 Environmental analysis examines such forces to predict the environment in which a business may have to operate.  Macro: level of inflation, interest rates, exchange rates, etc.  Micro: local business taxes.

PEST ANALYSIS  Applying PEST analysis: Those setting up a new business must be realistic about their knowledge and awareness of the environment the business will be operating in and how it might change.

Political  Direct and indirect taxes, influence consumer spending and market demand  Public spending by government  Regional and industrial policy  Interest rate policy  Changes in international trade  Competition law  Regulation  Education and training

Economic  Business Cycle. Advertising, leisure and restaurants are more susceptible to the impact of business cycle.  Employment levels  Inflation  Interest rates  House and stock market prices

Social  Population growth  Age structure  Rural to urban migration  Social and cultural shifts

Technological  Level of expenditure on research and development by competitors  New markets  Production methods  Rate of adoption of new technology

The following is a summary of PEST analysis for broadband access that enables fast data speeds PoliticalEconomic - Regulatory pressure on incumbent telecommunication business to provide access to their networks which connect to the home - Restrictions on broadcast rights - Copyright laws - Competition law in relation to mergers between network providers and content suppliers - Regulation of the television business of - cable business -The charges made by incumbents for access to the local loop -Degree of competition between broadband network providers -The costs to the customer of broadband access -Economic growth and disposable income -Interest rates - Inflation - Exchange rates Social and DemographicTechnological - Internet penetration - Population density - Topography - Leisure time - Home-working/tele-working - Demand for audio and video delivered on demand into the home - Rate of adaption of new technologies and services - Demand for gaming services -Acceptance and growth of e-commerce - Increased use of distance learning - Provision of medical and financial services remotely - The perceived value of a single provider and bill for television, telephone and internet access - Internet content in languages other than English -The development and availability of competing broadband technologies such as cable, DSL, fibre optics and 3G mobile - Future broadband technologies such as very High Bit and DSL (VDSL) - The costs of establishing broadband networks and upgrading existing networks - The creation of “killer” (highly attractive with mass-market appeal) applications - The development and improvement of interactive television - Automatic language translation software - Security of data transfer - Wireless technologies - Embedded, connected (wireless) devices within the home - Software developments

Scenario Planning  In stable markets, predicting future is straightforward. In dynamic and turbulent markets, future may be unrecognizable from the past. Scenario planning is a solution to this problem. Scenarios describe different environments in which a business may have to operate and highlight trends and interactions that may characterize their development.

The Stages of Scenario Planning 1. Identify factors of high uncertainty and high impact. 2. Describe alternative behavior patterns for those factors. 3. Select the three or four most informative scenarios. 4. Write the scenario descriptions.

The Impact/Uncertainty Matrix for A Typical Consumer Business Impact LOWHIGH Uncertainty HIGH - Economic growth and disposable income - Home-working/tele-working - Demand for gaming services - Increase demand for distance learning - Remote provision of financial and medical services - Development of future broadband technologies - Software development - Embedded, connected (wireless) devices within the home - Identification of “killer” applications - Charges to operators for access to the local loop - Prices to end customers - Demand for audio and video-on-demand - Rate of adoption of new technologies and services - Acceptance and growth in e-commerce -The value of a single customer bill - Costs of establishing and upgrading broadband networks LOW - Improvements in digital security - Copyright laws - Competition law - Inflation - Exchange rates - Population density - Topography - Leisure time - Availability of competing technologies - Improvements to interactive television - Advances in automatic language translation software - Restrictions on broadcast rights - Regulation of access to the local loop - Regulation of television services provided by cable businesses - Interest rates - Internet penetration - Equipment costs - Volume of content in foreign languages - Developments in wireless technologies

Alternative behavior patterns  Business Impact: High quadrant of the matrix contains all the environmental factors that have the greatest potential impact on the business and the highest level of future uncertainty.

Potential development paths Environmental factorsPath 1Path 2Path 3 Embedded, connected (wireless) devices in the home Hardly any domestic appliances are capable of being connected to the internet A small number of devices such as alarms, televisions and DVD players are connected Virtually all electronic devices in the home, from garage doors to the oven, are connected to the internet Charges to operators for access to the local loop Incumbent monopolists continue to charge high prices for local-loop access Regulation forces prices down to low, cost-based levels Demand for audio and video- on-demand from domestic customers Significant demand but from only a few minority customer segments Audio and video-on-demand becomes the norm for nearly all households Identification of “killer” applications Telecommunication business and service providers fail to identify compelling “killer” applications for their customers A range of compelling applications and services are developed which are highly valued by many different customer segments Prices to the end customerPrices fall rapidly making broadband access affordable for all Prices remain high and fall slowly Rate of adoption of new technologies and services Consumers are reluctant to commit to new technologies, and the take-up of new services takes place over an extended period of time Early adopters and high- income consumers adopt the new services rapidly, but the mass market of consumers takes considerably longer All consumers swiftly embrace new technologies and services from the outset

 Select the three or four most informative scenarios

Initial Scenario Matrix Embedded, connected (wireless) devices in the home PATH 1PATH 2 Demand for audio and video-on-demand PATH 1 Hardly any domestic appliances are capable of being connected to the internet Significant demand but from only a few minority customer segments Virtually all electronic devices in the home, from garage doors to the oven, are connected to the internet Significant demand but from only a few minority customer segments PATH 2 Hardly any domestic appliances are capable of being connected to the internet Audio and video-on-demand becomes the norm for nearly all households Virtually all electronic devices in the home, from garage doors to the oven, are connected to the internet Audio and video-on-demand becomes the norm for nearly all households

 Only scenarios that are realistic, contrasting and relevant to the business planning problem should be selected. Bottom-right quadrant has been selected in this case.