What is Business Environment Analysis?

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Businesses must maintain constant vigilance in the face of such a vast, hostile and unpredictable environment. No one can predict whether things will end well or badly.

Therefore, analysis of the business environment is very important to map the position of the business being run. The business environment can be considered as everything that influences business activities in an organization or company.

These factors can be classified into two groups, namely factors from within the company (internal) and factors from outside the company (external).

Understanding the Business Environment

The business environment is a situation that occurs around a business or company that can affect the speed of business. If this continues, it will have an impact on the success of the company as a whole.

It is difficult for a company to completely control the external factors that shape its business environment, but a company must depend on these factors to some extent to achieve long-term success.

Understanding the nature of the business environment and its changes is part of understanding the business environment and developing a competitive strategy. This is to ensure the company has the right success plan, not only in the present but also in the future.

Business environment analysis can consider competitors, suppliers, media, customer groups, customers, government, market conditions, economic conditions, technology, investors, trends, and many other parties from outside the company.

Understanding the Business Environment

For example, a government-imposed Value Added Tax or VAT policy has the ability to make consumers buy smaller quantities of goods than they sell. In this case, the business needs to reset its selling price to get out of the rut.

No matter how far from the corporate circle, it is still necessary to carry out a thorough assessment of the business environment in order to stay afloat and capture every new opportunity that presents itself.

Definition of Business Environment Analysis

Business environment analysis is the process of mapping and monitoring the business environment in a company to identify the company's strengths and weaknesses, as well as the opportunities and dangers it faces.

Business environment analysis is the environment that companies use to foresee or predict how changes in the business environment will affect the future growth of their company. The existing business situation must be mapped using a business environment analysis.

The purpose of business environment analysis is to find out the strengths and weaknesses of the company as well as the opportunities and dangers it faces.

Business Environment Analysis Techniques

There are a variety of effective business environment analysis methodologies that help business leaders understand the external business environment. Here's how it works:

PESTLE ANALYSIS (PESTLE ANALYSIS)

PESTLE analysis is one of the risk management methodologies used to evaluate the external business environment. This analysis is carried out by breaking down the opportunities and hazards into the following factors:

Political Factor (Political Factor)

In what ways can government policies evaluate businesses and brands? Analysis of political, stability, trade, fiscal and tax policies are all included.

Economic Factor

Evaluate the direct or indirect long-term effect of items such as economic growth, currency exchange rates, inflation rates, interest rates, consumer incomes, and unemployment rates on brands.

Business Environment Analysis Techniques

because the purchasing power of customers will be affected by these factors.

Social Factor

Evaluate aspects of society such as demographics, standard of living (such as health), social class, and other cultural and racial barriers, as well as other social dimensions.

Technological Factor

It is therefore necessary to determine whether new developments in technology will have positive or negative effects on businesses and markets.

Legal Factor

Legal issues such as occupational health and safety and workers' compensation are just a few of the many to be evaluated.

Environmental Factors

Analyze the factors related to the environment, including environmental, meteorological, and climate change factors that have the greatest impact on the business.

Stakeholder Analysis

The company's stakeholders can be identified individually or in groups through a stakeholder analysis. In order to take precautions, all parties involved in the situation will be considered during the identification process, which will provide an assessment.

In formulating or implementing a strategy, it is necessary to carry out a stakeholder analysis to determine which party's interests should be taken into account. Stakeholders and their roles in the company must be carefully collected and analyzed by the business owner.

This analysis aims for collaboration between stakeholders and the implementation team to ensure the success of the current project.

Example of Business Environment Analysis

Examples of business environment analysis based on internal and external factors are as follows:

Example of Internal Business Environment Analysis

Below is an example of internal business environment analysis, namely:

Example of Business Environment Analysis

Resources

A coconut wood craft company uses raw materials sourced from Maju Makmur Village.

capabilities

The company is able to employ five people, consisting of 1 designer, 2 craftsmen, and 2 product marketers.

Core of Competence

The company is able to develop uniqueness that the market doesn't think about so that it becomes added value.

