PEST ANALYSIS These factors affect a business and are beyond the control of the business P olitical E conomic S ocial T echnological

Political Government legislation – e.g. employment law, define the boundaries in which a business can operate Government intervention – e.g. taxation and interest rate policies affect the political and economic stability of a country.

Economic The state of the economy – –Trade cycle –determined by 4 key variables: inflation, unemployment, economic growth and international trade.

Social Cultural and demographic changes E.g. liberal and modern attitude to women have led to a more flexible workforce Pressure for businesses to be more environmentally friendly has led to businesses changing their practices

Technological Advances in technology has affected businesses. E.g. The internet and the microchip

Three steps to carry out PEST analysis 1.Brainstorm external factors likely to affect the business, under each of the PEST headings 2.Discuss these factors to decide which ones are the most likely to have a significant impact on the business 3.Summarise the information in PEST template to further develop the business strategy

Evaluation of PEST analysis If the overall opportunities of a decision outweigh the threats then the business is likely to pursue that option In reality, some factors in the external business environment are subject to rapid change An exogenous shock (war or oil crisis) can reduce the chances of success, despite what the PEST analysis revealed

PEST is quite simple to use Helps managers with decision making Useful brainstorming decision tool Promotes proactive and forward-looking thinking Businesses will be better prepared to deal with external shocks and to devise more appropriate strategies

STEEPLE Analysis S ocial and cultural opportunities and threats T echnological opportunities and threats E conomic opportunities and threats E nvironmental opportunities and threats P olitical opportunities and threats L egal opportunities and threats E thical opportunities and threats

Social and Cultural Growing knowledge and support for environmental protection has changed business behaviour Demographic changed such as better educated and an ageing population has changed recruitment practices, marketing strategies and products provided by businesses Changing attitudes to the roles of women in the workplace created a larger, more flexible workforce Increased awareness and acceptance of multiculturalism has created opportunities

Technological Opportunities from the internet –Speed of access to information –Reducing language and cultural barriers –Reduced the cost of production Threats from the internet –Price transparency –Online crime –Higher costs of production

Other opportunities that technology brings to businesses: New working practices – working from home Increased productivity and efficiency gains – Machinery and robots are faster the humans! Quicker product development time – CAD/CAM New products and new markets - iPod

Other threats that technology brings to businesses: Not always reliable Costly Shorter product life cycles – the amount of new iPods Automation has led to job losses

Factors to consider when implementing technology: Costs – cost of purchase, installation, maintenance, replacement and insurance Benefits – expected gains in efficiency and profits Human relations – impact on resistance to change, staff morale and workforce planning Recruitment and training – costs of training, number of people who need training, time for training

Economic Opportunities and threats Four key macroeconomic objectives: –Controlled inflation –Economic growth –Reduced unemployment –Acceptable international trade balance Government macroeconomic policies are used to achieve these and will have either a direct or indirect effect on businesses

Controlled rate of inflation Inflation can be defined as the continual rise in prices in the economy Demand pull inflation Cost push inflation

Inflation can make business planning and decision making more complicated Inflation has an effect on the international competitiveness of a country

How do governments control inflation? Raise taxes to control the amount of consumption Subsidise production of local businesses to reduce their costs of production Pursue supply-side policies to improve the productive capacity of the economy – investment in education, health care and training These programmes will help to increase the quality and productivity of the economy’s resources over time