However, there will always be factors outside of your control that affect how your business operates. One method for discovering and quantifying those factors is the PEST analysis. PEST is an acronym for political, economic, social and technological — external factors that commonly affect business activities and performance. Jim Makos, director at Weberiencethe digital publishing, web development and marketing company behind the Pestle Analysis website, says PEST can help companies improve their decision-making and timing.
The factors that are hurting and helping other players in the industry will also impact your business. While you probably can't control all of these external factors, you can control how your business will respond to them.
In fact, the way your business responds to them might constitute part of its competitive advantage. A Successful Company's Best Defense. Potential financiers will want to see that you have a thorough understanding of how your industry works and where your business fits in.
They will also want to understand for themselves the industry that they will be investing in if they don't already and be convinced that your business will be a profitable addition to the industry. How do your firm's products or services fit into their industry, and how do they interact with market conditions to create a profitable opportunity?
Explain the concrete reasons you expect your business to flourish, and lay out the steps you will take to achieve your company's goals. It was probably an observation or a series of observations about the conditions in your industry that made you decide to open your business in the first place.
You noticed a trend or an opportunity that you could exploit to earn a profit. Now you just need to put that into writing and back it up with data. The Industry Analysis is the first section of your plan where you can and should go into detail instead of merely summarizing.
Include the following information in your business plan's formal industry analysis. Defining Your Industry The industry overview for your business plan, also called a market analysis, should define the industry that your business belongs to, the major characteristics of that industry and its major existing players.
Where do their strengths and weaknesses lie? How will your business be able to compete with their strengths and improve on their weaknesses?
A local foods business, for example, would be part of the grocery store and supermarket industry. You'd then note that smaller companies can compete by serving a local market effectively, offering unique products or providing superior customer service.
Industry Overview Explain what's going on in your industry as a whole. Is the industry new, expanding or stable? Is it growing faster, slower or at the same pace as the economy as a whole? For example, because all of your food will come from within a mile radius, your business will be strongly affected by seasonal changes in the availability of fruits and vegetables.A good business plan starts with research into the potential business's industry, competitors and market.
This gives the business owner a complete understanding of the playing field.
As a business. Political factors and environment of a country impacts any business organization and can also introduce a risk factor can cause the business to suffer losses or compromise over its profit stream. Many political factors have an influence on the business community, ranging from the philosophy of the governing party to political responses to economic trends.
When government leaders and agencies set policies, they start trends that often have a powerful influence on the legal structure within. Political trends can impact any level of society, whether individuals, families or organizations such as small businesses.
Trends in policies set by government agencies and leaders can affect the. Political factors are the external factors that influence the business environment. Government decisions and policies affect a firm’s position and structure. Government decisions and policies affect a firm’s position and structure.
Economic factors that commonly affect businesses include consumer confidence, employment, interest rates and inflation. Consumer Confidence Consumer confidence is an economic indicator that measures overall consumer optimism about the state of the economy.