External Environment refers to those influences outside a business control.
- Business managers have to be aware of changes to the external environment and adapt - Poor adaptation leads to unsustainability (the ability to maintain levels of activity) and poor decision making Carrying out a STEEPLE Analysis
Collecting and Applying Information
Describing each external factor from the POV of the business Describe the impact each factor has on the STRATEGIC OBJECTIVES Describing the positive or negative impact upon the business operations Identifying appropriate business responses to each external factor.
STEEPLE used to analyze a business external pressures
Social - In the social step for STEEPLE analysis, you have to look carefully at the social. You will also have to judge the cultural changes which take place in the business environment. This step often includes market research. This is because it is important to see trends and patterns. You might need to study population growth, consumer attitudes, age structure, or lifestyle changes when analyzing the social environment. The analysis might point out any faults in your strategy. It can also provide new ideas. Technological - The business world has become different from what it was in the past. A lot of these behavioral changes are a result of technological changes. Technology has advanced in all parts of the world. The importance of these changes depends on the business market. Changes in method of production can pose as new opportunities. These can help to improve your companys profit margin, but these need huge initial investments. You should understand that these technological changes can impact demand. Advancement in technology can create new market Economic The economic situation will change a lot of times throughout the companys lifetime. You have to weigh the present levels of inflation, economic growth, unemployment and international trade. By doing so, you can carry out your strategic plan better. For example, if the trends suggest that your country might be a victim of the recession, you should make small changes in the capital investment plan. Changes are also needed in product launch strategies.
Environmental - The second E in STEEPLE is for the environment. All businesses
impact their environment. The impacts vary from business to business. This impact can either be negative or positive. It is negative in cases of pollution or waste. It can be positive when the environment gets benefits like processing and cleaning waste. Political Changes in the government policy make up the political factors. The changes can be economic, social or legal. They might even be a combination of these 3. Example of an element would be increase or decrease in tax. Your government might increase taxes for some businesses while it reduces taxes in other areas. Changes like these will have a direct sway on your businesses. So, try to stay upto-date with all the political factors. Government interventions, such as changes in interest rate policy, can have an impact on companys demand patterns. Legal Everyone hopes that their business goes like they wish. It is not that easy to shape a business. The legal limits and regulations avert negative behaviors. These elements also increase the cost in many industries. To operate legally in the environment, it must follow the laws. The business should focus on health, safety, employment and even competition. There are many other factors which you should watch. To ensure compliance, you need to check on new legal requirements. Ethical This E in STEEPLE refers to the range of social values which shape business behavior. The values provide a basis for what is right and what is not. You must always check the companys ethical factors. The ethical ideas of a country will not change overnight. But, small changes in morality take place over time I suggest using the concept of social responsibility to take your company to a better ethical standing. Business owners spend a lot of time to analyze the internal capabilities of their company. The external factors have equal impact on the success of a firm. STEEPLE analysis is a great way to prompt helpful discussion. It helps to find out where your business stands within its external environment.