Strategic Analysis and the Business Environment
Read the environment before the numbers
Start every case with the entity's position in its industry. PESTLE covers macro forces: political instability, the policy rate and inflation, PKR depreciation, energy tariffs and circular debt, SECP/SBP/CCP regulation, demographics, automation. Porter's five forces explains why industry profitability is what it is: buyer power, supplier power, threat of entrants and substitutes, rivalry. Feed both into SWOT, then into a power/interest stakeholder map to test feasibility.
Where marks are lost
Candidates list factors without connecting them to the financial statements. The examiner rewards direction, magnitude and the affected line item. Avoid mixing levels: PESTLE is macro, five forces is industry, SWOT is firm-specific. Never forget Pakistan-specific regulatory gating - a plant expansion may need provincial EPA clearance, NEPRA tariff approval or SBP financing approval, any of which can delay cash flows by a year and must appear in the appraisal.
Worked rule of thumb
A textile exporter imports raw material equal to 40% of cost of sales, and cost of sales is 65% of sales. The rupee depreciates 10%. Cost impact = 0.10 x 0.40 x 0.65 = 2.6% of sales. If pricing power allows only 1% pass-through, gross margin falls 1.6 points - convert that into rupees and express it as a percentage of profit before tax. One sentence of that quality, ending in a mitigant, earns more than a page of description.