When investigating the business environment for any aspect of business planning you should use some aid memoir, there are a range of possible choices PEST; STEP: PESTLE etc.. but I use the PRESTCOM acronym to be very useful this stands for the following areas;
The Planning Context
Business planning is an on-going activity in every context of the business as part of the strategic process, it is essential for the successful implementation of a strategy.
In relation to the marketing communications plan the PRESTCOM acronym takes into account the issues relating to regulation of advertising and promotional activity, what competitors are doing in terms of their promotion and also the market conditions.
In relation to the business unit plan it considers the organisational aspects – which could heavily influence the way that a plan has to be developed. It will also encourage the analysis of the specific competitive and market conditions for a given business unit – which might be significantly different than that of other units and highlight issues that must be addressed at an operational level not significant at the strategic level.
Finally if we look at the production or manufacturing areas it draws attention to the technology that should be considered as well as regulatory and competitive aspects.
Political – This relates to all aspects of government including international; national; regional and local politics, all of which can have an impact on the business planning process. You need to consider the political system, the colour and the stability.
Regulatory – Clearly linked to the political element you must be aware of the legislation that is in place to control the business, this will need to cover all the territories that the business plan covers. In addition to legislation there are also other regulatory aspects that might need to be considered such as codes of practice and specific regulatory bodies.
Economic – There are a wide range of factors that might need to be considered here – inflation, cyclic factors, etc.. Usually over time a set of key indicators are developed and used by a businesses planning team.
Social – An understanding of how society is changing is essential when planning new products. Social factors impact on all the stakeholders, for example changes of attitude towards environmental factors influences customers, investors and employees. Social factors range from the deep cultural aspects of society linked to religion and cultural identity, through family and group influences to current and more transient individual influences such as fashion.
Technical – I always consider technical aspects as being divided into materials and processes, significant changes in materials are generally slower in their adoption – but often the impact is more profound, for example the developments in silicon semiconductors have been changing the range of products we use, but this has been going on since the first transistors was invented in the late 1940s and we are still seeing new applications. So it is the processes that innovate the manufacturing process or the way that products or new materials are used that often have the greater impact. For example the touch screen tablet computer had been technically available for several years before Apple launched the iPad – but was the processes that the Apple operating system used and the way it integrated into a life style that created the dramatic development of a whole new market.
Competitive – the most important aspect of this element is understanding who your competitors are. Competitors are either direct, close or total budget that is they offer the same benefits, similar benefits or compete for the consumers spending. So Coke has Pepsi as a direct competitor, Tango as a close competitor and chocolate bars as total budget competitors.
Organisational – Successful development and implementation of any business plan must accommodate the organisational factors, manager cannot afford to ignore the internal issues – be they political or structural in nature.
Market – Knowing and understanding the market is essential many of the above factors can be identified, understanding your marker relies on market insight and hard data. Market insight helps you understand how your market will react to changes. For example for years synthetic materials were only acceptable of they imitated the natural materials they replaced – so we saw plastics disguised with wood or leather prints, today we see plastics in primary colours, and those who realised at what point these would be accepted made a killing. The hard facts of the market are; market size, growth, market share and market structure.
Environmental Analysis or Environmental Scanning?
You might use the PRESTCOM analysis as part of a one-off planning activity to create a proposal or to underpin an implementation plan for a given strategy; however it is just as important to make sure that your analysis is current. To achieve this you will need to carryout reviews of the environment to ensure that your initial analysis was correct and any forecasts or predictions are still valid or need revision.
Again it is important that during the analysis process you identify key areas where there are likely to be changes within the planning period, for example governments will often instigate consultation into areas before legislation, in an area relating to your business these should be closely monitored and where there is a key interest participated in.
As ever one of the most important aspects of the business planning process is communication to ensure that information collected using the PRESTCOM environmental analysis tool is disseminated across the organisation.
The Next Step
Having completed your analysis of the business environment you will need some way of analysing the data to identify where to focus your management activity. One approach is to use the SWOT or TOWS matrix approach. (Read More)
[Original post April 2008]