Context analysis

Context analysis is a method to analyze the environment in which a business operates. Environmental scanning mainly focuses on the macro environment of a business. But context analysis considers the entire environment of a business, its internal and external environment. This is an important aspect of business planning. One kind of context analysis, called SWOT analysis, allows the business to gain an insight into their strengths and weaknesses and also the opportunities and threats posed by the market within which they operate. The main goal of a context analysis, SWOT or otherwise, is to analyze the environment in order to develop a strategic plan of action for the business.

Context analysis also refers to a method of sociological analysis associated with Scheflen (1963) which believes that 'a given act, be it a glance at [another] person, a shift in posture, or a remark about the weather, has no intrinsic meaning. Such acts can only be understood when taken in relation to one another.' (Kendon, 1990: 16). This is not discussed here; only Context Analysis in the business sense is.

The first step of the method is to define a particular market (or subject) one wishes to analyze and focus all analysis techniques on what was defined. A subject, for example, can be a newly proposed product idea.1

The next step of the method is to conduct a trend analysis. Trend analysis is an analysis of macro environmental factors in the external environment of a business, also called PEST analysis. It consists of analyzing political, economical, social, technological and demographic trends. This can be done by first determining which factors, on each level, are relevant for the chosen subject and to score each item as to specify its importance. This allows the business to identify those factors that can influence them. They can’t control these factors but they can try to cope with them by adapting themselves. The trends (factors) that are addressed in PEST analysis are Political, Economical, Social and Technological; but for context analysis Demographic trends are also of importance. Demographic trends are those factors that have to do with the population, like for example average age, religion, education etc. Demographic information is of importance if, for example during market research, a business wants to determine a particular market segment to target. The other trends are described in environmental scanning and PEST analysis. Trend analysis only covers part of the external environment. Another important aspect of the external environment that a business should consider is its competition. This is the next step of the method, competitor analysis.

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