While the external environmental analysis gives the business owner to analyze the political, economic, social, and technological aspects that can have a huge impact on business.
Therefore formulating a suitable business plan is important while opening a business. Also, it is also important for a business to have a vision and mission statements, which gives the foundation of achieving the set goals and objectives.
Internal environment analysis of a business
This involves the analysis of the employees and the available resources that are at the disposal of a business entity. The employees must be trained to carry out the activities in this business actually. This gives the organization the ability to provide quality products and services to their consumers
With the business in its introduction phase, establishing itself in a competitive market without any record might be difficult. Therefore, this analysis helps an entrepreneur to determine effective ways to overcome the challenges that might face the business in future dates.
Before establishing a business, it is important to consider the available opportunities that can be exploited. For example[le if a business is to be established in construction and service industry, it is important to exploit numerous opportunities such as the real estate market where the organization may bid for supply tenders for interested developers. There are also individuals who might need to renovate their kitchens and floors of their houses.
Analysis business threats such as the competitors that offer close substitute goods or services at lower prices can be a threat to any new business entity. Therefore, it is important to consider risks that can prevent a business to expand in the end.
External analysis of the business environment
5. Political forces
Political decisions that enforce legislation may affect ways in which a new business can enter and operate within a market. The management or business owners have the obligation of ensuring that there is adherence such laws in the best way possible to ensure successful business venture.
6. Economic forces
The main reason all businesses exist is to make profits. The economic situation in a country or globally may affect how an organization carries out business. Therefore, economic factors affect the market prices of goods and services, which is important for an entrepreneur to analyze to determine the acceptable price range for her or his property and services.
7. Social, technological, environmental and legal forces
Based on the social analysis, an entrepreneur has the capability to determine how consumers behave regarding choice and preferences. Also, the technological factors are important in deciding on what type of equipment to establish in business premises. The legal and environmental factors are also important to consider before building a business because they help in determining whether a business is viable, observes human rights, and protects the nature.
8. Mission and vision
It is important for a business entity to have vision and mission statements that act as the foundation of the process of achieving goals and objectives of an organization.