External Environment

External Environment

External Environment

An important step in the strategic planning process is to examine what is happening in our external environment: ie, where our end-customers “live.” These are the influences that affect our company outside of our industry.  These factors include:

  • Demographic – for example, trends that might impact the wine industry include younger people becoming more inclined to prefer white wines instead of red wines because they are seen as less “heavy”, and having less tannin content – and thus “a healthier alternative.”
  • Social/cultural – Several industries are affected by Australians coming from or visiting foreign countries. For example, Japanese and Korean cars are often preferred by those coming from Asian countries. In contrast, French car manufacturers gain many sales by offering special deals for renting their products by Australians when travelling through France and the rest of Europe.
  • Economic – A growing economy can encourage a company to hire additional staff to anticipate a growth in sales.However, a downturn can signal that this is an excellent time for a strong market player to judiciously acquire weakened competitors to rapidly expand their footprint across the country.
  • Political – Free trade agreements have opened the doors to foreign competition. For example, accounting clients have started realising that if their services are all delivered over “the blue cable” sticking out the back of their computer, their competition could be in Melbourne, Manila or Mumbai. They have to respond with a strategy where a physical presence in front of the client makes the difference.
  • Legal – Recent legal cases has placed a higher emphasis on “traceability” of the components of production for critical products such as food and pharmaceuticals. Several Australian companies have repatriated some of their manufacturing processes to Australia to meet the demands of this trend.
  • Technological – Changes in technology – principally advances in IT – can affect our business. For example, sending marketing information via physical mail used to be a way to reach older – and thus less IT savvy – senior managers. However, the adoption of electronic mail has increased so much that people are now more inclined to ignore physical mail approaches altogether.

 

Understanding your external environment can help you position your company to take advantage of the trends that will shape the future marketplace.

 

If you need any help with this, don’t hesitate to get in contact us.

 

– Blog by Paul Ostaff

Paul Ostaff is part of a business coaching team

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