professional life 2-lesson one

Future uncertainty

Theory: STEEP analysis

"Nothing can be certain except death and taxes"

Benjamin Franklin, scientist and one of the founding fathers of the USA

A STEEP analysis is a commonly used tool in business that companies and organizations use to make sense of their wider macro-environment. The theory is widely taught in business schools. 

A STEEP analysis is used to identify the external forces affecting how individual companies compete within their industry sector. These external forces within the wider macro-environment consist of Socio-cultural, Technologies, Economic, Environment and Political factors. 

Socio-cultural

This aspect focuses its attention on forces within society such as family, friends, colleagues, neighbours and the media. Social forces affect our attitudes, interests and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. For example, in many countries in the world, people's attitudes are changing towards their diet and health. As a result, these countries are seeing an increase in the number of people joining fitness clubs and a massive growth in the demand of organic food.

Population changes also have a direct impact on organisations. Changed in the structure of the population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall in developed countries. Conversely, an increase in the global population is currently leading to calls for greater investment in food production. Due to food shortages African countries, such as Uganda, are now reconsidering their rejection of genetically modified foods. 

Technology factors

Technological advances have greatly changed the manner in which business operate. Technology has created a society which expects instant results. This technological revolution had increased the rate at which information is exchanged between stakeholders (customers, suppliers, employees, government, etc). A faster exchange of information can benefit business as the are able to react quickly to changes within their operating environment. However, an ability to react quickly also create extra pressure as business are expected to deliver on their promises within ever-decreasing timescales. Customers can now shop online 24 hours a day for their homes, work, or on the move from their phones. Technology will continue to evolve and impact on consumer habits and expectations. Organisations that ignore this fact face extinction. 

Economic factor

All businesses are affected by national and global economic factors. National and global interest rates and tax policies will be set around economic conditions. The climate of the economy direction how consumers, suppliers and competitors behave within society. For example, an economy in recession will have high unemployment, low spending power and low confidence. A successful organisation will respond to economic conditions and respond appropriately. In this global business world organisations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example, cheaper labour in developing countries affects the competitiveness of products from developed countries.

Environmental factors

Companies and organisations are increasingly aware of the huge impact the natural environment can have on the other STEEP factors and on business in general. Factors include global warming and climate change, increase pollution levels, deforestation, etc. If, for example, there are adverse weather conditions in India, consumers throughout the world will pay more for tea at their local supermarket. Environmental factors are particularly important when it comes to the question of energy and the decreasing availability of natural resources such as oil, fresh water and minerals such as iron and uranium. 

Rapidly increasing competition for these resources is leasing to rising prices and in some cases to wars and large-scale social unrest. 

Political factors

Political factors can create advantages and opportunities for organisations. Conversely, they can place obligations and duties on organisations, Political factors include legislation such as the minimum wage, employment law and environmental legislation. An example of tough environmental laws in California, which became the first state in the USA to regulate emissions of the greenhouse gas carbon dioxin from motor vehicles. Vehicles with high levels of emissions simply cannot be sold any longer in California  Regulations and laws are not just at a national or a local level but are increasingly coming from international bodies such as EU and the WTO (World Trade Organisation) on issues such as market regulations, trade agreements, import taxes, etc. Failure to conform to these legal obligations can lead to sanction such as fines, adverse publicity and imprisonment.