Environmental Analysis: Micro & Macro Factors

• Macro environmental analysis helps businesses understand external factors affecting operations and market performance.
• Microenvironmental analysis assists businesses in understanding and managing their market effectively.
• Environmental analysis evaluates internal and external factors impacting a business, preparing it for market conditions.
• Microenvironmental analysis assesses an organization's capital, capabilities, and resources for achieving market goals.
• Macro environmental analysis examines uncontrollable external factors like political, economic, and legal aspects.

Key points of environmental analysis:

• Strategic planning enables businesses to adapt to changing market conditions.
• Businesses must adapt quickly to maintain or improve performance.
• Environmental analysis aids in addressing market problems by assessing an organization's ability to cope with external factors.
• Frameworks for internal and external environmental analysis include PESTLE, Five Forces, SWOT, and Three Cs

Macro & Micro Environmental Analysis

• Macro environmental analysis examines external factors like political, economic, social, technological, environmental and legal aspects (PESTEL).
• Micro environmental analysis focuses on internal elements like capital, capability and resources (SWOT, Three Cs, Porter's Five Forces.)

Frameworks for Environmental Analysis:

• PESTEL assesses macro-environment factors like Political, Economic, Social, Technological, Environmental, and Legal.
• Porter's Five Forces evaluates industry competitiveness by examining dynamics between suppliers, buyers, substitutes, and new entrants.
• SWOT examines Strengths, Weaknesses, Opportunities, and Threats.
• The Three Cs include Company, Customers, and Competitors.
• PESTEL helps organizations adapt their strategies and make informed decisions.

Key components for Political Factors:

• Understanding the political environment, including government stability, regulations, and policies, is crucial for businesses.
• Adapting to political changes, such as eco-friendly packaging or adapting to corporate tax rates, is essential for market competition.

Key components for Economic Factors:

• Analyzing both short-term and long-term economic conditions.
• Consider interest rates, inflation, and consumer confidence.
• Retail spending is influenced by interest rates.
• Consumer disposable income is impacted by inflation.

Key components for Socio-Cultural Factors:

• Understanding cultural norms, values, and demographic trends is significant in shaping strategies.
• Responding to trends, non-alcoholic options in response to drinking habits, the growing trend of health-conscious consumers impact the market strategy,.

Key components for Technological Factors:

• Technology drives innovation and competitive advantage.
• Staying updated with technological advancements is vital.
• The rise of streaming services transforms the music industry and ride-sharing platforms disrupt the taxi industry.

Key components for Environmental Factors:

• Accountability for environmental sustainability and climate change is increasing.
• The ban on single-use plastics pushes businesses to adopt alternative packaging solutions.
• Climate change regulations influence supply chains and operations.

Key components for Legal Factors:

• Understanding local and international laws is essential.
• Strict data privacy rules, fair trading practices, impacting advertising and product labeling requirements, are crucial for market success

Porter's Five Forces

• Porter's Five Forces assesses competitive forces within a market environment and profitability.

Threat of New Entrants:

• Startup and capital costs, legal regulations, and brand loyalty are barriers to entry.
• Entering is relatively easy for coffee shops, however the gaming console industry has high capital needs.

Threat of Substitutes:

• A product or service can be replaced by another, fulfilling a similar need.
• Including price-performance trade-offs, switching costs, time efficiency, and availability of alternatives are things to look out for.
• A tea shop serving customers who want a warm drink instead of coffee.

Bargaining Power of Buyers:

• Factors such as buyer concentration, substitute availability, and product necessity influence pricing and terms.
• Customers have high bargaining power in markets with many competitors since they have several options.

Bargaining Power of Suppliers:

• A supplier's ability to increase prices or reduce product quality is based on market supply.
• Differentiated goods and switching costs factor into the market supply.
• Strong supplier power to lock users into an ecosystem, making it difficult and costly for customers to switch.

Intensity of Competitive Rivalry:

• Competition level among firms is indicated by industry growth, product differentiation, and market saturation.
• Hybrid console rather than competing directly differentiated itself in a crowded market.
• Market opportunities and risks are evaluated using Porter's Five Forces
• Strategic decision-making assesses potential advantages and challenges.

SWOT Analysis

• Strengths, Weaknesses, Opportunities, and Threats are evaluated using by businesses to do well in markets.

Components of SWOT Analysis:

• Strengths are positive attributes that help an organization achieve its objectives.
• Weaknesses are internal limitations that hinder success.
• Opportunities are external factors that a company can leverage to grow.
• Threats are external risks that can harm the business.

Key Questions for SWOT Analysis

• Key Questions for Strengths include: What does the company do well?; What makes it stand out from competitors?; Why do customers prefer this company?
• Key Questions for Weaknesses include: What does the company struggle with?; What complaints do customers have?; What disadvantages does the company face compared to competitors?
• Key Questions for Opportunities include: What emerging trends can the company benefit from?; What are competitors failing to do?; How are customer preferences changing?
• Key Questions for Threats include: What are competitors doing better?; Are there industry trends that could threaten the business?; Are new regulations impacting the market?
• SWOT helps in strategic planning, decision-making, risk management, and identifying competitive advantages.

The Three Cs Analysis

• The market environment may use the Three Cs, a strategic framework.
• They represent Customer, Company, & Competitor, and help analyze the market environment.
• Understanding customer needs, company capabilities, and competitor strategies helps develop strategies.

Customer Analysis

• Customer needs, preferences, and behaviors shape purchasing decisions.
• Customers' buying decisions are driven by Demographics, Buying habits & motivations, and Psychographics
• Market research such as surveys and reviewing customer data can influence buying habits
• Meeting real demand, enhancing customer experience, pricing, branding, and promotional strategies, prevents product-market fit failures are reasons for customer analysis.

Company Analysis

• Internal capabilities, weaknesses, and strengths ensure customer expectations are met.
• Elements of the Company that determine if it meets customer expectations are Products & Services, Brand Image, Customer Support, Distribution Channels, Financial & Human Resources.
• Strategic goals recognize strengths to capitalize on and weaknesses to improve.
• Identifying competitive advantages, areas for improvement, aligning company resources with market demand, and reducing risks are reasons for company analysis.

Competitor Analysis

• What strategies can businesses use to gain a competitive edge to determine where they stand in the market is key to competitor analysis.
• Market analysis should cover: Pricing Strategies, Marketing Tactics, Distribution Channels, Market Positioning
• Market positioning, understanding their position in the market, identifying market gaps, staying competitive, developing effective strategies and what competitors do are key to competitor analysis.

Integrating Three Cs Analysis with SWOT

• Strengths & Weaknesses are the internal factors (Company).
• Opportunities & Threats are the external factors (Customers & Competitors).
• Combining 3Cs and SWOT helps businesses make data-driven decisions about product development, pricing strategies, marketing efforts, and expansion opportunities.