Strategic Planning in the Small Business

HO

2-4 (continued)

Unit 2

firm can

be studied constantly.

There is neither

the time nor

the resources

to do so. Moreover,

much environmental

infor­

mation is extraneous

to a particular

situation and

therefore,

has negligible

effects on the

business. Managers

must select the

specific environmental

factors

that have the most

critical impact

on their firms.

These become

the factors

to track, study,

and

analyze. Although

certain general

matters

may be commonly

felt by all firms,

each company's

managers

will concentrate

on

the key environmental

factors

peculiar to

its situation.

Consider

the following

example.

All small firms

are af­

fected

by the economic

situation of

their particular

commu­

nity or trade

area. However,

the need

to track and

monitor

changes

differs

greatly from

business to

specific economic

see that

the store's

business. A

local variety

store owner

may

success

is affected

by interest

rates and

unemployment.

How­

ever,

because

the bulk of the

store's sales

come from

low-price,

high-turnover

items, shifts

in interest

rates and unemploy­

ment

do not visibly

impact

the store's sales.

In comparison,

a

small

woodworking

business

that specializes

in building

kitchen

cabinets

encounters

a different

situation.

It's sales represent

investments

by consumers

in their

homes. Kitchen

cabinets

are

a

that consumers

expensive,

and may

be considered

luxury

might

postpone if

economic times

are tough.

Historically,

the

firm's

management

knows that

as interest and

unemployment

rates climb,

consumers

are less

likely to consider

purchasing

new kitchen

cabinets.

Therefore,

in developing

their environ­

mental

analysis, these

managers

closely monitor

inter:st

rates

and unemployment

shifts as indicators

of their

level of

busi­

ness activity.

HistoricalApproach

The

question remains,

how

does one know

which environ­

be sure

which external

mental factors

to track? How

can one

factors

are moct

important to

the business both

today and in

the

near-term future?

One way to

make this determination

is

to rely

on historical

trends. A careful

examination

of the past

may

signify the external

environmental

factors that have

most

39

Chapter

One Environmental

Analysis

182