Environmental Analysis

 Environmental analysis is a strategic tool.

 It is a process to identify all the external and internal elements,
which can affect the organization’s performance.
 The analysis entails assessing the level of threat or opportunity the
factors might present.
 These evaluations are later translated into the decision-making
process.
 The analysis helps align strategies with the firm’s environment.

The goals of the environmental analysis are:

 Gain an understanding of the opportunities and threats confronting

the firm.
 And use this understanding to identify Strategies that will enable
the company to outperform its rivals.

So in a nutshell,

 it involves monitoring, evaluation and dissemination of the

information from the external and internal environment to key
people within the corporation.
Macro environment Analysis

 PESTLE analysis consists of various factors that affect the

business environment.
 Each letter in the acronym signifies a set of factors. These factors
can affect every industry directly or indirectly.

The letters in PESTLE, also called PESTEL, denote the following

things:

 Political factors

 Economic factors

 Social factors

 Technological factors

 Legal factors

 Environmental factor

I will discuss the 6 most commonly assessed factors in environmental

analysis.

P for Political factors

 The political factors take the country’s current political situation.

  It also reads the global political condition’s effect on the country
and business.
 When conducting this step, ask questions like “What kind of
government leadership is impacting decisions of the firm?”

Some political factors that you can study are:

 Government policies

 Taxes laws and tariff

 Stability of government

 Entry mode regulations

E for Economic factors

 Economic factors involve all the determinants of the economy and

its state.
 These are factors that can conclude the direction in which the
economy might move.
 So, businesses analyze this factor based on the environment. It
helps to set up strategies in line with changes.

I have listed some determinants you can assess to know how economic
factors are affecting your business below:

 The inflation rate

  The interest rate

 Disposable income of buyers

 Credit accessibility

 Unemployment rates

 The monetary or fiscal policies

 The foreign exchange rate

S for Social factors

 Countries vary from each other. Every country has a distinctive

mindset.
 These attitudes have an impact on the businesses.
 The social factors might ultimately affect the sales of products and
services.

Some of the social factors you should study are:

 The cultural implications

 The gender and connected demographics

 The social lifestyles

 The domestic structures

 Educational levels
  Distribution of Wealth

T for Technological factors

 Technology is advancing continuously. The advancement is greatly

influencing businesses.
 Performing environmental analysis on these factors will help you
stay up to date with the changes. Technology alters every minute.
This is why companies must stay connected all the time.
 Technological factors will help you know how the consumers react
to various trends.

Firms can use these factors for their benefit:

 New discoveries

 Rate of technological obsolescence

 Rate of technological advances

 Innovative technological platforms

L for Legal factors

 Legislative changes take place from time to time. Many of these

changes affect the business environment.
  If a regulatory body sets up a regulation for industries, for
example, that law would impact industries and business in that
economy.
 So, businesses should also analyze the legal developments in
respective environments.

I have mentioned some legal factors you need to be aware of:

 Product regulations

 Employment regulations

 Competitive regulations

 Patent infringements

 Health and safety regulations

E for Environmental factors

 The location influences business trades. Changes in climatic

changes can affect the trade.
 The consumer reactions to particular offering can also be an issue.
This most often affects agri-businesses.

Some environmental factors you can study are:

 Geographical location
  The climate and weather

 Waste disposal laws

 Energy consumption regulation

 People’s attitude towards the environment

There are many external factors other than the ones mentioned above.
None of these factors are independent. They rely on each other.

If you are wondering how you can conduct environmental analysis, here
are 5 simple steps you could follow:

1. Understand all the environmental factors before moving to the next

step.

2. Collect all the relevant information.

3. Identify the opportunities for your organization.

4. Recognize the threats your company faces.

5. The final step is to take action.

It is true that industry factors have an impact on the company

performance. Environmental analysis is essential to determine what role
certain factors play in your business. PEST or PESTLE analysis allows
businesses to take a look at the external factors. Many organizations use
these tools to project the growth of their company effectively.
The analyses provide a good look at factors like revenue, profitability,
and corporate success. If you want to take the right decisions for your
firm, employ environmental analysis. The analysis you should conduct
depends on the nature of your company.

PESTLE/PESTEL Analysis of Subway Restaurants

 Customers in more than 100 countries, walk into Subway for their
delicious, healthy options. It’s likely one of the first restaurants to
pop into your head when you’re craving something low-calorie,
easy, and healthy for dinner.
 The company boasts their vast selection of fresh, healthy meats
and bread. Their slogan is “eat fresh” after all. And health-
conscious customers adore it.

