Business Environmental Analysis

This project report explores the impact of the business environment on the performance of companies, specifically focusing on British American Tobacco plc. It includes a detailed analysis of macro environmental factors using PESTLE analysis and identifies the strengths, weaknesses, opportunities, and threats of the chosen business entity using SWOT analysis. The report highlights the role of SWOT and PESTLE analysis in decision-making for companies.

BUSINESS
ENVIRONMENTAL
ANALYSIS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. PESTLE analysis in order to identifying and discussing different macro environmental
factors which have impact on businesses.....................................................................................3
2. SWOT analysis in order to identify strength, weakness, opportunity and threat of chosen
business entity..............................................................................................................................5
3. Key findings and role of SWOT and PESTLE analysis in decision-making for companies...7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The term business environment can be defined as a combination of internal and external
factor which can impact to companies monetary and non monetary performance. The aim of
project report is to demonstrate understanding about impact of environment on business
performance (Patnaik, 2017). In the project report a company has been chosen which is British
American Tobacco plc. This company operates its operations in the context of manufacturing of
Cigarette and Tobacco products. The project report covers detailed information regards to
positive & negative impact of macro environment. As well as internal & external analyse of
chosen business entity.
MAIN BODY
1. PESTLE analysis in order to identifying and discussing different macro environmental factors
which have impact on businesses.
PESTLE analysis- This can be defined as a kinds of tool which is applied by business entities in
order to evaluate macro environmental factors. It is useful for those companies who started a new
business or entered into new market (Jenkins and Williamson, 2015). Under this method, a vital
range of factors analysed. Herein, below in the aspect of British American Tobacco plc this
framework has been applied in such manner:
Political factor- It is a type of factor which includes government policies, political stability &
instability, political relation of one nation with another etc. This can impact to performance of
businesses in both positive and negative manner. In the aspect of above respective company, its
positive and negative impacts are demonstrated below in such manner:
 Positive impact- In the case when political conditions in UK are stable and in the favour
of doing business then it can be easier to British American Tobacco plc to conduct their
operations effectively.
 Negative impact- The negative impact of this factor is that if political relations are not so
good between UK and other countries then above respective company can not expand
their services in rest of nations.

Environmental factor- Under this factor different kinds of elements are included such as
economic growth, exchange rate, inflation & interest rates and many more. These aspects can
impact to performance of businesses for long time period in both positive and negative manner.
In the context of British American Tobacco plc, its impact are demonstrated below:
 Positive impact- This factor can affect in positive manner to business entities if market
condition is favourable (Hassanien and Dale, 2019). Such as in the above company, they
can generate higher profit if demand of tobacco products is higher in UK market.
 Negative impact- It can become cause of negative affect of performance of companies if
there are too much fluctuation in economical environment. Such as if exchange rate in
UK gets lower then it can be difficult for British American Tobacco plc to do import and
export with other countries.
Social factor- In this factor demographical characteristics, norms, age & income distribution,
cultural barrier etc. are included. These elements are necessary to be followed by businesses
during preparation of plans and policies. It has some positive and negative affect on companies'
performance which are as:
 Positive impact- This can affect positively to businesses if they prepare their strategies in
accordance of social factors. Such as in the British American Tobacco plc, it can impact
them positively if they follow all above mentioned elements. For example, it is essential
to them to not offer their tobacco products in area of schools and colleges.
 Negative impact- It has some negative impact too on businesses such as if customers
perception changes then this can be difficult to above company to sold out previously
produced products.
Technological factor- This factor is related to innovation in techniques and technologies which
can affect businesses in both positively and negatively. It includes technological advances,
automation, R&D activity etc. Below its favourable and unfavourable impact on companies are
mentioned in such manner:
 Positive impact- It can impact positively to above company if they implements new and
advanced techniques in production process. This is so because by help of it cost of
producing tobacco products will be lower.

 Negative impact- This may affect negatively to companies if they will not adopt new
techniques because competitors can beat them. Same as in British American Tobacco plc,
this factor can impact them negatively if they will not adopt new and advanced
technologies.
Legal factor- This factor includes various kinds of laws and legislations such as discrimination
law, employment law, consumer protection law and many more (Falkner, 2017). It is essential
for companies to follow all rules and regulations so that this can not be affected them negatively.
 Positive impact- It can impact positively to British American Tobacco plc' s monetary
and anti monetary performance if they follow all laws regards to employment and health
of work force.
 Negative impact- This may affect negatively to above company because if they ignores
some key legislation like discrimination law and wages law then their employees can
protest against them.
Environmental factor- It can be defined as a type of factor which includes different aspects such
as weather, climate changes and many more. This factor is uncontrollable and it may effect
positively and negatively to business entities.
 Positive impact- This factor can impact to performance of businesses positively if their
operations and activities do not harm to environment. Such as for above company, it is
essential to them manufacture tobacco products by considering protection of
environment.
 Negative impact- It can effect negatively to above company if weather changes or any
natural disaster occurs such as flood. Due to this their existing operations and activities
can be affected in a negative manner.
2. SWOT analysis in order to identify strength, weakness, opportunity and threat of chosen
business entity.
SWOT analysis- It can be defined as a type of framework which is used by business entities in
order to analyse strength, weakness, opportunity and threat. In the context of above chosen
British American Tobacco plc this tool applied in such manner:

