W5_Industry-and-Environmental-Analysis

INDUSTRY AND
ENVIRONMENTAL
ANALYSIS: BUSINESS
OPPORTUNITY
IDENTIFICATION
OBJECTIVES
• identify principles and tools in creating a business;
• apply SWOT analysis as a tool in evaluating a business
opportunity;
• apply Porter’s Five Forces of Competitive Position
Analysis: a tool in evaluating a business opportunity;
• analyze the activities in the circular flow of economic
activity;
• make a simple industry analysis;
• identify factors considered in an environmental
analysis
• state the importance of competitiveness and
efficiency in the economy
• identify and assess small business opportunities
Techniques
A. Business Formation according to business
organization
a. sole
b. partnership
c. corporation
d. cooperative - an entity organized by people/members with similar
needs
B. Classifying business as to size
a. micro - up to 1.5M total assets
b. small - 1.5M to 15M total assets
c. medium - 15M to 60M total assets
d. large - 60M and up total assets
Business
A. According to a guide developed by North Carolina’s Small
Business and Technology Development Center, the key factors
that must be considered in analyzing the industry are the
following:
• The geographic area which your business will cater to. Is it
limited to local areas? or will cover a region?
• The size and outlook of the industry. What trends can be
identified?
• Description of the product
• The buyers have to be identified. Who are your target
customers?
• The regulatory environment. Are there local, national laws
that will restrict the business?
• The need to identify the leading businesses in the industry,
and to provide company information on the most successful
businesses that you will be up against.
• Factors that will affect the growth of the business
B. The SWOT Analysis by Edmund P. Learned, et. al. in the
book, Business Policy, Text and Cases (Irwin 1969). It is an
analytical framework that can help a company meet its
challenges and identify new markets. It also helps in identifying
the internal and external factors that may affect the businesses.
● Strengths and Weaknesses actually refer to the internal

factors and these are the resources and experiences readily
available to the business proponent, example:
○ Financial resources
○ Physical resources
○ Human resources
○ Access to natural resources
○ Current processes
● Opportunities and Threats are external forces that are outside
of the business’s control, example:
○ Economic trends
○ Market trends
○ Natural and local laws and statutes
○ Demographic characteristics of the target market
○ Relationships with suppliers and co-owners
○ Competitive threats
Strengths Weaknesses
● Government incentives ● Difficulty of organization

● Low capital requirements ● Costly set-up
● Market acceptance ● Possible pollution problems
● Experienced leaders ● Lack of training of workers
Opportunities Threats
● Project may replace imported ● Entry of competitors

good available in the market ● Time consuming production
● Will improve employee ● Opposition from residents in
welfare the community
● Improved company
reputation
Strengths
• What is our unique value - Knowledge of the product
proposition?
• What are we good at? - Key workers who have been in the
company for years
Weaknesses
• Where should we improve? - Lack of social media presence
• How is our finances? - Lack of funding
Opportunities
• What are the shortcomings of our - Tap other markets
competitors that we can capitalize
• What new markets, services, or - Come up with new products/services
products can we develop?
Threats
• How will out competitors advance on - Another player in the market that
us? offers new product at lower cost
• How will the economy threaten us? - Price war
C. Porter’s Five Forces of Competitive Position Analysis
It was developed in 1979 by Michael E. Porter of Harvard
Business School as framework or a guide for assessing and
evaluating the competitive strength and position of a business
organization.
Its importance is for organizations to understand the
factors affecting profitability in a specific industry and can help
to form decisions in entering or not an industry.
Lesson 3.3. Industry Analysis
In a book published by the Development Academy of the
Philippines, How to Prepare Project Feasibility Studies, it includes
analysis of the following important factors.
- Competition
- Customers
- Suppliers
- Substitutes
Lesson 3.4. Environmental Analysis
The other analysis that has to be done is an analysis
of the environment in which the business will operate.
This means an evaluation of the possible or probable
effects of external forces and conditions on the survival
and growth of the business
o PESTEL = (Political, Economic, Social,

Technological, Environmental, and Legal) are tools
that analyze the external environment that have
influence in business organization
Political: the type of government, the stability and strength of
the government, and good leadership
Economic: income of the people, esp. the target market,

economic conditions such as inflations, recession,
prosperity, demand, and supply in the market.
Social: cultural practices such as fiestas, celebration of

Christmas season, trends in consumption patterns.
Technology: funding research & development,

technology innovation, laws on technology, Issues on
intellectual property, changes in IT internet and etc.
Environmental/Physical Environment: population size, geography
of the place where business will be located, land distribution,
climate.
Legal: national and international laws.
Competition: the degree of competition in the market

and the extent and strength of competition are very
vital in determining the success/failure of a business
Exercises:
• Complete the PESTEL of a mining company or a
fast food chain
Political Economic Social Technologic Competition

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INDUSTRY AND

● Strengths and Weaknesses actually refer to the internal

● Government incentives ● Difficulty of organization

● Project may replace imported ● Entry of competitors

o PESTEL = (Political, Economic, Social,

Economic: income of the people, esp. the target market,

Social: cultural practices such as fiestas, celebration of

Technology: funding research & development,

Legal: national and international laws.

Competition: the degree of competition in the market

Political Economic Social Technologic Competition

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