Irrespective of the product or service, one major factor differentiating the great and failed ventures is the ability to adapt to the changing business environment.
The ‘Environmental business analysis’ is a term for the systematic process by which businesses identify the environmental factors affecting their business, assess the impact and devise a strategy to mitigate risks or take advantage of them. For analysis, there are multiple frameworks available, however, none of them truly encompasses all the factors. These frameworks just provide an orientation to the user. However, irrespective of the framework used, the process of analysis is important. Understand the business environment, derive a process for analysis and convert the insights of analysis into strategy.
As the environmental analysis is carried out by every business manager irrespective of his designation. It is important to select the process and communicate the same across the organization. The wisely used process involves firstly, scanning for environmental factors followed by selection and monitoring of the factors. Further, those factors are analyzed using frameworks for impact. Finally, the insights from the analysis are used to devise strategies for implementation. Further, as a continuous process, constant monitoring of the business’ compliance so as to avoid any unwarranted risks arising from changing scenarios.
Identify Environmental Factors
The first step of the analysis is identifying the environmental factors. It involves a contribution from every department of the organization as the environmental factors affecting the processes of different departments are different. Common environmental factors include new regulatory laws, tax laws, export and import laws, consumer trends, changing technology, security threats, quality standards, pollution control laws, or a new competitor.
Multiple analysis frameworks are available to understand the impact of the factors on the business. One of the widely used frameworks is PESTEL analysis. It analysis the political, economic, social, technological, environmental and legal factors affecting business. Secondly, Porter’s Five Forces Framework is a tool for competition analysis of a business. It derives five forces helping to determine the competitive intensity. The competition is analyzed on Threat of new entrants, bargaining power of buyers, Threat of substitution, bargaining power of supplier and competitive rivalry. Finally, SWOT analysis looks at the business’ strengths, weaknesses, opportunities, and threats, both internally and externally. With SWOT, a business can define how to leverage strengths to take advantage of opportunities in the business and improve on weaknesses to mitigate threats.
The most important steps of the business analysis are devising a strategic plan based on the impact of environmental factors. For example, for business facing high impact due to changing pollution laws, the internal operations of the company need to be re-designed and relevant KPI needs to be established with benchmarks to align its pollution levels with the laws.
Monitor your Compliance
With dynamic business environment due to changing regulations, consumer trends; it is important to adopt a dynamic strategy coupled with constant monitoring your internal and external compliance so as to mitigate any risks arising in future.
With VComply, set relevant KPIs to be monitored and manage your compliance in real time to avoid any business risks.Add to favorites