Have a business idea or even a full blown business model? I bet you have decided on all the ins and outs of your company and how it will operate, but have explored the external environment in which your business exists? Before solidifying your value prop, explore the external environment. Explore the space in which your business was designed to operate.

4 Environmental Areas:

Market Forces

• Issues, Wants, and Needs - What are key environmental shifts that are influencing your market? When I say environmental, I am referring to external market trends. Ex./ The demise of Blockbuster occurred because they failed to react to the change in the way their target market obtains rentals. Netflix identified a problem, the inconvenience of driving to a movie rental store, and solved it by creating a movie rental platform via the web. Had Blockbuster better understood their customer's wants and needs then they may have been able to create the first digital movie rental platform.

• Available Market Segments- What are the available market segments in your sales territory? Which make sense for you to target? Do you fully understand your current market segment and are you satisfying their needs?
• Switching Costs- Is there a reason that your customer always chooses you and what if they decide to choose your competitor? Evaluate the cost incurred by your customer should they decide to buy elsewhere. Ex. If a customer is a Kroger Card member and chooses to shop at Cash Saver, they will not get their reward points or their automatic coupons, therefore, they will probably choose to seek out Kroger over Cash Saver to avoid the cost of loosing their points. If the customer decides to cease business at Kroger all together, they will forfeit the loyalty points that they have built up over their time as a valued customer.

Industry Forces

• Competitors- Know your competitors and their strengths and weaknesses, as well as their product and service offering. Where do you have the advantage? Do they have an influence over your customer? Are they viewed as an expert in their field?

 

• Substitutes- One key strategy of many competitors is to create a substitute product to combat a successful business stealing market share. Are there substitutes in the market for your key products or services? Ex/ Skype is a no cost substitute to the telephone when it comes to international phone calls.
• Suppliers & Value Chain Players- Are there key vendors that add value to your business? Who are the main players in your business sector's value chain? To what extent do you depend on other players and how would their discontinuance of business effect your day to day business activities? 
• Stakeholders- Who influences your business? Employees? Local and National Government? Certain laws could greatly effect your business. Understand the politics around business and those who are pushing for laws in favor of small business or your business sector. 

Key Trends

•  Technology- Technology is very important to the infrastructure of many businesses. Choosing a technology that makes doing business easier for you and your customer is very important. It is also a plus to choose a technology that is innovative in the consumers mind. Ex/ We use Ipads as a check out register. Now, many boutiques are switching to the low cost Ipad, but when we opened for business in 2012 we were one of the few shops that had a fully integrated IPad POS system and the customers loved it. They always commented on how "ahead" we were in our technology and how cool it was to do business with an IPad.

 

• Regulatory- Are there business tax or laws in your area or sector that may effect the way you do business or your current model?
• Societal & Cultural -  Are there certain trends that may effect your model such as sustainability and going green efforts? If so, you may want to consider re-usable shopping bags, locally made items, or even sponsoring in local green events.
• Socioeconomic- Observe demographic trends such as income and wealth distribution. What are the spending patterns of your market segments? How high is the disposable income of your target market and what are the main spends of that income?
  

Macroeconomic Forces