B415 Stage 2 session 1 Lecture 2

1. Principles of Business
Lecture 2: Introduction to the
Business Environment
Stage 2 Session 1

2. Overview
• Review of lecture 1
• Environmental scanning – why?
• SWOT analysis
• PESTEL analysis
• LoNGPEST analysis
• Scenario Planning
• When it all goes wrong ….
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3. Learning outcomes
of this Lecture
• To be able to define why organisations carry out
environmental analysis
• To become familiar with some of the key tools
that organisations use to scan the environment
• To be able to distinguish between the various
tools and where they will be used most effectively
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4. Why do organisations scan their environments?
• To be able to compete effectively
• To be able to make better informed decisions
• To understand where to strengthen the business
• To be aware of the dynamic and changing nature of the environment they work in
• To inform their overall long term and strategic planning approach
• To highlight potential threats and opportunities within a timescale that enables
effective action to be taken
• Sometimes they get it wrong, as we see in the cases of Kodak, Nokia and others

5. The tools they use
• This lecture will concentrate on the following tools:
• The SWOT analysis
• The PESTEL analysis
• The LoNGPEST analysis
• Scenario Planning

6. SWOT analysis
• Stands for:
USUALLY INTERNAL ISSUES USUALLY EXTERNAL ISSUES
• Can be used to analyse a business, or a business unit, or a product or service
• You can even do a SWOT analysis on yourself!
• A well constructed SWOT analysis can provide some clear insights into the business
and inform what areas need to be strengthened either to mitigate against
potential threats or take advantage of potential opportunities

7. Carrying out a SWOT analysis
STRENGTHS WEAKNESSES
What are your strengths?
What do you do better than others?
What unique capabilities and
resources do you possess?
What do others perceive as your
strengths?
What are your weaknesses?
What do your competitors do better
than you?
What could you improve given the
current situation?
What do others perceive as your
weaknesses?
OPPORTUNITIES THREATS
What trends or conditions may
positively impact you?
What opportunities are available to
you?
What trends or conditions may
negatively impact you?
What are your competitors doing
that may impact you?
Do you have solid financial support?
What impact do your weaknesses
have on your threats?
EXTERNAL INTERNAL

8. The PESTEL analysis
• Originally known as the STEP analysis, but has been extended over the years

9. Political
• Local or national governmental issues
• Alliances and agreements between countries
• Changes in government and approaches to business
• Changes in regulation
• Changes in employment law

10. Economic
• Spending
• Economic growth
• Exchange rates
• Employment statistics
• Taxation changes

11. Socio-cultural
• Health conscious society
• Age demographics
• Lifestyle changes
• Fashion changes
• Multi-culturalism
• Religious changes

12. Technological
• Information and Communications technology
• New Machinery
• Changes in energy
• Social networks

13. Environmental
• Green issues
• Corporate Social responsibility
• Attitudes towards charity
• Attitudes towards waste

14. Legal
• New laws, repeals of old laws
• Regulation again
• Licensing
• Driving laws
• Tendency to be more litigious

15. Another way of looking at it
Political Economic Socio-cultural
Technological
Local Local authorities
and associations
Local economy Local
community
affairs
Difficult to
segregate but rise
in new
communications
Technology, social
networks etc
National National
government and
employer
bodies
Central
monetary and
fiscal policies
Stock market
Demographic
change,
immigration,
culture
Global Alliances and
agreements or
disagreements
Trading blocs
World money
markets
Global demo-graphics,
cross cultural
issues,
religious
issues

16. Things to consider within a PESTLE analysis
• Each of the factors must be looked at when carrying out the analysis
• BUT – the situation or the context may mean that one or more factors is looked at
more deeply than the others
• Not all factors are threats – some are opportunities (cf SWOT analysis)
• Carrying out a PESTLE analysis is not a substitute for continual environmental
scanning – the world changes very very quickly sometimes

17. Scenario Planning
• Industries that use scenario planning:
• Oil and gas
• Counter-espionage and terrorism
• Military
• Insurance
• Banking

18. Scenario Planning is:
• A strategic planning tool used to make flexible long term plans
• A way of looking at how events could shape the future
• A way of identifying how significant events, the protagonists involved and the way
they act will impact on the business
• A way of helping organisations decide how best to face thefuture

19. 6 steps to Scenario Planning
www.jiscinfonet.ac.uk/tools/scenario-planning
1. SCOPING
What is the question
you want to address?
3.
BUILDING
SCENARIOS
Using your outcomes
from the first two
steps build your
scenarios to explore
2. TREND
ANALYSIS
Consider the external
forces in operation
and consider the
pressures they play
4.
GENERATE
OPTIONS
Consider the options
available within the
scenarios -
innovations,
new services,
projects or
opportunities
5. TEST
OPTIONS
Identify and discuss
potential
implications and
impacts of
scenarios on the
identified options
6. ACTION
PLAN
Define an action plan
as a result of these
activities

20. Bringing it all together
• We have now looked at four key methods that businesses use to scan their
environment
• In the coming seminars, we will look at two of them in more detail and you will
have a chance to carry them out for yourselves

21. • End of Lecture