What is Environmental Analysis? – Step by Step Guide

What is environmental analysis, and why is it important for marketing? All around the world, companies use it to check their existing strategies and for planning future strategies.

Are you amazed to know that? Let us dive into its details to learn more about it, the steps to perform it, and its benefits.

What is Environmental analysis?

The process in which all external and internal factors that affect the business are discussed is known as environmental analysis. Sometimes it is also known as PEST analysis which is the acronym for political, economic, social, and technological factors.

External factors refer to the opportunities and risks on which we have no control. However, internal factors include all company entities, for example, company workers, strategies, etc.

Step by Step Process of Environmental Analysis

There are just a few steps that you will have to follow for environmental analysis. The implementation of policies based on its result will have long-lasting effects on your business and its growth.

Identification of Factors

First of all, you have to go in-depth and identify everything that influences business or can affect the company later. Write down all things which are affecting it, whether on a major level or minor level.

For example, go through your company’s working process and write all factors affecting it, then go to the market and gather information. In the end, identify factors at the national and global levels.

Inspection of Factors

Now go into detail about all factors and check their strength. If an agent has minimal influence on business, ignore it. Make a list of all agents that are strongly affecting the business.

It is a critical step because some things will look small, but they do affect business very much, so before making any decision, make sure that factors have a minimal influence and you can ignore it.

Effect of Factors

Do a detailed analysis of all factors and check how they are affecting your business. Furthermore, analyze the target area of all agents to prepare a better strategy to cope with them.

There are different techniques that are used to study the influence of factors. Following are a few of them which are most effective and widely used

  1. Benchmarking
  2. Delhi technique
  3. Scenario building

Make Predictions

One by one, take each factor and think about how it will affect your business if left untreated.  An agent that you feel will help you grow your business in the future and has a positive effect leave it unaltered

 But if you find that some factors will destroy your business and put you at a loss, think about them and make the strategy to overcome their negative effects. In short, forecast the effect of each factor.

Advantages of Environmental Analysis

What is environmental analysis, and what are its advantages.  It is very important for any organization, business, and company performance. Following are its major benefits

Check and Balance employee’s Performance

One of its most significant benefits is that you can assess the working and performance of employees. You get to know how they are working, and is there any need to replace some people with more talented people?

Moreover, you get to know the weak areas of your workers, and then you can arrange a training session for them and ask them to learn those skills for their betterment and companies’ progress and prosperity.

Customer Satisfaction

This analysis also helps you in finding what people’s reviews on your product are. You will get to know the most famous and beneficial features of your product and few things due to which people avoid your products.

Thus, you get a chance to work in your weak areas and make your services better and get 100% client satisfaction which will increase your revenue,

You can plan your next strategy better as you know the things that need to be changed and agents that are working well, and there is no need to change them, but you can modify them further.


It helps you determine the priorities and budget of people; thus, you can modify your product’s price accordingly. For example, if you find out that a product is not selling because it is out of range of people.

You can introduce a new product having almost similar specs, but the price is a bit low.  However, if you find that people have no problem with its price, you can launch a new pricey product having a few innovative features to increase your revenue.

Identification of Threats

You get to know what is happening in the market and what things are overshadowing your product, and can soon cause you a significant loss.

So, you can make new plans and strategies or modify existing ones to help your company better cope with threats and prevent it from loss in the future.

Grab Opportunities

Most importantly, you get to know what is in demand in the market and the problems people face nowadays. Once you identify their needs, then plan strategies accordingly to them.

Similarly, if you see that there is an excellent product but have a few cons, grab this opportunity and introduced a product that overcomes its cons within the same budget.

Optimum use of Resources

By environmental assessment, you get to know about all the resources and their use in marketing. There are three main types of resources human, natural, and capital resources.

Thus, have a detailed view of each resource and then plan something to use them better. Similarly, if you see that some resources are wasting and there is a need to implement a plan for using them to their best, make a plan and execute it as soon as possible.

Helps in Making Strategies

The most significant benefit and the main reason to learn what is environmental analysis is that you gather a lot of information, facts, and figures. This information helps in making better policies and modifying existing policies according to the situation.

Strategy and its implementation is the pillar of the business. With the help of environmental analysis, you get to know your target audience and their mindset, and you can plan your strategy according to it.

Survival and Growth

Identifying weaknesses, strength, threats, and opportunities help you make better strategies that, in return, keep your business alive and let you survive in the world of highly competitive businesses.

Moreover, environmental analysis increases the rate of business growth and profit, resulting in the company’s prosperity and its employees.

Helps in Making Decisions

You will have plenty of opportunities and options, but you have to choose a few of them. The data you will collect from the environmental assessment will help you in making the decision.

Now you have a complete understanding of what is environmental analysis, how to perform it, and its importance.

Final Words

In a nutshell, environmental analysis is very important for the survival and growth of the business. It helps you identify weaknesses, strengths, threats, and opportunities that influence organizations’ performance, so you can make better strategies for earning profit and overcoming future problems.