Example of External Business Environment Analysis

Below is an example of external business environment analysis, namely:

Threat of New Entries

There will always be newcomers. To avoid competition, companies try to make their business unusual and "stand out" from other potential competitors.

Threat of Subtitle Products

As a form of support for environmentally friendly goods, the company makes plates from coconut wood.

Bargaining Power of Customers

Innovation created by the company must be supported by the appropriate selling price. However, a price that is too high will encourage competition, while a price that is too low will make it impossible to make a profit.

Bargaining Power of Suppliers

Coconut trees take a long time to develop, so the supply of raw materials must be monitored to prevent illegal logging.

Companies must also be able to handle excess wood waste to ensure the long-term sustainability of the surrounding environment.

Factors Affecting the Business Environment

Internal factors include organizational structure, corporate culture and company resources, corporate image, staffing system used, business partnerships and employee relations, marketing strategy, and the quality and objectives of the business being carried out. Business rotation is quite influenced by the internal workings of the business environment.

Influencing Factors

While external factors cover all levels of the company. For example, customers or consumers, relationships with relationships that are driven to work, media used for business marketing and business rivals or competitors.

From Thomas L. Wheelen's book "Strategic Management and Business Policy", the external environment hierarchy is separated into three levels, including:

Natural Physical Environment

Physical resources, weather, and animals make up the physical environment. They are the external environment and have an impact on the other two environments, namely the social environment and the task environment.

Social Environment

Politics, factors, culture, and technology all have a role to play in shaping our social environment. However, while changes in the natural environment may have an influence on changes in political and economic policies, socio-cultural patterns, and technology, it is not the other way around.

For example, the way the government implements economic policies will be affected by global warming. The government will definitely try to react to these developments.

Governments and society, however, have little impact on global temperatures. We can only adapt by reducing our impact on increasing global temperatures through ecologically responsible activities.

Task Environment

The task environment involves interactions between the company and its stakeholders, such as governments, consumers, competitors, trade groups, unions, creditors and society.

From these forms of the business environment, it can be stated that the company or business owner has control over the internal environment but not over the external environment. Companies only respond to changes in the external environment through innovation and adaptation.

In this case, the uncertainty and degree of influence must be considered by the business owner. The greater the level of uncertainty and the resulting impact on the company, the greater the strategic issue.

Companies will be forced to react quickly and correctly to changes in the external environment. To act and make judgments, scenario preparation, intuition, and learning techniques are essential. A flexible structure is needed so that choices can be made quickly.

Benefits of Understanding the Business Environment

Start-up entrepreneurs should take the time to learn about the business environment before launching their business. harmony between business and environment is the ultimate goal.

A good business environment will help the functioning of the business. A good environment may also have a beneficial influence on all levels of business and society.

The business environment analyzed can also be a reference for lifestyle or the latest trends that people are interested in. This can be used as material for determining target markets and developing marketing plans.

Benefits of Understanding the Environment

As a result, the business environment has a significant impact on the future development and possible operations of the business. By analyzing and understanding the business environment, business prospects can be built.

In addition, the company's performance and profitability are affected by the business environment. Changes in the business environment will certainly affect the strategic choices made by the company. Indirect effects are possible, but direct effects are also possible.

FAQs

The following is an example of questions and answers regarding business environment analysis

How to Analyze Industrial Environment?

There are several ways to analyze the industrial environment. One of them is using the right strategy and can be developed for the company using Porter's Five Forces Model.
The purpose of analyzing the internal business environment is to find out the threats and possibilities in the external environment sought through environmental analysis. To achieve strategic competitiveness, companies must face threats in the external environment.

What are the Characteristics of the Business Environment?

The business environment includes dynamic and complex characteristics, related to technological advances, limited resources, the global economy, and unpredictable political changes (Eriksson, 2008:6).

Conclusion

Environmental analysis business is the environment that companies use to foresee or predict how changes in the business environment will affect the future growth of their company.

This is information about business environment analysis that we can convey in the article above, hopefully it can be helpful and useful for all of you.

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