You created a consumer profile, followed branding guides, and created an overall solid marketing plan. Then, something outside your business control come along to throw a wretch in all your hard work. That’s where external analysis could have saved you a big headache.
What Is External Analysis
Also called an environmental analysis, it is the process of assessing potential changes in your industry and the world as a whole. These changes may affect your business in the future and understanding them now means you’ll be able to adapts properly when they occur.
Not sure where to start? Well, luckily there’s an easy-to-remember acronym to get you started: PESTEL.
The extent to which the government can affect your business. This includes policy, laws, regulations, trade barriers, and even political stability.
How economic shifts can directly affect your business. This includes inflation, exchange rates, interest rates, and overall economic growth or decline.
This is where you focus on possible demographic changes. This can include population patterns such as Gen Alpha aging into possible consumers, or changes in customer behaviour.
The world moves pretty quickly and technology moves even faster. This section is where you focus on adapting to new advances that might evolve or innovate your industry such as automation. It also means paying attention to things like adoption rates in consumers.
You should know about any ecological or environmental forces that could affect your business. Things like renewable energies, climate change, or reacting to a global pandemic. This also includes any corporate responsibility initiatives.
Any legal requirements that your business is required to comply with in the area you operate. Things like health and safety, labour, and consumer protection laws.
While PESTEL is a good start, you’re not quite done with your external analysis yet. There are a few more things to keep in mind and research to give your business a strong foundation.
While your supply chain might sound internal, there are many external factors that will affect it. Things like the availability of raw resources and possible third-party transportation and manufacturing of your companies’ product.
Examining your supply chain closely can often reveal crucial ways to maximize efficiency and pad the bottom line.
If you’re going to do business, you better know who you’re going up against. This includes the obvious look at other businesses with similar products, prices, and target audience. However, this also includes possible products that will compliment one another and can also give you insight into pricing your products.
While it might seem similar to a competitor analysis, this is a bit more broad. It’s looking at the industry as a whole, where the current market sits, and how it might change in the future. Things like size, projected growth, and alternative industries.
Now that you have completed your external analysis, it’s time to look inward (if you haven’t already). For more on conducting an internal analysis, check out our other blog.