THE FAR EXTERNAL ENVIRONMENT

In the previous blog, I talked about the 3 Environments that affect a business and its chances of success.

In this blog I’ll be looking at the first – The Far External Environment.

For this, I’ll be using an analysis model called PESTLE.

The reason it’s called PESTLE is because, as you can probably see, the first letters of the Key Elements that you have to think about spell out PESTLE.

So, we’ll go through them one by one. For each one, we look for the factors that may have an effect on us and our business, either now or in the future, but which we cannot control.

Usually, we know what’s affecting us now, so it’s important to see what changes may occur that will affect us in the future.

For this, we use Environmental Scanning. It sound very technical, but what it really means is reading newspapers, watching the news and trying to get a feel of changes that are occurring or are likely to occur that might affect us.

POLITICAL

This includes Political Parties coming to power – changes in Government. Changes to Political Parties in Government generally mean changes in Policy.

For example, cast your mind back to 2010, with a general election coming up. If you are a company that relies on Government funded contracts, you might be thinking “If the Conservatives get in, they might reduce funding, because they have been saying that the Government needs to reduce the amount it spends each year”. So, thinking this might happen, you could start to plan what you would do.

ECONOMIC

This deals primarily with the overall state of the economy. At the moment the economy isn’t doing too well. Most analysts believe it may be some time – years – before the economy picks up.

So if you are a company that was thinking of spending a large “Launch Fund” on launching a range of luxury items, perhaps you might wait to see what happens. On the other hand, you might still want to launch the range any way, but at slightly lower prices, believing that people want a treat and you want to be the “Affordable Treat” provider.

SOCIAL

This deals with social trends – of many different types.

Say you run a Hairdressing Salon. Perhaps you have noticed that the local college is expanding, and its 100 yards away from your shop. The next intake is next month. So you approach the college and ask to have a spot during “Freshers Week” (The first week of the term when the new students find their feet). This way, you can make sure that they all know you are local, and have got really good rates for students. And so you increase your turnover. (No matter what you hear, students ARE poor and DO get their hair cut – you might just have found a very large new market)

TECHNOLOGICAL

This deals with any new technologies, and how they might be used to help your business. Or it might be becoming aware of threats to your business.

Things like the internet, which allow people to buy without having to go into a shop. If you decide to sell on the Internet it might help you. If you don’t, it might hurt you.

Cast your mind back to the 90’s. Bookshops generally just did not see AMAZON coming – until it was too late. Bookshops seemed to be convinced that people wanted to browse. They did want to browse – so Amazon included this feature in their Web Site.

LEGAL

An offshoot of POLITICAL, these are changes in Law that might affect your business. Generally, we know about changes in Law that are coming into force before they actually do – that’s how it works with Parliamentary Law making. So, knowing this, we can be prepared for it.

ENVIRONMENTAL

These are the things to do with what most people think of as Nature. So changes in the environment (nature) and the associated implications of these changes. For example, the growth of “green” technologies and products, such as organic foods.

With all of these, the key is to think how the factors out there in the work might affect our business. Not all of them will always apply at any given time to any given business. What’s important is that you are generally aware of trends in these areas, how these trends might affect your business, how you plan to deal with them.

Click here to see the previous blog.

Click here to see the next blog.

Or alternatively, click here to download the entire series of blogs in one article.