competitive environment that the organisation is operating in.