Strength- This can be defined as those positive elements which a business entity has inside its
functions. Such as strong brand name, goodwill are some example of strength for companies
(Ott, 2018). British American Tobacco Plc has below mentioned strengths which are as follows:
 Cost structure- The company has lower cost structure which helps in producing and
selling tobacco products at lower cost.
 Financial position- The company has a better monetary condition with regular profits in
previous five years. As well as they have accumulated profit reserves which may be used
for further capital expenditures.
 Dealer community- British American Tobacco has effective relation with its dealers
which helps them in offering suppliers of needed material as well as in promoting their
products and services.
Weakness- This can be defined as those negative elements which a business entity has inside its
functions. Above company has below mentioned weaknesses which are as follows:
 Higher day sales inventory – British American Tobacco plc consumes higher amount of
time in order to buy and sell products in compare to rest of their competitors. This is a
main weakness for above company.
 Higher employee turn over rate- In the above company, employee turn over rate is too
much higher which is showing that there are more number of people who are leaving
jobs. Due to this company is making higher spending on training and development of
new joined employees.
Opportunity- It may be defined as those positive aspects which are existing in external
environment and can be beneficial for companies. British American Tobacco Plc has some
opportunities which are as follows:
 E-commerce- In the present business scenario, companies are expanding their products
and services by help of e-commerce. British American Tobacco plc has an opportunity of
selling their products by help of e-commerce which may lead to generating higher sales
revenue in less cost.
 Social media- The users of social media are increasing day by day. There are three key
social media platforms which are Facebook, Twitter and Instagram. Above company can

use social media sites for promoting their tobacco products. This way of promoting
products can be helpful for them in order to reach large number of customers in less time
and cost.
 Interest rate- Lower interest rate in the market of United Kingdom can provide
opportunity to British American Tobacco plc to expand their business operations by
taking loans at cheaper rates.
Threat- It may be defined as those negative aspects which are existing in external environment
and can affect negatively to companies (Hillary, 2017). British American Tobacco Plc has some
threats which are as follows:
 Technological developments by competitors- Competitors of above company are
applying new and advanced techniques which is becoming a cause of threat to them. It is
so because due to this customers are attracting towards competitive companies to acquire
products at lower cost and with advanced techniques.
 Suppliers- The bargaining power of customers is increasing year by year which is leading
to decreasing in number of suppliers. As a result, they are unable to produce products at
lower cost.
 New entrants- There is no barrier to enter new companies and due to this competition is
increasing. Such as the above company can face issue of higher level of competition in
external environment. Due to this their sales revenues can be fell down.
3. Key findings and role of SWOT and PESTLE analysis in decision-making for companies.
In the current business scenario businesses can be successful if they have analysed macro
and micro environment in which they operate. Herein, below reason to use SWOT and PESTLE
analysis is mentioned in such manner:
 Evaluation of business- Both of the techniques are crucial in order to conduct a
systematic evaluation of all business processes and functions. Such as in the above
chosen British American Tobacco plc, they apply both of frameworks which are helping
them in order to make overall evaluation of different aspects.
 Helps in understanding changes- SWOT & PESTLE analysis techniques are useful for
companies in order to understand changes in environment and its impact on performance

of companies. Such as in the above company, their management department is aware
regards to environmental changes and they make strategies accordingly.
 Contributes in understanding pros and cons of major decisions- Another reason to apply
both of frameworks is that by help of it managers can become aware about impact of
major decisions on companies' performance. Like in the British American Tobacco plc,
their manager critically evaluates affect of major decisions on companies performance.
Role of PESTLE and SWOT analysis for decision-making:
Importance of PESTLE analysis- This framework contributes in an effective manner in order to
take crucial decision-making. It helps to managers by evaluating impact of each aspect of macro
environment. Herein, below role of this tool for making decision is mentioned in such manner:
 Informs about both internal and external factors- PESTLE analyse plays a key role in
providing information regards to internal and external factors which can affect to
company's performance. Such as in the above company their managers use this
framework to become aware about internal and external factors.
 Overview of current position- In addition, this framework helps to managers in providing
information regards to current condition in external environment so that they can make
policies accordingly.
 Helps companies to understand economical aspects- As well as it is useful for managers
in the context of understanding about current market and economical conditions. By help
of this, managers of British American Tobacco plc can take suitable steps in financial
decision-making.
Importance of SWOT analysis- Same as the above framework, it also contributes in better
decision-making. Below its importance in context of taking suitable decision is mentioned in
such manner:
 Helps in identifying threats and opportunities- This tools provide mechanism to
companies in order to finding key threats and opportunities that helps in effective
decision-making.
 Helps in setting objectives- In addition, SWOT analysis contributes in an effective
manner for companies in order to set objectives and goals. Such as in the above company,

their managers set further goals and objectives in accordance of identifying own
weaknesses and strengths.
 Identify core competence- Along with by help of this framework managers can find out
core competence and accordingly can make plan for further time span.
CONCLUSION
On the basis of above project report it has been concluded that SWOT and PESTLE
analysis are helpful for companies in understanding overall performance. The report concludes
about SWOT analysis of chosen business entity. Along with positive and negative impact of
different factors of PESTLE analysis is also concluded in report.

REFERENCES
Books and journal:
Patnaik, P., 2017. Handbook of environmental analysis: chemical pollutants in air, water, soil,
and solid wastes. Crc Press.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Hassanien, A. and Dale, C., 2019. Hospitality business development. Routledge.
Falkner, R., 2017. Business power and conflict in international environmental politics. Springer.
Ott, W. R., 2018. Environmental statistics and data analysis. Routledge.
Hillary, R., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.