I answer ‘Ask the Expert’ questions at www.bplans.com and occasionally I get a question that merits a special comment. This morning I had the following question:
Question:
What is the Environmental Analysis for this type of shoe business?
Comment:
This is probably a homework assignment. For the record, I’m not leaving anything out, the question is as shown here, with no additional information. “This type of shoe business” could be anything from manufacturing to retail to repair to whatever, and in any market, in any country, and with any mix of strategy and resources. So of course actually answering the question is impossible.
That, however, is not the point. That’s not why I’m choosing to post this on this blog. What’s interesting here is that this question illustrates a very common misunderstanding. It assumes that there is a “right” answer; that there exists “the environmental analysis” and the person asking the question wants to acquire that one right answer by asking an expert.
This is the same underlying world view that has created the strange proliferation of trade in sample business plans, as if there could be a right business plan for some generic kind of business, like a restaurant business plan or shoe manufacturer business plan. People ask for “the business plan” for a type of business as if it were a recipe. It isn’t.
If the question is homework, then the benefit the student is supposed to gain from it isn’t finding the supposed right answer, but rather going through the exercise of doing the thinking.
Answer:
The environmental analysis in the context of business planning normally refers to conditions and factors external to your company, outside of your company’s control, that might affect its sales, market, costs, and so forth. These are often grouped into kinds of factors, such as the common PEST, which stands for political, economic, social, and technological factors that might affect your company. They might be worldwide trends, or specific local market trends, or anything in between.
A good analysis looks at the specific individual context of your company, in your market, with your strategy and resources, and guesses how these factors might affect your company in the future.
— Tim
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
