An analysis of essential strategic factors enables you to gain an insight into what the prospective business can and cannot achieve. Its purpose is to identify what strategic factors are essential for the business to succeed, which of these factors you can control, and which factors are beyond your control. The analysis will enable you to recognise what strengths and weaknesses the business is likely to have, what opportunities you can exploit, and what risks may jeopardise your success. Essential strategic factors are those elements which are absolutely necessary for the business to succeed. They can vary enormously from one type of business to another. Examples of strategic factors include:
• The need for a certain type or size of target market
• Availability of certain products
• Dependence on a highly reliable source of supply
• A certain size, location or layout of facilities
• Essential services such as telecommunications or transportation
• Assured finance on reasonable terms
• Highly skilled or experienced staff
Some of the essential strategic factors may be beyond your control. The objective is to identify them and to determine whether or not they are working in your favour.
Uncontrollable factors generally consist of the following external influences:
Competition Legal restrictions
Economic conditions Government regulations
Social and cultural trends Industrial relations
Controllable factors generally consist of the internal functions of a business. Eventually these factors will become the basic dimensions of your business plan. The objective is to identify those that are among your essential strategic factors and to determine whether or not you can harness and control them. Controllable factors usually fall into the following categories:
Analysing essential strategic factors enables you to recognise how to maximise your internal strengths to take advantage of external opportunities, and how to minimise your internal weaknesses and exposure to external risks. Having identified and evaluated the essential strategic factors, you will have to make a ‘seat-of-the-pants’ judgment about the attractiveness of the idea and whether it is worthwhile to continue with an examination of its financial feasibility.