There are a lot of factors to take care of when you are assessing the external environment of an organisation. There are a lot of models that can be used to analyse this external environment of the organisation. And one of them is SLEPT analysis. Do you have an assignment to analyse the external environment using SLEPT model? Read on!
Hurry, hurry, step right up. Gather round because we are starting this right now.
Professor, what SLEPT actually is?
Excellent question, Jane. First things should be addressed first.
The SLEPT analysis is a tool that takes into account 5 major external factors that affect the macro-environment of an organisation.
They are –
For short, SLEPT.
By the time you complete a SLEPT analysis, you get an overall picture of the macro environment to identify threats and opportunities. What is the use? You can use them in your SWOT analysis. SLEPT aids in identifying and taking advantage of maximising opportunities and minimising threats.
Moreover, SLEPT provides an understanding of the broad and long term trends. This brings the organisation in a better position for strategic decision making.
Professor, what all is included in these factors?
There are a lot of things that combine to form these external analysis factors, Martin. Let me quickly draw out a couple of common factors that make up these external factors. Here you go –
It includes –
- Social classes,
- Population growth rate,
- Gender distribution,
- Education level,
- Health consciousness, etc.
It includes various laws like –
- Discrimination law,
- Regulatory mechanism,
- Anti-trust law,
- Consumer protection laws,
- Intellectual property laws,
- Employment laws, etc.
Various economic factors comprise of this section. The most common ones are –
- Growth rates
- Credit availability
- Fiscal policies
- Inflation rates
- Monetary policies
- Exchange rates
- Interest rates
Political factors are government policies and interventions in the economy.
- Competition regulation,
- Corruption level,
- Employment laws,
- Trade control,
- Involvement in trade unions,
- Government stability,
- Consumer protection laws, etc.
Includes technological aspects such as –
- the rate of technological change,
- R&D activity,
- infrastructure level,
- access to technology,
- technology incentives, etc.
Professor, how should we conduct this SLEPT analysis?
Well, Clara, conducting a SLEPT analysis is almost similar to conducting a PEST analysis. After all, SLEPT is a specialised derivative of PEST analysis. Here is an overview of how to conduct a SLEPT analysis –
Step 1 – Brainstorm
This is the first step of this analysis. The factors that I discussed above, you do remember them all, right? So, what you have to do now is that you need to list them down on a piece of paper, log onto Google and search for information.
For example, you are conducting a PEST analysis of Uber in Australia. Your search should begin by identifying the area the company is functioning is. What area is Uber in? Right, taxi sharing application.
How your search will begin? You will search for laws for taxi services in Australia (Legal factors), government policies for taxi services (Political factors), etc.
Step 2 – Prepare A Comparison
Remember, kids, that every SLEPT analysis is conducted to analyse our company with respect to a reference ground. So, if you are searching for Social or Political factors for the analysis, you have to prepare a comparison. Maybe that comparison is between Uber and Lyft in the US.
The point is that you need to identify the changes that are taking place in your business environment. You do understand how to search for factors, right? Now you have to see the changes. Remember, changes are always doors to opportunities. Hence, you need to identify these opportunities.
Step 3 – Never Count Your Pennies Too Soon
Kids, when you have assessed your opportunities, do not get over excited too soon. Keep in mind that where there are advantages, there are disadvantages as well. Where there are opportunities, there will be threats as well.
Hence, make it a practice to check how these factors can also harm your business. What doesn’t kill you makes you stronger but for that, you need to see what actually doesn’t kill you.
Step 4 – Lights, Camera and Action!
You have the lights of opportunities in place and the camera of threats rolling. On the basis of these, you have to now prepare your business plan. Take appropriate actions to minimise or eliminate the risks.
That concludes our class for today. Want to learn more?
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