Question

Choose three (3) external environments from the PESTEL analysis and identify, assess and provide a solution to one risk per environment that is affecting to Thai lingerie company.

Answer 1

The PESTEL framework provides a comprehensive list of influences on the possible success or failure of particular strategies. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal.1 Politics highlights the role of governments; Economics refers to macro-economic factors such as exchange rates, business cycles and differential economic growth rates around the world; Social influences include changing cultures and demographics, for example ageing populations in many Western societies; Technological influences refer to innovations such as the Internet, nanotechnology or the rise of new composite materials; Environmental stands specifically for ‘green’ issues, such as pollution and waste; and finally Legal embraces legislative constraints or changes, such as health and safety legislation or restrictions on company mergers and acquisitions. For managers, it is important to analyse how these factors are changing now and how they are likely to change in the future, drawing out implications for the organisation. Many of these factors are linked together. For example, technology developments may simultaneously change economic factors (for example, creating new jobs), social factors (facilitating more leisure) and environmental factors (reducing pollution). As can be imagined, analysing these factors and their interrelationships can produce long and complex lists.

         Rather than getting overwhelmed by a multitude of details, therefore, it is necessary to step back eventually to identify the key drivers for change. Key drivers for change are the high-impact factors likely to affect significantly the success or failure of strategy. Typical key drivers will vary by industry or sector. For example, a clothing retailer may be primarily concerned with social changes driving customer tastes and behaviour, for example forces encouraging out-of-town shopping. A computer manufacturer is likely to be concerned with technological change, for example increases in microprocessor speeds. Public sector managers are likely to be especially concerned with social change (for example, an ageing population), political change (changing government funding and policies) and legislative change (introducing new requirements). Identifying key drivers for change helps managers to focus on the PESTEL factors that are most important and which must be addressed as the highest priority. Many other changes will depend on these key drivers anyway (for example, an ageing population will drive changes in public policy and funding). Without a clear sense of the key drivers for change, managers will not be able to take the decisions that allow for effective action