In: Operations Management
1.) Outline and detail a PESTEL analysis. What, in your opinion, is currently the strongest component of the macro-environment? Why? How has this changed?
Your answers will be short essays and should be three full paragraphs or longer.
PESTEL analysis means analysis of Political, Economic, Social, Technological, Environmental and Legal evironment. It is a tool used to identify macro (external) forces which organization is facing. Organizations that can successfully analysis and respond to changes in the external environment are able to gain competitive advantage.
Political factors- it means to determine the extent to which government policies may impact on an organization. It includes taxation policy, political stability, trade policy and fiscal policy.
Economic factors- it impact on the economic and its performance which can directly impact on organization’s profitability. It includes employment or unemployment rate, interest rate, foreign exchange rate and costs.
Social factors- it impact on social environment and identify emerging trends in society. It helps marketers to understand consumer’s needs and want. It includes demography, lifestyle, education level and attitude of people.
Technological factors- it defines the rate of technological innovation and developments that could affect an organization. It includes research and development, changes in digital technology and automation. It also gives consideration to new methods of manufacturing, logistics and manufacturing.
Environmental factors- factors that are related to the influence of the surrounding environment. This factor becomes important after rise in important of corporate social responsibility. It includes carbon footprints, waste disposal, and climate, reduce, recycle and reuse process and sustainability.
Legal factors- it is important for an organization to understand the legal framework within the territories they operate in. It includes consumer law, trade regulations and restrictions, international regulations and restrictions.
The strongest component of the macro environment currently is Technological factors. New innovations are changing the way of doing business. For example, now companies need social media to interact with existing clients and to attract new customers. Companies have to keep up with modern technology to be remains relevant in today’s competitive environment. For example Telephone, it is the product which goes through several technological changes, from landlines to smart phones. Technology changed our way of living; it increases the speed of work. Technology affects businesses from core. For example- Amazon provides products through online orders given by a person whenever and where-ever. Earlier people have to go to the market place for shopping but now everything is on just one click. So being competitive or for survival company’s has to change according to the changes in the technology factors.
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