The STEEP analysis is a commonly used tool in the marketing sectors to evaluate various external factors that can affect an enterprise. In the business world, there are immense pressures of taking quick decisions and acting on those decisions without any careful analysis of the circumstances. Thus the STEEP analysis is implemented by the organizations to determine which external factors would impact the revenues. This analysis also assists in predicting the trends in the future. The STEEP analysis is an acronym for Social, Technological, Environmental, Economical and Political.
Many companies around the world rely on the STEEP analysis for their brands. The main goal of the STEEP analysis is to determine the required strategies for the future and understand the market before the introduction of any new brand. This analysis also offers concentrated information regarding different elements of the business environment. STEEP creates a bridge between the future trends and socio-politico reality. The analysis provides a clear overview of the situation the organization might be in due to specific decisions.
Also known as the Bird’s eye view, the STEEP analysis describes stimulus and the situations that surround that business and trades. This helps an enterprise to visualize roles, relationships, and needs of the future suppliers and consumers. In the STEEP analysis, a change in one factor will also lead to the change in another one. For instance, technological factors can influence economic factors or political decisions that can have economic consequences.
The Factors of STEEP analysis
The five factors of STEEP analysis that influence the results are as follows. They are:
The social developments of an organization include factors like religion, consumer behavior demographics, values, lifestyles, advertisement, attitude, consumer trends, distribution of income, development of the population, education, and security. Different aspects within society like friends, family, neighbors, colleagues, and media also influence the social factor of the STEEP analysis. Change in the socio-cultural environment can create a drastic change in an established strategy.
Technological factors have significantly changed how organizations operate. Technological processes generate a society that needs instant results. The technological elements of STEEP analysis include attributes like communication, transport, innovation, development and research, patent regulations, energy, and product life cycle. The invention of new technologies reduces the life cycle of the product and increases the product demand. Technological factors help in the fast exchange of information between the stakeholders that can benefit the organizations due to the capabilities to react quickly to the changes.
The economic factors of the STEEP analysis are directly proportional to the buying position of the consumer. It also determines the capacity of an individual to acquire particular services or products under certain economic conditions. Strategic analysts should properly assess what will be the reaction of the customer towards a certain product if the economic environment changes and how the firm should react to that change to remain ahead in the competition under certain circumstances. The economic factors in the STEEP analysis include international trading, rate of interest, taxes, availability of jobs, inflation, business cycles, subsidies, resource availability, stock quotes, and fluctuations of the currency rate.
The environmental aspect of the STEEP analysis includes the current scenario of the biological and physical environment that the companies might encounter. Companies who deal with the manufacturing of goods with natural resources have to invest time to minutely examine the ecological environment of the country where they were going to sell their services or goods. Environmental developments of the STEEP analysis include ecological elements like wind, water, energy, environmental regulations, food, pollution, soil, natural resources, transport routes, global warming, waste disposal and management, and energy-saving technologies.
The political aspect of the STEEP analysis includes the study of the legal and political environment of a country where the organization is currently operating. Failure to analyze this element properly will result in losses that might be too costly to deal with. Thus it is very important to be aware of the current political scenario or in the upcoming shift in power. Factors that need to be considered while analyzing the Political aspect for the STEEP analysis are political stability, tax policies, price regulations, monopolies regulation, consumer protection, trade and jurisdiction unions, labor market policies, competition oversight, state legislation, restrictions or tariffs, and clarity of a particular law.
When to Utilize the STEEP Analysis?
There are three situations under which an organization should conduct a STEEP analysis for their business. They are as follows.
- During the time of Uncertainty
There are certain times when the strategic plan is finalized. But still, some managing members are not sure about how the market will respond to the changes in the price or features of a product. In this situation, a strategic analysis collects information through STEEP analysis to gather the reaction of the market before the launch of the service or product. Accurate Information on the current environmental trends will reduce the chances of uncertainties.
- During Times of Disorganization
STEEP analysis can help to paint a clear picture when an organization seems to be confused about the external environmental factors. However, if the analysis is conducted properly, then the result will assist the firm to organize themselves properly and to reach the objectives of the set strategies.
- During Times of Overload of the Information
When there is a constant flow of inkling information regarding the external factors, then information overload can happen. In this circumstance, the strategic analysts can employ STEEP analysis as the information begins to arrive. This analysis helps the analysts to decide which information should be kept to build a concrete strategy. All the other irrelevant and outdated information is discarded.
Moreover, the STEEP analysis helps to get a clear understanding of how each factor of the analysis will affect the planning process during the times of a downturn in the economy and lack of investment. In today’s world, all the big and small enterprises are taking advantage of this analysis and setting up their best strategic plans for the firm.