Environmental analysis for startups

Environment is defined in the Meriam-Webster dictionary as the conditions that surround someone or something. It is no surprise that environmental analysis in the context of business strategy is related to the analysis of external factors.

As seen above, environmental analysis can be separated into different layers according to Johnson Scholes and Whittington (JS&W). This is how the macro-environment is connected to an organization and in this post, I shall focus on this layer in the context of a startup.

Before developing the business plan, I believe the crucial step that many startup entrepreneurs overlook is the macro-environment. Here are some models to get started:

1) PESTEL

Who hasn`t heard of PESTEL: political, economic, socio-cultural, technological, environmental and legal factors? Fundamentally, entrepreneurs need to identify the factors that may contribute to the success of their business idea. For instance, in my dating startup, due to socio-cultural differences in Europe and Malaysia, our content has to vary. Also, in the real world, a number of these factors are interconnected and thus should not be seen separately.

2) Key drivers of environmental change

It is of utmost importance that entrepreneurs remember the business environment is not static. The key drivers of environmental change are based on globalisation trends:

• Cost globalisation
• Market globalisation
• Global competition
• Government policy

Entrepreneurs should have a bird`s eye view when working on a business idea. The strategic part of planning is crucial and should not be overlooked.