Environmental Analysis - Skyline Chili

Environmental Analysis Paper

MBA580

University of Phoenix

April 26, 2008

Environmental Analysis Paper

The environmental analysis done before a company opens its doors to the public is vital to the company’s success in the future. Forecasting is essential when making the business plan to present to prospective partners and financial institutions for approval for financing and making sure that all rules and regulations are followed at the local, state and federal level are necessary. Skyline Chili established in Cincinnati, OH in 1949 has gradually spread throughout the Midwestern region of the United States over the past 59 years. The company is now looking to expand to the southeastern region of the U.S. for the company to succeed in the southeast, Skyline Chili will need to do an environmental scan of the area looking at all of the issues and opportunities that the southeast has to offer.

Forces and Trends

One of the remote forces that will affect the success of Skyline Chili in the southeast will be to find financing for the start up of a new location. Each Skyline Chili is part of a franchise, and each franchise owner is responsible for start up for the store.

Lending to small businesses is seen as a more risky move for a bank than lending to a large firm.

“Small businesses are much more susceptible to swings in the economy and have a much higher failure rate than larger operations. Historically, lenders have had difficulty determining the creditworthiness of small business loan applicants. As noted, small businesses are extremely diverse--they range from small corner grocery stores to professional practices to small manufacturers. This heterogeneity, together with widely varying uses of the borrowed funds, has impeded the development of general standards for assessing small business loan applications and has made evaluating such loans less straightforward and relatively expensive” (Board of Governors of the Federal Reserve System, 1996).

The United States will lend approximately 40931.1 billion dollars within the banking and non-banking sectors in 2008, with 37911.1 being lent to the private sector and 3019.9 to the public sector. By the year 2010 it is forecasted that over-all lending will increase to 44351.5. Lending to the private sector will increase also to 41034.5. The public sector will see a decrease in the amount to 3317.0, with this amount continuing to decrease into the future (Ward, 2008).

Although the amount of lending will increase over the next two years, many perspective small business owners will still be turned away. “The main requirements of attaining a small business loan are your personal credit history, business plan, experience, education, and feasibility of the business you are starting or expanding” (Marte, 2008). These are just some of the factors that financial institutions look at to make a final decision. The availability of getting a loan should be strong but a strong strategic plan and convincing the lender that the small business will succeed will be key to obtaining a small business loan now and in the future.

A lot of people say timing is everything, although this is very true in the aspect of business, location and the demographics of that area are also essential to the success of any business. Putting Tiffany’s in the middle of Amish country would probably not be the wisest business decision.

When deciding where to locate a business one needs to look at the demographics of that location to make sure that the business would fit in well and have the opportunity to be successful. When looking at the southeast region of the U.S. Skyline Chili made the decision to put their first southeastern store in the largest city in the southeast Jacksonville, FL.

One of the main things to look at when looking at demographics is the demographic of the businesses customers. The state of Florida has a population of 18,089,888 people. When looking at this demographic one needs to ask if there are enough people in that particular region to support their business and how many of those people fit into the average description of a customer for the business. Of course taking in the whole state of Florida might be a little too much for a small business. Looking at just the city of Jacksonville, FL would be more reasonable for a small business. Jacksonville’s population is about 773, 781 people, with the median household income of $40,316.00 in 1999. Jacksonville also has a 12.2% poverty rate. When staring a business all of these factors need to be taken into account. The business needs to