Tools for Analysing the Business Environment

Jun 11, 2020 | HR

Over the years, the human resource function has evolved into HR partnership. HR has become vital in improving the overall activities of any organisation, working closely with senior teams to oversee that the company’s goals are achieved. It is important that HR continues to critically assess the micro and macro factors that influence good HR. To assess the business environment, HR can use some useful tools for analysis, such as the SWOT analysis, PESTLE analysis, and Porter’s five forces.

SWOT Analysis

SWOT technique is a tool for analysing the business environment to determine strengths and weaknesses, opportunities and possible threats. This technique enables any company to devise appropriate strategies to exploit opportunities while combating possible threats. Companies are also able to identify weaknesses and develop strategies and tools to minimise them.


Every company should consider the PESTLE analysis while formulating its business strategy. Under this analysis, political, social, legal, economic, technological, and environmental factors are considered because they may directly or indirectly affect the business operations of a firm.

Porter’s 5 Forces

Porter’s five forces technique is a vital tool in assessing a company’s competitive position. These five forces are buyers’ power, the threat of substitution, the threat of new entry, supplier power, and competitive rivalry. An analysis of these factors enables a company to determine the best way to operate.

Comparison of Tools for Analysing the Business Environment

SWOT analysis is a useful technique in analysing existing business conditions and predicting the future position of a company. The tool allows a firm to identify its weakness and determine available opportunities. These insights provide an organisation with information regarding its resources (workforce and otherwise) and allows it to remain in a competitive market position. On the other hand, a PESTLE analysis is essential for firms interested in analysing its own product or service and the wider industry. Importantly, this analysis offers a broad view on the macro environment, which is vital in proper decision making. Porter’s five forces focuses on analysing competition in the market and their performance. This competitive assessment helps determine the viability of a business and its products and services.