Key Elements of any Business Plan
For a business to be successful, it requires extensive planning and analysis to survive in the market and industrial environment. Businesses conduct analyses to assess conditions and environment in which they are operating. Every company has certain frameworks that allow them to understand the market and analyze their products and services. Companies carry out market research by conducting surveys to evaluate market needs and trends. SWOT, PEST and STEEPLE analysis are methods through which companies plan ahead and forecast.
The PEST analysis refers to Political, Economical, Social and Technological factors which influence the business environment. SWOT refers to Strengths, Weakness, Opportunity and Threats. STEEPLE Analysis refers to Social, Technological, Economic, Environmental, Political, Legal, and Ethical factors. These factors are prime determinants of strategic planning. Without SWOT, PEST & STEEPLE analysis, companies might fail to achieve desired goals.
These are the 3 important key elements of a business plan:
SWOT Analysis consists of internal positive factors that affect the business environment. It focuses on strengths, weakness, opportunities and threats. Strengths can be controlled and taken advantage of if firms focus and improve on their strengths in order to achieve their goals, focusing on USP (unique selling point) and enhancing the quality of their products/services. Weaknesses are negative internal attributes which point out what the company lacks or is unable to achieve, lower profits in specific department or products plus sales and internal structural problems.
Weaknesses need to be dealt with through proper evaluation and regulation. Opportunity is an external factor that represents reasons why business is likely to flourish. It is directly related to the firm’s external environment. Firms can use lower taxes, good market trends and a booming economy. Threats are external negative factors that challenge firms and pose a risk plus companies don’t have control over threats which can damage the firm or create uncertainty. This has a negative impact on the business. Unrest, new competitors, and government policies are some examples of external threats.
PEST analysis focuses on the macroeconomic issues that businesses face and how they can be dealt with. The PEST analysis comprises of external factors which are primarily used for market research. It is used as an alternative to SWOT Analysis. Political factors are the external factors that influence the business environment. Government decisions and policies affect a firm’s position and structure. Tax laws, monetary and fiscal policies as well as reforms of labor and workforce, all these factors influence companies in different ways.
These factors are important and need to be managed in order to overcome uncertainty.
Economic factors impact business in the long run. Inflation, interest rate, economic growth, and demand/supply trends are to be considered and analyzed effectively before planning and implementing. Economic factors affect consumers and enterprises both. Social factors are related to the firm’s products and services which they offer or the nature of the business. It involves the trends of population, domestic markets, cultural trends and demographics.
These factors help businesses assess the market and improve their products/service accordingly. Technological factors are key elements that impact a firm’s long-term planning. It analyses the technology trends and advancements in business environment, innovations and advancements and lowers barriers to entry plus decrease production levels which can result in unemployment. This includes research and development, automation and incentives.
The STEEPLE analysis is used when working on strategic positioning and planning. It is more advanced as it covers external factors that affect the firm’s internal and external environment and structure. STEEPLE prioritizes factors in a practical way. The social factor is considered first in STEEPLE because social and cultural changes are important elements in business planning as they are directly related to what business excels at and produces or provides. Without proper demographic, living standards, cultural trends and marketing strategy knowledge, firms cannot progress.
Technological factors are second and relate to the same point as in PEST analysis as technology and innovation can create new opportunities as well as help reduce costs and increase demand if the technology is capitalized on effectively. Economic factors are third in priority since economic conditions are unpredictable and not in control of the business. The inflation rate, economic growth and trade levels need to be assessed and studied for planning ahead. Investments in unstable economies with inflation and other factors are unfavorable for the business.
Environmental factors impact the business environment because the decisions businesses take, affect their surroundings, Firms need to be socially and environmentally responsible because it favors the goodwill and reputation of the business. Political factors are the same as they are in the PEST analysis, because politics and government are two important elements that firms have to assess.
Government laws influence firms in many ways and controls the firm’s decision-making power because taxes, trade laws, labor laws, barriers to entry, subsidies and incentives plus interest rates and governments fiscal and monetary policies all are related to their day to day operations. So, firms need to have good relations with the government to peacefully continue. Legal factors are what STEEPLE analysis is about and that’s what makes it different from SWOT and PEST analysis.
This accounts for the regulations, audit and legal limitations of the firm as legal factors are barriers to entry plus firms are answerable to regulatory bodies if laws are not followed. Ethical factors refer to social values in the region where the firm is established. Firms need to respect and adapt the ethical values of the people they are catering to or else the business will get isolated. Corporate Social Responsibility is important as well as ethical values of the company because it determines whether the company is able to establish itself or not.
All analyses are good in terms of planning and research but in order to be successful, each analysis should be used according to the requirement of the firm. PEST & SWOT analyses are always to be used together since they help with strategic planning and marketing but STEEPLE is an advanced long-term analysis that covers all aspects and provides a larger picture.
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