1. BCG Growth/Share Portfolio Matrix
ITOTW 1
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Macro-Environmental (STEEP) Analysis
Intelligence Collaborative - Mastering the Methods Series

2. Macro-Environmental (STEEP) Analysis
This White Paper is #9 in a series of intelligence methods being offered to members of the
Intelligence Collaborative. It was developed by Dr. Craig S. Fleisher to provide a concise
overview of how to apply key intelligence methods to support analysis. Although every
effort is made to ensure that the information is accurate and fit for its purpose, the author
and Aurora WDC make no implied or explicit warranties as to its applicability or use in
your particular work context.
Please direct any questions about this paper to its author at the following:
Craig S. Fleisher, Ph.D.
Aurora WDC
Email: craig.fleisher@aurorawdc.com
http://IntelCollab.com
Other White Papers are available on a regular basis from http://IntelCollab.com. Related
Methods in the series are:
SWOT Analysis
Value Chain Analysis
Win/Loss Analysis
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3. Macro-Environmental (STEEP) Analysis
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4. Macro-Environmental (STEEP) Analysis
Abstract
Macro-environmental (STEEP) analysis is a scan and examination of the external macro-environment in
which an organization exists. It is a useful tool for understanding the socio-cultural, technological,
economic, environmental, and political-/legal environment that surrounds the industry in which your
organization competes. It can be used for evaluating opportunities and threats, market growth or
decline, and as such the position, potential and direction for an industry, market and company.
The Method’s Primary Value
A key question that executives must address in evaluating their company business prospects is “What’s
the company’s present situation?” Two facets of a company’s situation are especially pertinent:
a. The competitive, industry and market environment (-s) in which the company operates. This is
the area in which macro-environmental and STEEP analysis apply.
b. The company’s collection of resources and capabilities, its strengths and weaknesses as com-
pared to its rivals, and its windows of opportunities.
Senior managers must be able to insightfully analyze a company’s external and internal environments to
succeed in developing strategies that is align comfortably and easily with the organization’s company’s
situation, is capable of generating competitive advantage, and has the potential for raising the
company’s financial and strategic performance.
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5. Macro-Environmental (STEEP) Analysis
Overview of the Method
STEEP analysis is a simple and effective tool used in situation analysis to identify the key external forces
(i.e., those present in the organization’s macro-environment) that are and might affect an organization.
These forces can create both opportunities and threats for an organization. Therefore, the purpose of
doing this analysis is to determine the current factors affecting the company, what changes are going to
happen in the external environment and to exploit those changes or defend against them better than
competitors would do. The outcome of a STEEP analysis is insights of the overall picture surrounding the
industry and impacting your company.
Social factors encompass the culture of the society (-ies) that an organization operates within. These
factors affect some industries more than others, particularly those that aim to market and sell directly to
consumers or have recurring models or cycles (i.e., the fashion industry, cinema, etc.). It is important
here to assess demographics, living conditions, religion and its impacts, wealth distribution, class factors,
population growth rates, education levels, and lifestyle trends, among others.
Technological factors refer to the nature and rate of new inventions and progress in their absorption by
the marketplace and consumers, changes in information technology, mobile commerce, and
government spending on research, among other things. Expenditures on research and development,
innovation types and processes, patents, expansion in knowledge around scientific subject matter areas,
changes in process and product technology, patent regulation, and the life-cycle of products are all
assessed in this category.
Economic factors include phenomena that occur in the wider economy. This can include economic
growth rates, unemployment trends, prices and costs of productive inputs such as energy, fuel and
wages, fiscal and monetary changes, exchange rates and inflation rates. These may also vary from one
country to another and all change over time. Tracking them over designated periods (e.g., quarters,
months, years, etc.) is critical in doing this analysis.
Political factors refer to the impact that occurs in the public policy institutions surrounding the industry
and company. As such, it includes governmental, political and legal forms of activity. It is often seen in
government influence on tax policies or government involvement in trading agreements. Political factors
are always interrelated with legal and regulatory factors such as employment laws, trade regulations
and restrictions, competition rules, advertising and packaging policies, and consumer protection.
Environmental factors occur in the ecological or natural environment within which our organizations
interact. The analyst needs to examine the state and evolution of natural resources, the cost to acquire
and process these resources, pollution levels, carbon impacts, measures taken for protecting the
environment and overlapping with the political factors, are environmental regulations.
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6. Macro-Environmental (STEEP) Analysis
Where the Method Fits in Planning and Strategy
Developing an effective strategy typically begins with a strategic appraisal of the company’s external and
internal situations to form a strategic vision of where the company needs to head, then moves toward
an assessment of the highest potential market options and business models, and finally culminates in a
choice of strategy. As such, STEEP analysis is a key component in strategy development and usually is
done in advance of the organization’s annual or regular planning process.
Environmental conditions affect the entire strategic management process. Organizations do not operate
in a vacuum, and a key to effective strategic management is to make decisions that will enable actions to
correspond positively with the context in which those actions will ultimately take place. To some degree,
an organization’s internal conditions, in particular its strengths, weaknesses, resources, or capabilities,
will determine the action. On the other hand, the action is often largely dictated by external factors. To
some extent, the company can shape the environment to its advantage or react in ways that
disadvantage it less than its competitors.
Cautions with Applying this Method
Problems in conducting macro-environmental analysis tend to fall within several categories:
• Interpretation. Organizational decision makers often have difficulties in conceptualizing or
defining what their environment is, making it difficult to interpret the specific kinds of impact
the environmental variables will have and the nature of effective responses that the
organization may choose to pursue. Weaknesses in interpreting environmental factors include
being able to structure meaningful studies, showing financial impact, synthesizing short and
long-term implications, a lack of senior management involvement in the analysis, difficulties in
translating potential opportunities into action plans, and appropriating the time and resources
required to do accurate analysis.
