Learn how to do External Analysis of a company (with examples)

Remember Robert Duke from Lesson 1.2? Was he smart enough in his business decisions? Not exactly. He should have tested the water before jumping into it.

Like business, anything requires strategy, whether it is learning five pages of a book or doing any analysis. PESTEL Analysis needs smart approach. This analysis is so vast that you can be lost in the sea of information without reaching to the end, or you can reach to the end without much useful information at hand.

You have to pick only the relevant data and information and leave out the rest. For any factor in the PESTLE analysis, you will find unlimited information from different sources. The trick is to focus only on those information that are necessary.

Now the question comes, “How will you know which information is important?”

To know this, you have to do some homework before you start the journey of information search. First of all, you have to list down all the questions that you want answered for the success of your organization. Your questions can emerge from the goals of your organization. So, when you have identified the goals of your organization, it will be easier to list down the relevant questions. Your goals can be taken from your business proposition.

Let us understand this by taking the example of Robert Duke’s smartphone company that we have been studying along.

Suppose one of the goals of Robert Duke’s company is to sell x number of smartphones (priced at $y) to the customers who have disposable income of more than $y and likes Robert’s smartphone technology and features. Disposable incomes are the money left with an individual to spend or save after deduction of taxes and social security charges.

Now, from this single goal you can come up with the following questions, which can only be answered through macro (external) analysis:

• Does the country, where Robert has his business, has individuals who have disposable income of more than $y?
• How many such individuals are in this country? Are they more than x?
• Is government coming up with any new policy changes that will improve the economy of the country leading to increase in the number of such individuals who can afford Robert’s smartphone?
• Is there any existing or upcoming economic issues that may affect the purchasing power of the citizens in the coming days?
• What is the current growth rate of smartphone sales with the similar technologies and features that of Robert in the country?
• Is there any new technology coming up in the market that will impact the preference for the existing smartphone technology and features?

These are only few of the many questions that you can ask. These questions directly relate to the Robert’s business success. While conducting external analysis, Robert can only focus on these similar questions. He can dig through various online and offline authentic sources to know the answer. He can ignore all other random things that does not have relevance to the company. As for example, a WHO report on the current water crisis of the country may seem useful as it is related to the macro analysis. But it is not directly relevant to the operation of Robert’s business.

So the trick to conduct correct PESTEL analysis is to first list down the relevant questions, and then go about finding the answers to these questions. It will save time and get things done faster.