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)&micro(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

  1. When is the country's next local, state, or national election? How could this change government or regional policy?
  2. Who are the most likely contenders for power? What are their views on business policy, and on other policies that affect your organization?
  3. 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?
  4. Could any pending legislation or taxation changes affect your business, either positively or negatively?
  5. How will business regulation, along with any planned changes to it, affect your business? And is there a trend towards regulation or deregulation?
  6. 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

  1. How stable is the current economy? Is it growing, stagnating, or declining?
  2. Are key exchange rates stable, or do they tend to vary significantly?
  3. Are customers' levels of disposable income rising or falling? How is this likely to change in the next few years?
  4. What is the unemployment rate? Will it be easy to build a skilled workforce? Or will it be expensive to hire skilled labor?
  5. Do consumers and businesses have easy access to credit? If not, how will this affect your organization?
  6. How is globalization affecting the economic environment?

Social factors

  1. What is the population's growth rate and age profile? How is this likely to change?
  2. 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?
  3. What social attitudes and social taboos could affect your business? Have there been recent socio-cultural changes that might affect this?
  4. How do religious beliefs and lifestyle choices affect the population?

Technological factors

  1. Are there any new technologies that you could be using?
  2. Are there any new technologies on the horizon that could radically affect your work or your industry?
  3. Do your competitors have access to new technologies that could redefine their products?
  4. In which areas do governments and educational institutions focus their research? Can you take advantage of this?
  5. How have infrastructure changes affected work patterns (e.g. remote working)?
  6. 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.