Question

1. PEST analysis (political, economic, socio-cultural and technological) describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. Give examples and discuss the impact of each of the elements in the PEST analysis

Answer 1

Answer:-

Also known as PESTLE, PESTEL, PESTLIED, STEEPLE, SLEPT and LONGPESTLE

PEST Analysis is a simple and widely used tool that helps to analyze the Political, Economic, Socio-Cultural, and Technological changes in your business environment. It is a useful strategic tool for understanding market growth or decline, business position, opportunities and direction for the possibly required actions.

Elements of PEST.

1. Political factors : -

Indicated to what extent the Government influences in the economy. - Tax Reforms, Law Insertions, Budgetary decisions, fiscal policy, labour law, environmental law, trade restrictions, rates and political stability.

Example:-

• When is the country's next local, state, or national election? How could this change government or regional policy?
• Could any pending legislation or taxation changes affect your business, either positively or negatively?

2. Economic Factors:-

Economic factors include growth, interest rates and the inflation rate of an economy.

Example:-

• How stable is the current economy? Is it growing, stagnating, or declining?
• How is globalization affecting the economic environment?
• Are customers' levels of disposable income rising or falling? How is this likely to change in the next few years?

3. Socio-Cultural factors:-

Social factors are, among other things, cultural aspects and include health consciousness, population growth, age structure, careers and an emphasis on safety.

Because of the globalisation, MNCs have been set-up in different countries which leads to cultural conflict.

such as cross-border mergers provide diversity in the nature of employees but also throws a challenge to cultural and religious beliefs of them.

Example:-

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

4. Technological:-

Technological factors include ecological and environmental aspects as well as aspects of research and development (R&D) and automation.

Minimum cost and efficient production levels and in-sourcing and outsourcing considerations.

Example:

• Are there any new technologies that you could be using
• Are there existing technological hubs that you could work with or learn from?
• Do any of your competitors have access to new technologies that could redefine their products?

Understanding these factors for any organisation is must and may lead the organisation to achieve its target goals and objectives.