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Pestle analysis

An overview of PESTEL analysis as external business factor.

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Pestle analysis

  2. 2. PEST analysis describes a framework of macro-environmental factors used in the environmental component of strategic management. The PEST factors, combined with external micro-environmental factors and internal drivers, can be classified as opportunities and threats in a SWOT analysis.
  3. 3. PEST SPELIETSTEEPLESTEEPLED PESTELSLEPTLegal Environmental Demographic Ethics Intercultural
  4. 4. The PESTEL Analysis provides you with a framework that enables you to investigate your external environment by asking questions for each factor and discussing the likely implications. • What are the key political factors? • What are the important economic factors? • What cultural aspects are most important? • What technological innovations are likely to occur? • What current and impending legislation may affect the industry? • What are the environmental considerations?
  5. 5. POLITICAL FACTOR Political Factors Government Stability Employment & Operational Laws Government Leadership Trade Restrictions of Reforms Tax Regulation Corruption Levels Bureaucracy Issues Stability of Neighbors
  6. 6. GOVERNMENT STABILITY World Bank Worldwide Governance Indicators. Political Stability & Absence of Violence/Terr orism Value Date Value 2013-12-31 12.32 2012-12-31 11.85 2009-12-31 10.90 2005-12-31 17.79 1996-12-31 19.23 EMPLOYMENT & OPERATIONAL LAWS • Support to Training and Employment Programme for Women (STEP) . • Entrepreneurship Development Programme, Skill Development Programme (SDP),Management Development Programme . • Monetary & Fiscal Policy of Govt. of India.
  7. 7. TAX REGULATION • The rate of the individual and corporate tax has been reduced in order to bring more people in the tax net. • Local Arms Of MNCs Come Under Service Tax Scanner. • Heavy reduction in the import duties has been implemented. TRADE RESTRICTIONS OF REFORMS • FERA Restrictions Removed. • RTP Restrictions Removed. • Free Entry of Foreign Investment. • Reduction in Restrictions of Export-Import.
  8. 8. GOVERNMENT LEADERSHIP • Establishment of Foreign Capital Market & Capital Market Reforms. • Providing Incentive for Export. • Statutory Liquidity Ratio (SLR) has been lowered. CORRUPTION LEVELS • 85th Rank In Corruption Perception Index 2014. • Countries at the bottom need to adopt radical anti- corruption measures in favour of their people.
  9. 9. BUREAUCRACY ISSUES • Abolition of Licensing. • Freedom to Import Technology. • Contraction of Public Sector. • MRTP Restrictions Removed. STABILITY OF NEIGHBOUR’S
  10. 10. Economic Environment • It is the environment in which business operates. • It includes system, policies and nature of an economy, trade cycles, economic resources, level of income etc. • It is very dynamic and complex in nature.
  11. 11. Elements of Economic Environment{EEE} EEE Economic condition Economic system Economic policies Economic legislation
  12. 12. Importance of Economic Environment • Helps to estimate the market trends. • It’s a leading indicator of government goals and its planned use of economic tools and market reforms. • Determine opportunities and threats. • Giving directions for economic growth. • Help to deal with business challenges.
  13. 13. Factors affecting Economic Environment • Growth rate • Inflation • Business cycle • Labor cost
  14. 14. Limitations of Economic Environment • Reduces the individual freedom of choice. • Less scope of foreign investment. • Imposes too many restrictions.
  15. 15. • Sociological attitudes and profiles are constantly changing. • These factors scrutinize the social environment of the market, and gauge determinants like cultural trends, demographics, population analytics etc. SOCIAL FACTOR
  16. 16. This Social created by a society-at-a-large in which a business functions can be referred to as its external social environment. If a business operates in a multi –cultural society, then the social external social environment is even more complicated because the environment will consist of diverse sub populations with their own unique values, beliefs and customs.
  17. 17. To understand the impacts better, you might need to study the factors in details. Some of the Social factors are: Lifestyles Buying habits Population growth rate Emphasis on safety Health consciousness Family size and structure Attitudes towards saving and investing Attitude towards customer service and product quality
  18. 18. If social factor is neglected Organizations should be able to offer products and services which aim to benefit people’s lifestyle. The offerings should complement customers’ behaviour. Not reacting to changes in the society can be a costly mistake. They might lose market share. Demand for their products and services will fall.
  20. 20. Technological Environment • “Technological Environment means the development in the field of technology which affects business by new inventions of productions and other improvements in techniques to perform the business work”. • External Factor in Technology that impact business operations.
  21. 21. Features of Technical Environment • The pace of change in technology is becoming more rapid, and often changes that impact your market come from unexpected sources. • Technological factors can be broadly divided into two areas: manufacture and infrastructure. • Organizations that fail to keep up with technological advances leave opportunities for a smaller producer or new entrant to enter their market.
  22. 22. Technology Factors Rate of Change Use of Outsourcing Network Coverage Eliminates Bottle Neck Knowledge & Management System Quality & Price Intellectual Property Patents & Licenses Research & Development Production Efficiency Government Activity & Legislation
  23. 23. Importance of Technical Environment • Automation • Improved quality of parts and end product • Incentives • Significant cost savings • Use of outsourcing to control costs and offer greater flexibility
  24. 24. ENVIRONMENTAL FACTORS • Environmental factors include those factors that influence or determine surrounding environment. • Environmental factors talk about how people’s perception towards environment can affect business. • These factors have become important because of increasing scarcity of raw materials, increasing pollution, amount of waste generation and it’s disposal.
  25. 25. Environmental factors 1. Geographical location 2. Climate change 3. Disposal of waste material 4. Energy availability and consumption 5. Recycling procedures 6. Limited natural resources 7. Attitude towards environment
  26. 26. Starbucks company analysis 1. Recycling cups 2. composting of coffee grounds 3. Energy consumption is reduced by 10%. 4. Water consumption will be reduced by 25% by the year 2015.
  27. 27. Legal Environment Legal environment of business means all factors relating to laws and legal orders which affect business and its working. Law: system of rules, usually enforced through a set of institutions e.g., employment laws, health and safety regulations, IPR laws, copyright, patent, discrimination laws, and antitrust laws. • Regional Laws • Law Enforcement • Court System
  28. 28. Examples • Facebook : Law suited in India, Privacy issues, Social monitoring. • Tata Motors : Safety rules, Quality Control, Vehicle rules. • Infosys: IT rules, Piracy Protection, Software Import rules & regulation. Organization Government
  29. 29. Legal Environmental aspect of a Business 1. Indian contract act 1872 2. Indian sale of goods act 1930 3. Indian partnership act 1932 4. Industrial dispute Act 1947 5. Minimum wages act 1948 6. Indian companies act 1956 7. Foreign exchange regulation act (FERA ) 1973 8. Foreign exchange management act 1999 9. Monopolies and restrictive trade practice act 1969 10. Consumer protection act 1986 11. Indian income tax act 1961 12. Central excise act 1944 13. Security exchange board of India act 1992 14. Banking regulation act 1949 15. Chartered accountant act 1949 16. Information technology act 2000 17. competition act 2002 18. right to information act 2005 19. Micro, Small and Medium Enterprises Development Act,2006 20. Commissions for Protection of Child Rights Act,2005
  30. 30. CONCLUSION: • All organizations need to identify external factors within their environment that could have an impact on their operations. • Many of these will be things that the organization has no control over, but the implications of which need to be understood.

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An overview of PESTEL analysis as external business factor.


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