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Strategy Part 2 -PEST Analysis (PESTLE analysis (Political:…
Strategy Part 2 -PEST Analysis
level of strategic management
vision&mission
strategy for company
strategies for strategic business units
functional strategies
operative management
an overview of the strategy process
vision and mission
analysis
external chances and risks
internal strengths and weaknesses
macro(pest)µ(5 forces) analysis
core competencies twd competitors
formulation
intergration of analysis in the SWOT-matrix and conclusions
formulation of strategy for strategic business units and groups
implementation of strategies
Strategic Analysis
external environment: micro-level
company environment: Macro Analysis: PEST-Analysis
internal factors: 7S Model+ Core Competency+SWOT
Porter: 5 Forces Analysis
threat of new entrants
barriers of entry
economies of scale
brand loyalty
government policies
access to distribution channels
switching costs
capital requirements
cumulative experience
bargaining power of buyers
number of customers
size of each customer order
differences between competitors
price sensitivity
buyer's ability to substitue
buyer's information availability
switching costs
bargaining power of suppliers
number and size of suppliers
uniqueness of each supplier's product
focal company's ability to substitute
threat of substitute products
number of substitute products available
buyer propensity to substitute
relative price performance of substitute
perceived level of product differentiation
switching costs
rivalry among existing competitors
number of competitors
diversity of competitors
industry concentration
industry growth
quality differences
brand loyalty
barriers to exit
switching costs
PESTLE analysis
Political
: government+policy+political+stability+corruption+foreign trade+policy+tax policy+labour law+trade restriction
Economic
: economic growth+exchange rate+interest rates+inflation rates+disposable income+ unemployment rates
Socio-Cultural
: population growth rate + age distribution+career attitudes+safety emphasis+health consciousness+lifestyle attitudes+cultural barriers
Technological
: technology incentives+level of innovation + automation+R&D activity+technological change + technological awareness
Legal
: discrimination laws+antitrust laws+employment laws+consumer protection laws+copyright and patent laws+health and safety laws
International
Environmental
Demographic
PESTLE
Political factors
When is the country's next local, state, or national election? How could this change government or regional policy?
Who are the most likely contenders for power? What are their views on business policy, and on other policies that affect your organization?
Depending on the country, how well developed are property rights and the rule of law, and how widespread are corruption and organized crime? How are these situations likely to change, and how is this likely to affect you?
Could any pending legislation or taxation changes affect your business, either positively or negatively?
How will business regulation, along with any planned changes to it, affect your business? And is there a trend towards regulation or deregulation?
How does government approach corporate policy, corporate social responsibility, environmental issues, and customer protection legislation? What impact does this have, and is it likely to change?
Economic factors
How stable is the current economy? Is it growing, stagnating, or declining?
Are key exchange rates stable, or do they tend to vary significantly?
Are customers' levels of disposable income rising or falling? How is this likely to change in the next few years?
What is the unemployment rate? Will it be easy to build a skilled workforce? Or will it be expensive to hire skilled labor?
Do consumers and businesses have easy access to credit? If not, how will this affect your organization?
How is globalization affecting the economic environment?
Social factors
What is the population's growth rate and age profile? How is this likely to change?
Are generational shifts in attitude likely to affect your company?
What are your society's levels of health, education, and social mobility? How are these changing, and what impact does this have?
What social attitudes and social taboos could affect your business? Have there been recent socio-cultural changes that might affect this?
How do religious beliefs and lifestyle choices affect the population?
Technological factors
Are there any new technologies that you could be using?
Are there any new technologies on the horizon that could radically affect your work or your industry?
Do your competitors have access to new technologies that could redefine their products?
In which areas do governments and educational institutions focus their research? Can you take advantage of this?
How have infrastructure changes affected work patterns (e.g. remote working)?
Are there existing technological hubs that you could work with / learn from?
Conclusion
PEST: A way of understanding how external forces impact your business.
It should be included in every business plan, in addition to a SWOT analysis, as part of risk management and strategy design.
Any change in the business environment is highlighted which in turn helps the business to take calculated risks.
It helps to develop an objective view of the external business environment which helps in tapping opportunities at the right time.
The real value of PEST analysis can be achieved if the findings are deeply studied and acted upon, e.g. compared with other analysis results.