Business Plan Development Guide (Swanson)

Levels of Analyses

When evaluating entrepreneurial opportunities—sometimes called idea screening—an effective process involves assessing the various venture ideas being considered by applying different levels and types of analyses. Entrepreneurs starting ventures and running existing businesses should also regularly analyze their operating environments at the societal, industry, market, and firm levels. The right tools, though, must be applied at each level of analysis (see Figure 3). It is critical to complete the essential initial research at all four levels (societal, industry, market, and firm). The initial scan should be high-level, designed to assist in making key decisions (i.e. determining if there is a viable market opportunity for the venture). Secondary scans should be continuously conducted to support each part of the business plan (i.e. operations, marketing, and finance). However, information should only be included if it is research-based, relevant, and adds value to the business plan. The results from such research (i.e. the Bank of Canada indicates that interest rates will be increasing in the next two years) should support business strategies within the plan (i.e. debt financing may be less favourable than equity financing). Often, obtaining support data (i.e. construction quotes) is not immediate, so plant a flag and move forward. Valid useful resources may include information from Statistics Canada, Bank of Canada, IBIS World Report, etc.

Societal Level

At a societal level, it is important to understand each of the political, economic, social, technological, environmental, and legal (PESTEL) factors—and, more specifically, the trends affecting those factors—that will affect a venture based on a particular idea. Some venture ideas might be screened out and others might be worth pursuing at a particular time because of the trends occurring with those PESTEL factors. When including this research in your business plan, avoid using technical jargon or informal language that may distract readers (i.e. rivalry among firms) and use simpler language (i.e. competitive environment).

Industry Level

Analysis of the industry level will focus on the sector of the economy in which you intend to operate. Because the right analysis tool must be used for the assessment to be effective, apply Porter’s (1985) Five Forces Model, or a similar tool, to assess industry-level factors. Again, avoid technical jargon (i.e. threat of new entrants) and use simpler wording (i.e. difficulty of entering the market) or flip to an analysis of the threat (i.e. strategies to establish and maintain market share).

Market Level

At the market level, you need to use a tool to generate information about the part of the industry in which your business will compete. This tool might be a set of questions designed to uncover information that you need to know to help develop plans to improve your proposed venture’s success.

Firm Level

At a firm level, both the internal organizational trends and the external market profile trends should be analyzed. There are several tools for conducting an internal organizational analysis, and you should normally apply many of them.