Whenever analyses are carried out, they are conducted with the intention to know the business environment better. They help in determining the major trends in business and if there are any factors who cause these trends, if yes then what are these factors, how long have they been affecting the trends and with what magnitude, how these trends have changed and evolved over the years and these trends along with their determining factors affect the firm in what manner. All this research helps in forecasting the faith of the business.
For example, if sale of one product shoots up in summer because its substitute product fails in summer heat then it will help in forecasting the sales in summers and thus preparing production schedule to meet the increased demand in the summer season.
STEEP Analysis
It is an extension of PEST analysis where environmental factors are included along with political, social, economic and technological factors. This analysis as the name suggests help in determining afore mentioned external factors: what is the tax policy in the country of business, what are environmental laws and regulations, what are import duties and restrictions and what are export incentives, what are the latest trends in consumer behavior and psychology, what lifestyle changes have recently occurred, what are the social media habits of individuals, what technological improvements have changed business interface and what developments are expected in future, how much needs to be invested in research and development keeping in view the nature of the business and competitor’s spend, what is the product life cycle, what patent laws govern the industry, what is the interest rate offered by banks, which fund raising options are available, what is the rate of inflation and what is the GDP per capita, do majority of universe lie inside the income bracket of your product price range or within it, how big is your market size, how the business will affect the environment and what are the laws regarding dumping. This analysis deeply dissects the external factors and help in making informed decisions and even sometimes aid in predicting the future situation.
STEEPLE Analysis
Add laws and ethical analysis in STEEP and it becomes STEEPLE. Latter is definitely better as it covers more external factors. The debate is not to prove which one is better but to see and determine which one to use in which situation. It includes factors such as: what are the laws regarding minimum wage, what are the safety standards which need to be followed and implemented, what are right of employees, how to build sustainable and healthy working environment for employees, what are the over time charges on average, how to carry out business in ethical manner without disturbing the balance of nature and harming others. For example, if a paper company has to cut trees in order to make papers and hence make money than it should make sure that it is planting trees too and protecting endangered species from getting extinct.
When the company is new to the market and launching a product for the first time then it is advisable to conduct STEEPLE as provides more detailed review of the situation and helps the company in making better future decisions keeping in view that the company will be operating in the environment for the first time therefore it might face new challenges and surprises. It is also safe to perform STEEPLE when a company is about to start business in a new country where it has never done business before.
STEEPLE will help in analyzing the laws and regulations that it will be following once it starts its operations, and this is very crucial for the business because any unruly behavior and attitude can land heavy penalties and losses even before the business starts earning profits. Moreover, it helps the company to understand the ethical boundaries in that country that it must respect if it wants to be considered ethical and worthy of conducting business with. Not only consumers but other business partners as well prefer developing relations with businesses who are ethical in all their dealings.
However, if the company is old and present in the country and industry for long then it can live with STEEP analysis only. as laws and ethics do not need to be analyzed every now and then unless there are some changes made in them, for example if the government makes changes in the laws that will affect the business, then it becomes necessary to analyze laws again or if the government changes altogether then again it becomes a necessity. One analysis is another’s extension so it’s not a debate of which is better than the other, it depends on requirement of the company if STEEPLE provides detailed analysis, then STEEP saves time and effort and hence saves cost. A
good analyst knows which of his tools to use when and make the best utilization of resources at hand because all of us are time bound; none of us have access to unlimited resources. The onus lies on us regarding use of resources.