How to Analyze Your Business Environment [7 Categories to Help Conduct an Objective Analysis]

If your business operates in different market segments, where you compete with different companies, then it’s essential that you analyze each segment separately, and create a different plan for each of those segments.

Many smaller organizations participate in only one segment, like WOW Pest Control whose efforts are focused on residential pest control in Miller County. In that situation, there’s only one market segment, residential customers. However, if WOW Pest Control decided to provide services to both homeowners AND business customers, there’d be different competitors, and the strengths that WOW has in the residential market might mean nothing when selling to businesses. 

Even if WOW had a 20 percent market share in the residential segment, they might only be capable of capturing 1 percent in the commercial market.

The analysis of environmental factors is too often ignored or done poorly. 

There’s a tendency to “assume away” the business environment as if it will never change, and to jump right into the traditional SWOT analysis (strengths, weaknesses, opportunities, and threats). Remember that it typically takes a lot time to conduct this analysis well, so be sure to give it the attention it deserves if you don’t want to get blind-sided by things you didn’t anticipate.

The goal here is to identify the future REALITY, good or bad, that will affect your business in the future. These are things that are outside of your control, and will happen regardless of whether or not your business exists.

Don’t sugar-coat things! 

You want unbiased information from reliable sources!  To stay objective, some organizations invite an industry expert to visit with their executive team and discuss the future outlook for the industry to make sure there aren’t any undetected obstacles, or opportunities, that haven’t already appeared on their radar.

You can also use industry associations, the public library, internet articles, trade journals, government statistics, or possibly a team of college students who can conduct custom research for your company.

7 Factors to Consider When Analyzing Your Business

Here are seven categories to help you conduct a thorough and objective analysis of the factors that will be affecting your future business. Some will have a positive effect on you, some will be negative, and some will be neutral.

1. General Economic Conditions — These could be global, domestic, regional, or local, depending upon your business.
2. Industry Trends — Try to get objective forecasts for your industry from reliable sources.
3. Competitive Environment — Will there be new competitors, or new forms of competition, new pricing, or maybe even new substitutes or replacements for your product or service?
4. Demographic Shifts — For example, are your customers getting younger or older, or speaking different languages? And don’t forget that demographics can also have an effect on the employees you recruit, including language barriers between supervisors and those who report to them.
5. Government Regulations — Are there any changes in government regulations that will positively or negatively affect your business?
6. Access to Materials — Will you have access to the raw materials you need?
7. Technological Advancements — Will changes in technology affect your future business and, if so, are you prepared for those changes?

After considering all seven of these factors, and recording them for regular reference, write down the ones that you should take advantage of, or protect yourself against.

And remember that this exercise should be done for each market segment where you now participate, or plan to enter.