Economic, Social and Environmental Analysis for Business Sustainability

ECONOMIC, SOCIAL AND ENVIRONMENTAL ANALYSIS 1
Economic, social and environmental analysis
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ECONOMIC, SOCIAL AND ENVIRONMENTAL ANALYSIS 2
Introduction
The primary reason any rational and prudent investment is to make profits after meeting all the
expenses. Therefore, investors tend to channel their resources into the most profitable ventures.
To identify the most profitable undertakings, rational investors utilize a number of investment
tools, techniques and strategies (Žižlavský 2014). For there to be sustainability of any
investment, a strong understanding of the internal and external business environment is
important. This helps in indentifying risks, competitors and other factors which may affect the
investment. Therefore, the entrepreneur faces the challenge of balancing to meet the
requirements of the business environment and to make a good return on the investment. Some
business are setup without a clear analysis and much as they may make profit, it is at the expense
of the environment. Thus it is important to study the environmental variables in order to gain a
strong competitive advantage, attract and retain customers and at the same time gain a larger
market share(Žižlavský 2014).
Meeting customer’s expectation
In order for a business to sustain a good customer base, they should lay strategies to that meet the
customer expectation. In this way, they should provide a good customers service, understanding
customers and what they want is the first step towards meeting the customer’s needs(Gresty
2008, pp.11–24).
However, the business fails to meet the expectations of the customer, they shift business
elsewhere. Good business owners usually learn to listen and address consumer complaints.

ECONOMIC, SOCIAL AND ENVIRONMENTAL ANALYSIS 3
Despite the fact that addressing customer needs improves business performance, some customer
complaints require solutions that are not economically viable and may not meet the legal
requirements for operation of the business.
Economic Analysis.
Any investment decision bases on a decision rule which subjected to circumstances. However,
making this decision should be based on the following input; cash flows, project life and the
discounting factor. How effective the decision make is, depends entirely on how the above
factors have been critically analyzed and assessed (Kelly 2010). A clear understanding of the
business before implementation is required to produce a reliable estimation of the cash flow. The
duration of the business also called project life is very vital. The cost of capital is considered as a
discounting factor and therefore subjected to change over the year.
Capital budgeting is very important for any new business and it is grouped into two main
categories: capital budgeting under certainty and capital budgeting under uncertainty. Capital
budgeting (also known as investment appraisal criteria) under certainty is also broken down to
two groups; non-discounted and discounted cash flow methods(Mcafee et al. 2007). The former
capital discountingapproaches do not put into account the value of money over time and are
therefore only appropriate for short term businesses that do not last for more than a year. They
include Pay Back Period (PBP) and also Accounting Rate of Return (ARR). The discounted
methods are regarded as the modern technics since they put into consideration the value of
money over time. These methods are; Net Present Value (NPV), Profitability Index (PI)and
Internal Rate of Return (IRR). For the purpose of this paper, special emphasis
will be put on discounted cash flow methods specifically Net Present Value.