Anyone who has a basic understanding of economics understands the laws that dictate success. You need to have a product that people want to buy and have it at a price that they can afford it at. Businesses run on a supply and demand policy. That means, if there is a demand for a particular item, the company manufactures the item and supplies it for sale.
However, several other critical factors come into play. These factors are analyzed with strategic planning tools called PEST analysis, SWOT analysis, business competitive analysis, and industry analysis. These tools are used to evaluate the political, social, economic, and technological factors that will have an effect on a business.
These analyses are carried out before a project is implemented and they can provide an accurate forecast of business progress in a particular macro-environment, according to the University of Washington.
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What Are These Analyses and How Will They Benefit My Company?
You might have a wonderful product prepared to the highest standards and sold at a great rate. You are considering an aggressive marketing plan and you expect good results. However, market factors vary from country to country.
Ever see the labels for your favorite products in other countries? If you have, you’re usually going to notice changes in the label. The reason for this is that different characters and fonts get different reactions depending on where you go.
Before you market your product, you have to remember that the product may be good but differentials appear in the market and consumers. Marketing tools like PEST analysis, SWOT analysis, business competitive analysis, and industry analysis are designed to evaluate these factors and provide an accurate idea of what will affect product sales. Here is a quick idea of what each analysis will do.
PEST stands for political, economic, social, and technological factors that influence a business. It’s a way of getting information on the environment that your business is going to be grown in.
By paying attention to your PEST analysis, you’re going to be able to figure out how viable your business idea really is. The purpose of the analysis is to identify the external factors in these sectors. Managers will assess the risks afforded by these factors and then plan procedures to overcome these risks.
For example, a local restaurant will realize that there is a very strict underage drinking policy in the area and to prevent it from being closed down, they may implement a policy of checking the ID of all patrons. In the same vein, a company that sells baby gear may have a rough time in a neighborhood comprised mostly of students and couples that do not plan on having children.
Knowing what your area is like is going to be the key to success. You can have an excellent product, but if you put your store in the wrong location, no one is ever going to know.
SWOT stands for the strengths, weaknesses, opportunities, and threats that are inherent in a business. The goal of the analysis is to determine what makes a business strong and how it can be crippled due to simple weaknesses. With the analysis, it is possible to strengthen the company, eliminate weaknesses, and grab opportunities as they come along for company expansion.
For example, a quick survey by a chip company could reveal that one particular flavor is very popular with consumers. They could build on the flavor and increase production, thus resulting in increased sales.
Business Competitive Analysis
As the term suggests, this analysis is run on a competing business to determine its strengths and weaknesses. By analyzing a successful competitor, it is possible to factor these opportunities and threats into your own business model to become a success.
An industry analysis, or the Five Forces Framework, is a useful tool for business planners. The tool acknowledges the fact that industries may be the same but profit margins in different companies are variable due to a particular company structure and marketing plan. With this analysis, it is possible to change the existing structure and formulate a competitive but profitable future landscape.
The Bottom Line
All businesses can benefit from a competitive PEST analysis, SWOT analysis, business competitive analysis, and industry analysis, provided that they have carried out a professional firm. The firm will gather information, classify the data, and evaluate it by experts to create a comprehensive report that will guide the business owner.
Ideally, most of the factors that influence the analyses are fluid and rapidly changing and not all of them are applicable to industry. If you actually look into the process of making the analyses, it is quite easy to itemize the factors and consider their impact on a business. However, to ensure impartial but accurate analyses, it is necessary to hire an external firm to do the best job.