Political factors affecting Subway: Food and safety guidelines

 Subway is considered a fast food restaurant. And, like any business

in the food industry, Subway must abide by political factors.
 Following the restrictions of the health and safety regulations is the
company’s top priority. From packaging to distribution, Subway
and their workers handle the responsibility of their food products.
 However, health guidelines change based on a country’s specific
policies. The regulations in the United States differ overseas
compared to Muslim countries. There, most companies abide by a
 strict Halaal food restriction. If the food isn’t Halaal, it won’t be
eaten by the general public.
 Subway needs to make sure they’re following the rules in each
location strictly. Otherwise, they may lose favor with their
customers.

Subway economic factors: Customers happily buying subs

 customers have more disposable income than ever. Add in the

benefits of inexpensive options fast-food restaurants typically
offer, and customers are happily spending money at places like
Subway.
 It wasn’t always like this though. Fast food sales were affected
during the recession several years ago. Retaining customers was
difficult; many were laid off or terrified of being laid off. At this
time, fast food was more of a “luxury” purchase. People were
counting every penny and spending it on only the necessities.
 Subway didn’t make the cut.
 Luckily, Subway has shown an ability to adapt to changing trends.
They offer unique and healthy options for the general public.
 They’re a “saving grace” in a world filled with high sodium, high-
calorie fast food.
Social factors affecting Subway: The “Subway” guy

 For many years, Subway’s marketing campaigns starred a man

named Jared Fogle.
 He quickly became dubbed “the Subway guy”. By eating only
Subway, he managed to lose an excessive amount of weight.
 Considering Subway prides itself on being healthy, using Fogle as
a literal “before and after” spokesperson was smart.
 The ads with Fogle were incredibly successful. People knew him
the moment he popped onto the screen.

 Everything was all well and good… until Fogle was accused and
then convicted as a child molester.
 In those months, Subway quickly set a line in the sand between
themselves and Fogle.
 Subway started a race to separate their identity with the Subway
guy they created.
 Subway still has the healthy angle working for them. They just
don’t bring up their former spokesperson. Ever. And for the most
 part, Subway hasn’t suffered too much with their association with
Fogle. But for months, it was difficult for the brand.

Subway technological factors: Easier marketing but easier bad

publicity too

 Changes in technology the quality Subway can offer their

customers.
 The brand can now showcase their full menu online.
 They can also provide nutritional information about each offering,
including the calories of individual meats, veggies, and bread of
their meals.
 Additionally, Subway can advertise their selection on social media.
 Many fast food places put video ads on platforms like Facebook
and Instagram. And they converse with customers on Twitter.
 Answering questions and showing off new promos was once only
possible through print and commercials. Now it’s easier to reach
new audiences.

But the addition of social media isn’t always good.

 It makes it easier for customers to complain. Or leave bad reviews.

 This amount of freedom for customers can be troublesome for
Subway.
  Because unhappy customers are stereotypically the most vocal
online. The anonymity of the internet allows strangers to team up
and complain.
 Businesses have collapsed due to the influence of social media and
consumers before.
 Subway has to be wary of how they manage, handle, and treat
customers when it’s so easy to destroy a company’s reputation
online.

Legal factors of Subway: Food management and food nutrition

 Subway needs to follow food quality laws. This includes keeping

an eye on packaging, distribution of food products, and waste
management.
 Quality must be maintained in their restaurants too. In many cases,
workers must wear hair nets and gloves before handling any
Subway food.
 If Subway can’t maintain proper compliance and hygiene of their
workers, their stores will shut down.
 Additionally, many countries require publicly displaying the
number of calories of Subway foods. Although a legal
requirement, it’s also something customers want. But it’s not a
requirement in every country.
Subway’s environmental factors: A restriction on food additives

 Bills and regulations pressure companies, like Subway, to adopt

greener methods. This includes the management of food and
monitoring how the food is grown.
 Some places criticize the use of pesticides and antibiotics in the
meat served to their customers.
 This concern has led Subway to change the use of additives in their
foods. They wish to distinguish themselves against other fast food
restaurants, like A&W, Sonic, and Jack’s, who were found to use
antibiotics in their meat (in the United States).

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SWOT Analysis

 SWOT stands for: Strength, Weakness, Opportunity, and Threat.

 A SWOT analysis guides you to identify your organization’s
strengths and weaknesses (S-W), as well as broader opportunities
and threats (O-T).
 Developing a fuller awareness of the situation helps with both
strategic planning and decision-making.

When do you use SWOT?

A SWOT analysis can offer helpful perspectives at any stage of an

effort.

 Explore possibilities for new efforts or solutions to problems.

 Make decisions about the best path for your initiative. Identifying
your opportunities for success in context of threats to success can
clarify directions and choices.

 Determine where change is possible. If you are at a juncture or

turning point, an inventory of your strengths and weaknesses can
reveal priorities as well as possibilities.
  Adjust and refine plans mid-course. A new opportunity might open
wider avenues, while a new threat could close a path that once
existed.

