1.2 Objectives, Stakeholders & the External Environment

ibii PEST & PESTLE ANALYSIS

PEST Analysis:The External Environment

Organizations will have to address a wide range of factors in the external environment, which can be understood with the PEST analysis. PESTanalysis considers four aspects to the externalenvironment:• Political Issues• Economic Issues • Sociological Issues• Technological Issues

PEST Analysis:The External Environment

• Once the analysis has been completed, the organizations decision makers need to use the information and consider what changes, if any, may need to be made to its objectives and strategies.

• A PEST analysis can be undertaken as a one off event, but is should be something that is part of an ongoing process of continuous review planning and reaction.

• In international marketing, we use PEST analysis to consider the pros and cons of entering foreign markets.

STEEPLE ANALYSISExtension of PEST Analysis

There are seven sections with STEEPLE analysis:• Social or Cultural• Technological• Economic • Environmental• Political• Legal• Ethical

PESTLE ANALYSISExtension of PEST Analysis

There are six sections with PESTLE analysis: Political Economic Social Technological Legal Environment

PEST ANALYSISThreats & Opportunities

• There are both threats (negatives) and opportunities (positive) when a business undertakes a PEST analysis.

• Indeed there may be dozen of possible factors in each category.

• It can be constructed through consultation or can it can be undertaken by senior managers only – how it is done reflects on the organization’s culture and objectives.

POLITICAL FACTORS

• This can involve a range of areas, such as changes in employment, consumer competition and tax laws or a new government, which may well bring new political objectives that the business world will need to evaluate.

• A new government may also consider nationalizing (buying private businesses) or privatizing (selling state run organizations)>

POLITICAL FACTORSEmployment Law

• This may cover changes to the role and operation of trade unions, changes to minimum redundancy payments or changes to minimum wage laws.

• Eg: In the UK, the minimum wage is lower for 18 year olds than 22-year olds.

• Discrimination laws, covering disabilities, sex, age, and race often exist.

POLITICAL FACTORSEmployment Law

Impact on an Organizations objectives & strategies• Changes in trade union rules about voting and

striking.