Analyzing Your Environment

Analyzing the environment in which you operate is the first step to creating a strategy.

To be effective, an organization needs to achieve some degree of match between what it can offer and what the world needs. Making sense of the complex environment in which you do business, and using this information to create good strategy, is essential if your business is to survive.

Analyzing the environment in which you operate is the first step to creating a strategy. There are a number of analysis tools that can help you assess your chosen market and also the world in which you do business:

• SWOT analysis: This can help you understand your organization and its market or environment, by contrasting its "Strengths" and "Weaknesses" with the "Opportunities" and "Threats" in the market.
• PESTLE analysis: This assesses macroeconomic forces that affect all markets, including political and economic factors, social trends, and legislation.
• Porter's 5 Forces (P5F) This looks at factors that are operating within a given market, and that are of significance to all organizations within that market, but not necessarily other markets.

There may be some overlap in the information these tools generate, but it is still best to use all three, as each can generate unique information and insight.

ACTION POINT: Consider the tools above for analyzing your environment.