Internal External

Strengths Weaknesses Opportunities Threats

Elements of SWOT

 Strengths
o describe what an organization excels at and separates it from
the competition: a strong brand, loyal customer base, a strong
balance sheet, unique technology and so on.
 Weaknesses
o stop an organization from performing at its optimum level.
o They are areas where the business needs to improve to
remain competitive: higher-than-industry-average turnover,
high levels of debt, an inadequate supply chain or lack of
capital.
 Opportunities
o refer to favorable external factors that an organization can
use to give it a competitive advantage.
 o For example, a car manufacturer can export its cars into a
new market, increasing sales and market share, if a country
cuts tariffs.
 Threats
o refer to factors that have the potential to harm an
organization.
o For example, a drought is a threat to a wheat-producing
company, as it may destroy or reduce the crop yield.
o Other common threats include things like rising costs for
inputs, increasing competition, tight labor supply and so on.

Strength Weakness
Opportunities Maxi-Max Max-Min
(Aggressive) (Diversification)
Threats Mini-Max Min-Min
(Turnaround) (Defensive)

SWOT analysis of burger king:

Burger King strengths: Strong brand recognition and video games

 Burger King capitalizes on their brand recognition.

 Sixty-five years after first opening their doors and they remain a
household name all around the world.
  The logo has barely changed since 1969. You can still recognize
the familiar words, “Burger King”, squashed between two drawn
hamburger buns.
 Now, Burger King operates in more than 100 countries. Profits
increased as they expanded worldwide.
 It’s also one of the better way to survive the rollercoaster of
economic fluctuations. Meaning, if one country’s Burger King
operates in has a flatlining economy, it won’t be a huge loss. So
long as it isn’t in other countries.

Burger King weaknesses: Overly reliant on franchise business

model

 Burger King relies heavily on a franchise model. Nearly all of their

restaurants are operated as a franchise.
 In one way, this is a strength for the company. This model has
proven hugely profitable (which is why they maintain it).
 However, overreliance on the system means if something goes
wrong, the entire company could suffer irreparable damage.
 Franchise models easily suffer from bottleneck issues, low staff
morale, and reluctance to meet consumer needs.
 Upgrading the stores with new innovations may be tedious since it
has to go down the chain of franchises. Some stores may adopt the
 changes quicker than others, which may leave consumers
confused.
 As such, it’s difficult to retain brand loyalty. With so many options
to eat out these days, consumers don’t feel compelled to eat at the
same place every time they crave fast food.
 Not to mention, we’ve seen a leap in health consciousness with
consumers. Rather than grabbing something greasy, they reach for
a healthy alternative. Burger King, like most fast food restaurants,
doesn’t have too many options that are both healthy and low
calorie for this audience.

Burger King opportunities: Ordering apps limit long lines and

drives

 Technology allows Burger King to implement new innovation. Not

only is their entire menu available on their website, but they’ve
also created an app to order online.
 Additionally, you can order it for delivery through systems like
Uber Eats. This is great because people still get the food they want
without having to drive over or wait in line.
 Problem is, they’re not the only fast food restaurants using the
same apps. McDonald’s also has an app for ordering. Some places
offer delivery direct from the restaurants. Luckily it’s not an option
everywhere, but neither is Burger King’s version.
  Another opportunity lies in the Asian markets.
 Burger King is looking to expand more stores into Asian markets.
China is a huge, mostly untapped market for fast food restaurants.
India is a close second.
 Although Burger King does have a few joints in both locations, it’s
relatively low. Especially compared to their competitor,
McDonald’s, who has over 1000 establishments in both countries.
 Burger King will be increasing their stores in these locations, but
it’ll be difficult to keep ground. Because their competitors have
been in these markets with more stores for longer.

Threats: Rising competition saturates the market further

 The food industry is susceptible to changing laws and political

policies.
 Regulations must be followed exactly or companies like Burger
King could find themselves in legal trouble.
 By not following safety standards, health codes, and sanitation
requirements, it could force Burger King to close. These things
can’t be pushed aside or skimped on.
 Burger King’s many competitors remain a threat. KFC, Dominos,
Papa Johns, Chipotle… the list goes on. They’re not burger joints,
but that’s the point: people want different foods at different times.
 And with so many options, it means they can have whatever they
want. Whenever they want.
 Burger King’s influence weakens as the competition intensifies.
The market share dwindles.
 The food industry is also experiencing higher hikes on ingredients,
particularly raw materials. Prices have jumped within the last few
years. Add in the increased costs of labor and operations, and
owning a fast food joint becomes a costly venture.

With the health-food loving consumers, who also desire quality foods,
fast food profits are low. And the stark competition, giving consumers
more options for fast food, will only worsen for Burger King and all fast
food restaurants.