Company insolvencies and bankruptcies are on the rise, with research indicating liquidation soared fourfold in the UK between 2021 and 2022. Businesses are also experiencing a fall in customer demand as they traverse challenges such as inflation, rising costs and labour issues. According to Reuters, retail sales volumes fell by 3.0% in 2022, the worst full-year performance since at least 1997 as shoppers cut back on spending.
In order to survive the unstable economic environment, business owners must have an agile business strategy so they can understand risks and unlock new opportunities.
Assessing your current business strategy
A business strategy is essentially a set of goals, actions and activities that specify how and with what goods and services you will compete in your market. Traditionally, businesspeople have analysed external market factors to inform a multiyear plan to prosper in that future state.
However, the process becomes less linear as conditions change more drastically and quickly. Those who already see themselves as strategic must consider the agile environment and become more adaptable in order to survive the ever-changing landscape.
Firstly, you need to think about what you want to achieve. Are you looking to grow revenue, increase market share, open more stores, or hire more people? At the moment it might also include how to stay afloat, weather the storm, find new income sources, expand into more buoyant markets, and move in a new direction.
Then it’s about how are you are going to achieve these goals? Are you going to develop a new service, promote your business in a different location or find new marketing tools?
How to become more agile in your approach
It’s important to think of strategy development as a continuous process that generates a living, dynamic plan. Set yourself one or two priorities and then organise all your efforts around these. You also need to ensure people assigned to those priorities are competent, willing and understand what the goals are and why they must remain in laser focus.
So, how do you select the most appropriate goals that have the highest chance of unlocking the power in your business? This is where the PESTLE analysis comes handy.
The PESTLE analysis
The PESTLE framework enables companies to understand the external environment. In today’s business landscape, it is an essential exercise to identify the immediate impact on a company’s performance, and any changes in market conditions in the longer term. Some conditions are not always controllable, so regular monitoring enables businesses to assess the level of risk associated with their business activities. The PESTLE allows you to make sense of the business environment.
What should you be looking out for?
Political
There hasn’t been a climate of political volatility like what we’re seeing now for quite some time. Politicians’ decisions on issues such as wars, taxes, pandemics, and trade deals have far-reaching consequences for businesses. Consider the implications on your business if there is a change in policy, new legislation, or incoming regulations your business needs to comply with.
Economic
Global economies are being tested, if not broken. As a result of recent events, all of the major world economies are experiencing high inflation or are in recession, with some on the verge of a great depression-like scenario. When deciding where to target your business, consider how various economies are faring, whether they are micro-economies within the UK (towns and cities) or entire economies (countries). Perhaps you’ll need to open a store in a different city to attract new customers, or a lack of talent in your area may compel you to recruit from abroad.
Sociological
Our lifestyles, behaviours, expectations, and social norms have shifted and continue to do so daily. These social changes have shifted consumer preferences. Consider the sudden rise in instant-gratification culture, in which people expect things right away. While instant gratification may appear to have a customer-focused impact, such as people wanting next-day delivery, it has also had a significant impact on employee expectations. If one of your goals is to grow your business and hire more people, you must consider how your employees work: are you using outdated processes, or do they have access to useful digital tools?
Other sociological factors to think about include population demographics to better understand the traits of your target market; knowing if your customers are ethnocentric and what kind of an impact that might have on your operations; and what kind of working patterns you have (hybrid etc.) and how they will affect your business.
Technological
New technology has affected most business and will continue to do so as we see the rise of tech such as artificial intelligence, machine learning, virtual reality, blockchain and chatbots hitting markets. Critical assessment of the technological environment can inform research and development as well as provide an understanding of competitors efforts.
Legal
Government legislation affects many aspects of our ability to run businesses effectively. From employment law to pricing, product safety and data protection, these legislative considerations mean that businesses must constantly adapt to remain compliant.
Environmental
Global warming and the deterioration of our environment is wreaking havoc on businesses of every shape and size. You must be aware of the effect you are having on the ecological landscape, such as the rising demand for organic food. Are you employing sustainable practices or collaborating with the right partners?
Add to this the expectations from the new generation entering the workforce for businesses to be greener and ‘doing their bit’. You need to adopt a focused green strategy – whether it’s around creating efficiency, recruiting compliance leadership, and conducting sustainable marketing. Being environmentally conscious can no longer be viewed as a nice-to-have; if you want to appear as an attractive employer and company to do business with, protecting the environment should be on your agenda. This could involve small steps like using recycled materials to larger commitments like organising a green group in your business that’s in charge of your eco-initiatives.
All these factors point to one conclusion for business strategy: to succeed in turbulent times, you must be agile. You can no longer put all your eggs in one ‘long game’ basket; developing multi-year strategies is now a thing of the past and simply not viable. As the world changes around you, you must be ready to adapt to rapid changes and identify strategic risks and opportunities.
