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bhmith1m3467PESTEL
PESTEL
THE PESTEL originally known as pest is a micro environment framework commonly used equipment that helps depict the big image of a firm’s external environment, particularly as related to foreign markets. PESTEL is an acronym which stands for political, economic, sociocultural, technological, environmental, and legal contexts in which a firm operates. A PESTEL analysis helps managers and entire company to have grounds on what the company operates, the risks, threats and opportunities they face and how to compete profitably. This tool analyzes the growth and decline of the market, potential, and direction business a business should take. When a firm wants to venture in a market, these factors are of considerable importance.
Political factors
These captures how the government policy has to do with a company, such as the kind of goods and services the government provides, the stability and instability of the government on international market, how it subsides firms, political decisions usually can impact on very vital areas of the business including the education level of workers, the health of workers and nation at large. The level of infrastructure which in turn affects the level of outcome
Economic factors
Economic factors include the interest rates taxation rates the general economic rates inflation and exchange rates for example
Higher interest rates may hinder investment in connection that it costs more to borrow, high exchange rates makes importing and exporting hard due to a strong currency, high income growth boosts demand of a companies produce
These factors can further be divided into macro economical and micro economic factors. Macro-economic factors are the management of demand in any economy. Governments use interest rate control, taxation policy and government expenditure as their main mechanisms they use for this
Micro-economic factors are things like the way people spend their incomes in day today activities
Social factors
known as socio-cultural factors, this are the areas that involve the belief and attitudes of the population, These factors may include the rate of population growth, health consciousness, career attitudes age distribution- example in England the majority population are aging which means the there is an increase in firms which deals with pension payment.
Technological factors
This may include facts like to what level do the government and industry fund research, and are those levels changing with time? What is the government’s and industry’s level of interest and general focus on technology? How and to what level is your technology? Is there the presence of destructive technology around which works to pool down development
Environmental factors
These factors include climate and weather changes. They have really become important and an issue too due to the increasing negative change which has caused scarcity of raw materials. The growing desire to conserve environment is impacting many industries in cases where people are being overcharged in a bid to remove any unnecessary wastages as companies try to produce more environmental friendly products
Legal factors
This is in relation to the legal environment in which a firm operates. Legal factors include - health and safety, standards of advertising, consumer rights and laws, labeling of products and their safety. It is evident that firms need to know what is legal and what is not in a bid to trade successfully in the market. If an firm trades internationally it becomes a tough area to get rights as each country has its own constitution which set its own regulations
Factors affecting Strength and weaknesses of companies Market
The more the similar markets in different regions are many, the greater the pressure for an industry to thrive. This in itself proves to be a great drawback and hindrance for a company to grow.
Costs
The cost of production has a big effect on how a company does. A firm which uses quality raw materials to make quality product has really high chances
Governments
Favorable trade policies- good policies favor a firm while poor ones are destructive
Common technological – firms should have extra and uncommon developments to ensure they provide quality
Common manufacturing and marketing skills- this in turn will hinder any chance of development.
Competition
Interdependent countries have a good chance of their firms growing because they can go global otherwise its hard.
Global competitors- healthy completion makes sure firms provide good products; this actually helps a company grow positively.
Opportunities for growth
Local factors- this includes planning permissions and the general growth rates which should work to improve.
National factors
This includes the opening hour’s taxation and interest rates.
Global factors
Opening of markets globally would make it easier of companies for firms to do well. Cheaper regulation should de set to make sure companies are not deprived of their chances of ever making it globally.
References
1. Dillerup, R., Stoi, R. (2006), "Unternehmensführung",Vahlen, p. 179 et seq.; p. 187 et seq.
2. Kroon, J. (1995), "General Management" (2nd Edition), Pearson South Africa, p. 76
( Kroon,J. (1995), "General Management" (2nd Edition), Pearson South Africa, p. 76