• Inaccuracy and uncertainty. Problems experienced here include inaccuracies in analytical output
in STEEP analysis and lack of faith in the results due to the presence of too many ambiguities
and uncertainties or a combination of both. This can be a result of difficulties in depicting
environmental events and trends and properly characterizing uncertainties in meaningful terms
as well as difficulties in accurately forecasting the effects of STEEP forces and the social and
technological evolution and trends.
• Short-term orientation. Many decision makers dislike spending “real” money today for
speculative results tomorrow and are primarily concerned with short-term matters. Many of the
variables in the STEEP segments take numerous years to evolve, frequently far outlasting the
analysts and decision makers in the organizations who need to understand them.
• Lack of acceptance. Not accepting the value of environmental analysis can be due to
management’s lack of understanding of its value, difficulties in encouraging line managers to
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7. Macro-Environmental (STEEP) Analysis
utilize its outputs, resistance to changing forecasting methods, and presumptions among
managers that they are already experts in the implementation and management of this process.
Another related issue is the failure to link the STEEP analysis to competitive implications. A key
goal of using this technique should always be the identification of competitive implications for
the organization based on the environment analysis.
• Diversified businesses. Human limitations, prior experience, and bias affect environmental
analysis. This is especially true in multinational environments where home-country biases and
attitudes often lead organizations to superimpose their own experiences, views, and
understanding on variables that do not act in ways suggested or supported by the STEEP factors.
Applying the Method
In order to perform STEEP, the analyst has to gather as much relevant information as possible about the
firm’s external environment. Nowadays, most information can be found on the internet relatively easy,
quickly and with minimal costs. When the analysis is done for the first time the process may take a little
longer and as a beginner you may find yourself asking “What changes do I exactly look for in the 5
categories?” We always recommend that you employ a template for gathering and organizing the data.
We provider these for you as part of the Mastering Intelligence methods series here in the IntelCollab.
The environmental boundaries you define will establish the breadth, depth, and forecasting horizon of
the analysis. Breadth refers to the topical coverage of the environmental data collected; depth
determines the level of detail in the STEEP data being sought and analyzed; and forecasting horizons will
usually span the short, medium, and longer terms of time, as dictated by the relevant organization’s
specific environment.
To establish environmental boundaries, examine the organization’s strategic plans with respect to its
geographic reach (where it does and does not compete), its product or service scope (segments,
categories), its time horizon for returns on fixed resource commitments, technology and innovation,
sources of its resources (human, capital, other financial and raw materials), regulatory issues, and
flexibility. Note that the process will be constrained by the resources available and dedicated to
performing the task.
Once the environmental boundaries have been defined, the five STEEP segments can be analyzed by
addressing the following five-step process:
1. Understand the segment of the environment being analyzed.
2. Understand interrelationships between trends.
3. Relate trends to issues.
4. Forecast the future direction of issues.
5. Derive implications.
Upon completion of these steps, the analyst should generate a table or grid that captures this effort. It
will look something like the following:
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8. Macro-Environmental (STEEP) Analysis
Category Factors Impacts
Social 1.
2.
3
n.
1.
2.
3.
n.
Technological 1.
2.
3.
n.
1.
2.
3.
n.
Economic 1.
2.
3.
n.
1.
2.
3.
n.
Environmental/Ecological 1.
2.
3.
n.
1.
2.
3.
n.
Political/Legal/Regulatory 1.
2.
3.
n.
1.
2.
3.
n.
Complementary Methods
• Competitive Profiling
• Driving Forces Analysis
• Forecasting
• Functional Capability and Resource Analysis
• Industry Analysis
• Issue Analysis
• Scenario Analysis
• Stakeholder Analysis
• Strategic Group Analysis
• SWOT Analysis
Additional Resources
See chapter 11 (pg. 187-198) on Scenario Analysis in the (2013) book Analysis without Paralysis: 12
Tools to Make Better Strategic Decisions, 2nd
Ed., by Babette E. Bensoussan and Craig S. Fleisher, Upper
Saddle River, NJ: FT Press.
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9. Macro-Environmental (STEEP) Analysis
Business and Competitive Analysis: Effective Application of New and Classic Methods by Craig S. Fleisher
and Babette Bensoussan, 2007, Upper Saddle River, NJ: FT Press.
Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition by Craig
S. Fleisher and Babette Bensoussan, 2003, Upper Saddle River, NJ: Pearson/Prentice Hall.
Fahey, L. and V.K. Narayanan, Macro-Environmental Analysis for Strategic Analysis, 1986, St. Paul, MN:
West Publishing Company.
Ginter, PM and W.J. Duncan, “Macroenvironmental analysis for strategic management,” Long Range
Planning, 1990, 23(6), pp. 91-100.
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10. Macro-Environmental (STEEP) Analysis
Business and Competitive Analysis: Effective Application of New and Classic Methods by Craig S. Fleisher
and Babette Bensoussan, 2007, Upper Saddle River, NJ: FT Press.
Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition by Craig
S. Fleisher and Babette Bensoussan, 2003, Upper Saddle River, NJ: Pearson/Prentice Hall.
Fahey, L. and V.K. Narayanan, Macro-Environmental Analysis for Strategic Analysis, 1986, St. Paul, MN:
West Publishing Company.
Ginter, PM and W.J. Duncan, “Macroenvironmental analysis for strategic management,” Long Range
Planning, 1990, 23(6), pp. 91-100.
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