Business Environment Analysis: Factors, Uncertainty & Tools

Analysis of the Business Environment

Concept of Environment

Anything outside the enterprise as an organization (Mintzberg, 1984).

• External factors with significant influence.
• Not controlled by the company.

Types of Environment

• General: The socio-economic system in which the activity occurs.
• Specific: The sector of activity (industry).

Level of Uncertainty

Depends on:

• Stability: Stable vs. Dynamic factors.
• Complexity: Simple vs. Complex changes in factors.
• Diversity: Integrated (few variables) vs. Diverse (many variables).
• Hostility: Favorable/Friendly vs. Hostile impacts.

Basic Typology based on Uncertainty (Navas and Guerra, 1998)

• Stable: Stable, simple, integrated, favorable.
• Reactive-Adaptive: Relatively stable, complex, diverse, practically favorable.
• Unstable-Turbulent: Dynamic, complex, diverse, and hostile.

Analysis of the General Environment

• Diagnosis of the current and future situation.
• Detection of threats and opportunities.
• Identification of relevant variables.

Tools

PESTEL Analysis

• Political: Government stability, general political climate.
• Economic: Key indicators (e.g., unemployment, GDP, interest rates).
• Socio-cultural: Beliefs, values, attitudes, demographic conditions (e.g., immigration, population structure, social conflict).
• Technological: Scientific and technological framework (e.g., R&D&I, research centers, universities, patents per capita).
• Ecological: Environmental policy (e.g., waste management, recycling awareness).
• Legal: Administrative, legal, and regulatory factors (e.g., grants for enterprise creation, tax burden, labor regulations, EU regulations).

Influence of the General Environment

• The effect can differ across various sectors.
• It does not affect all companies equally, even within the same sector.
• The influence of each variable may differ by sector.

Anticipation and Foresight

• Forecast:
  • Conclusions (with probability) about the evolution of variables over time, based on historical data.
  • Suitable for stable environments.
• Foresight:
  • An overview of possible and uncertain futures, influenced by the past and the actions of individuals.
  • Suitable for turbulent environments.