BUSINESS IDEA SELECTION AND ENVIRONMENTAL ANALYSIS
Becoming a successful entrepreneur depends largely on choosing the best, most viable business idea. As an entrepreneur, your search for the best idea must start by beginning with at least 4 or 5 ideas. Once we start collecting and analysing the data available (by talking to future customers, employees, suppliers), the real picture about the business would start emerging. If we start with a single idea then after collecting and analysing information from the market, we may realise that it is not a viable idea and valuable time would have been lost.
Environment is the aggregate of all conditions, events and influences that surround and affect an organisation. Environmental analysis is the assessment of external uncontrollable variables that may impact the business plan. The internal environment reviews the entrepreneur’s strengths and weaknesses, whereas the external environment reviews the industry’s opportunities and threats. SWOT analysis is a popular tool used in environment analysis to help develop a future course of action. Please refer to the appendix for more information. The tool begins first with an analysis of opportunities and threats posed by the environment. Later, it identifies the strengths and weaknesses of the organisation to combat the environmental forces.
Environmental Opportunities and Threats
Macro Factors Opportunities Threats
Economy Growing population and life Poverty.
expectancy. Costly finance.
Increasing disposable income. Increasing debts, flight of
Availability of money and low capital.
interest rates. Droughts.
Growing GDP, favourable balance of Technological obsolescence.
payments, foreign exchange reserves. Lack of resources.
Good rains. Increased awareness of
conservation of materials.
Micro level Opportunities Threats
Customers Increasing number of customers, Demanding customers, increased consumption. consumer protection laws.
Suppliers Increasing number of vendors, quality Monopolies, growing . products, competitive rates. supplier power, increasing
prices.
Logistics Improved modes of transportation, Poor infrastructure.
reduction in time. Increasing prices.
Global reach. Warehousing.
Micro level Opportunities Threats
Competition Imitation. Unfair trade practices.
Government Incentives. Bureaucracy.
Reduction in fiscal duties. Red tape.
Financial Easy availability of money. High cost of raising finance.
institutions Alternatives available to raise funds. High interest rates. Shareholders Revival of primary and secondary. Poor capital markets.
markets. Losses by the investors.
Attractive returns.
While the macro environmental factors will affect all types of industries in the same manner, the micro factors will be specific for an industry.
Organisational Strengths and Weaknesses
Micro Factors Strengths Weaknesses
Research & Availability of talent and budgets. Quicker Obsolescence.
Development Faster rate of innovations. Lack of resources.
Difficult to show a cost-
benefit relationship.
Manufacturing Locational advantage. Bad location.
Economies of scale. Low production capacity.
Quality control. High rejection rates.
Marketing Wide product mix. Few products.
Wide market coverage. Poor reach of market.
Brand equity. Negative image.
Efficient sales force. Low morale of sales force.
Finance High liquidity. Poor liquidity.
Consistent profitability. Losses.
Good credit rating. Poor credit rating.
Human Resources Ethical leadership. Unethical.
Learning organisation. Conservative leadership.
Motivated staff. Low morale.
Good compensation. Poor paymasters.
When an entrepreneur is in the pre-planning stage, he will have to identify the strengths which will have to be cultivated as applicable to a specific project. For an existing organisation, they will have to identify their weaknesses vis-a-vis their competitors. In a planned manner, they will have to strive to overcome these weaknesses. This environment analysis can also be done at a global level as we are now part of the global environment.
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