1.5 External Environment PEST Analysis

PEST ANALYSIS This form of business analysis examines the external environment and the global factors that may affect a business. It can provide a quick and visual representation of business. It can provide a quick and visual representation of the external pressures facing a business, and their possible constraints on strategy. the external pressures facing a business, and their possible constraints on strategy. It is usually divided into four external influences on a business P – Political E – Economic S – Social T – Technological

PEST ANALYSIS POLITICAL: This is concerned with how political developments, regionally, nationally and internationally might affect a business’s strategy.  Employee protection- health/safety, redundancy pay, discrimination, minimum wage  Consumer protection- truth in advertising, high-pressure sales tactics, sales agreements  Competition protection- unfair trade practices, monoply, mergers & takeovers

PEST ANALYSIS ECONOMIC: This involves the analysis of a wide variety of economic factors and their effects on a business. They include:  Economic growth and rising living standards  Low/high levels of inflation  Low/high levels of unemployment  Balance of payments (value of imports vs exports)

PEST ANALYSIS SOCIAL - What competitive advantage might a business gain by social changes taking place outside of the business?  Aging population, reduced birth rates, longer life expectancy  Changing role of women in the workplace  Improved Education – better skilled workers  Early retirement, more leisure time  Rising divorce rates, more “single” households  Job security  Immigration creating a wider range of consumer tastes

PEST ANALYSIS TECHNOLOGICAL – The impact of technological advancement on business strategy.  Business Software applications (word processing, spreadsheets, database, accounting systems, inventory systems)  Computer-aided design  Computer-aided manufacturing  Internet/Intranet