This article was first published in The Huffington Post on 12/09/2016
In my last article we started looking at the concept of strategy, and why having one is an essential part of running your business successfully.
I referred to two sets of factors which play a part in the development of that strategy and in today’s post, my focus is on those that exist externally.
By “external” I mean external to your business; these influences exist in the wider environment and can make a big difference to how a business – indeed, a whole industry! – operates.
I'll go through each of these external factors in turn.
It would be foolhardy for any business or industry to ignore the prevailing mood in the political arena, since it often leads to policy changes.
It would be foolhardy for any business to ignore the prevailing mood in the political arena
This includes political pressure brought about by petitions, lobby groups, activists and campaigners, and can be a good indicator of what is imminent from a legal perspective (more on legal factors later).
I’ll give you two examples.
The first is the referendum held in June 2016, when the United Kingdom voted to leave the European Union. While it’s now the government’s duty to work out the finer details of Brexit, what is clear is that the outcome will have an impact on how businesses in many sectors operate.
Another example is the announcement in the last budget of a tax on soft drinks, based on their sugar content. While a number of media outlets declared the announcement a surprise, the pronouncement was probably not a bolt out of the blue to industry insiders.
An increasingly vocal anti-obesity lobby with high-profile advocates such as television chef Jamie Oliver, and growing concerns about the impact of diet and nutrition on the youth and National Health Service were signs of impending government action.
While soft drinks manufacturers were up in arms, the diversity of their product ranges assures me they were prepared for precisely this sort of outcome.
According to their website, Coca-Cola alone has more than 500 still and sparking brands (which includes the likes of Diet Coke, Coca-Cola Zero, Coca-Cola Life, Vanilla Coke and Evian), and I am willing to bet their strategy had already taken policy changes such as this into account .
All businesses must consider underlying economic factors, since these have a direct impact on the ability of customers to purchase their goods and services, which in turn has an effect on revenue and profits.
The following questions are just a few worth mulling over with respect to the population as a whole, and your target market specifically:
- In terms of your business’s geographical location, where is that country positioned in the economic cycle? Is the economy buoyant, just emerging from a crash, or heading into one? Note that a subdued economy doesn’t necessarily equate to a lack of business opportunities, but understanding the state of the economy and how your ideal customers are affected by it will give you valuable insight as you shape your strategy.
- What is the prevailing interest rate, and how does it affect disposable income? This may not apply if your offerings cater to a global audience in the online space, but is worth reflecting on if your target market has a specific national focus.
- What is the prevailing rate of inflation, and how does this affect disposable income?
These factors are social and cultural in nature.
Examples are the increased acceptance and promotion of flexible working practices by employers, young people living at home longer, and increased awareness of the environment.
These could all determine how your business needs to respond. And, remember that being proactive about cultural shifts will place you ahead of your competitors and any legislation that may eventually arise.
With the pace of change in the last decade alone, observing trends and planning adequately for technology is not optional.
An example of an area where you may have to make budgetary allocations is internet use on mobile devices.
With the pace of change in the last decade alone, observing trends and planning for advances in tech is not optional
Assessing how much time your target market spends online each day, where exactly they spend the majority of their time online (is it Amazon, eBay, Etsy, Facebook, Instagram, Pinterest, Netflix, Snapchat or Spotify?), and how (is it using a smartphone, a tablet or via a desktop?) will determine where your business should develop a presence, how much effort you put into developing products for those platforms and how you advertise those products.
Using financial services as an example, the Banking Reform Act of 2013 – which will ring-fence retail and deposit banking operations from investment banking – comes into force in 2019.
This has compelled banks to include implementation of this and other mandated regulatory reforms into their roadmap for a number of years leading up to that date.
Another example is the Consumer Contract Regulations (the replacement for the Distance Selling Regulations), which apply when a customer makes a purchase but is not physically present. So, online or over the phone.
The regulations protect consumer rights, and if you sell products or services and accept payment remotely, it stands to reason that compliance with these regulations must form a key part of your strategy.
These could mean you decide to introduce policies to reduce the impact your business has on the environment, such as printing hard copies of documents (e.g. do not print unless absolutely necessary, and recycling paper waste.
It’s been a long post, but I hope it has given you food for thought!
Reflecting on these factors will ensure that your business is primed to move in the right direction in the coming weeks and months.
In my next post I’ll delve into the internal factors that could shape your business’s strategy, so stay tuned!
In the meantime, contact us today if you need help working on your own business strategy.