What is STEEP Analysis
Marketers and analysts use a STEEP analysis to identify outside factors that can significantly impact an organization. Often, business decisions are made too quickly, without enough thought given to the potential repercussions. The STEEP analysis looks at external factors that influence trends, allowing you to analyze the past and predict the future. This analysis enables you to take a step out of your personal experiences and gain a better understanding of many influential factors that may affect your decision making. Working through a STEEP analysis is a great way to ensure that you stay aligned with the company's values.
STEEP is an acronym for Social, Technological, Economic, Environmental, and Political. Other acronyms include PEST, PESTLE, STEP, and STEEPLED. We find that STEEP covers the five most important factors to consider when looking at predicting the future and strengthening your strategic planning.
Five Factors of STEEP Analysis
Five factors create the foundation for STEEP analysis. They are as follows:
The social aspects should describe a society in its current state. This information can be a mix of demographic and social data such as age distribution, gender, religion, values, lifestyle, income distribution, education, advertisement, and other consumer behavior factors. These social factors can also be influenced by the workplace environment, family, friends, or media. The STEEP analysis' social shifts can drastically affect any organization's strategic plan, so it's essential to monitor changes closely. Adapting to social trends might improve the quality of your workforce or help you manage core product changes to meet changing needs of the consumer.
The technological aspects of STEEP analysis include factors like communication, transportation, energy, patent regulations, innovation, automation, and the life cycle of products. The invention of new technologies can alter an industry by entirely transforming the way a business operates. Technological shifts can significantly affect costs, but a quick response can save money and inspire innovation. Changes in technology may also directly affect decisions on outsourcing, which is a crucial determinant of profitability.
The economic aspect of the STEEP analysis is directly connected to the buyer's ability to purchase products and services given the current economic conditions. Analysts should assess what would change from a consumer perspective given various changes in the economy. This includes international trading, inflation, availability of jobs, interest rates, taxes, savings, subsidies, stock values, and currency fluctuations. These economic factors have an immense impact on how businesses operate.
The environmental aspects of the STEEP analysis are particularly important for companies that work with natural resources and other biological agents. Essential environmental elements to monitor are food, soil, water, wind, energy, pollution, waste disposal, natural resources, global warming, and environmental regulations. The insurance industry is particularly affected by these changes, as well as farming and tourism. Factors such as climate change are radically modifying how many businesses choose to package and distribute their products, though any company will be well served to stay abreast of any environmental changes.
The political aspect consists of monitoring not only the political, but the legal landscape of any country where the business operates. This involves monitoring any changes in tax policies, pricing regulations, voting participation rates, trade and jurisdiction union, state legislation, restrictions or tariffs, regulation of monopolies, political stability, labor laws, environmental laws, and other ordinances affecting business operations. Failure to comply with all legalities in various markets can become financially devastating. Analysts monitoring political factors for STEEP analysis must be vigilant and thorough.
When to Use a STEEP Analysis
Compiling the necessary data to complete a STEEP analysis can be a lengthy process. Knowing when to invest the time is crucial to the overall success of the strategic planning process. There are three main reasons why your business should use this framework.
The first scenario is when the organization faces uncertainty about a particular aspect of the business. Then, it is the analysts' responsibility to provide information that helps reduce that uncertainty. A prime example would be understanding how the market might respond to a new product feature before the company invests in the latest technology needed to add the feature. Another example would be staying up to date on the labor laws and tax implications of sourcing new material or ingredients from a foreign country.
Secondly, there are times when too much external information is seeping into the business. By analyzing too much information, the company may lose sight of what strategies are most valuable for the current objectives. Therefore, by gathering information through the STEEP analysis, this influx of data has a place to live until it is ready to be put into action.
Lastly, when the information overload creates disorganization around the organization’s strategic plans, a STEEP analysis can paint a clear picture of the factors impacting the company at all angles. Sometimes this is just what is needed to realign focus or to inspire change in a stagnant operation.
What to Consider When Starting a STEEP Analysis
Not all STEEP factors will be equally relevant to your organization. For example, large non-profit organizations might be more concerned with political and legal aspects, whereas a B2C business may be more invested in socio-cultural changes and trends. Furthermore, a change in one factor can influence other factors. There might be massive economic consequences due to technological or political development, for example.
While you might not place as much emphasis on each of the five factors, you will need to analyze each category, as they are interdependent. Initially, you might wish to rank the factors in order of importance and be open to shifting the order as you progress. Ask yourself questions such as:
- How have these trends changed over time?
- What evidence is there to support this?
- How will each of these trend changes affect our business?
As you move through each factor, document the interrelationships between factors wherever applicable. It's good to start with an extensive list of trends and then begin to relate trends to issues you may face. From there, you can whittle down the list to only the most essential data. When you've reached this point, you are now looking beyond facts and correlating cause and effect. Identify the driving forces behind the key issues, and you will be ready to strategize with predictors that are sure to guide you through the decision making process.