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| Words: 1488 | Submitted: 23-Sep-2013
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DescriptionIt's about the pestel analysis.
Globalization and technological advancement has improved the level of interaction among people living in different spheres. Boundaries created by countries located in various areas have lost importance in their daily economic activities in the continuous change created by globalization (Miller 2011). Goods and services manufactured in political geographies have increased. This has resulted in competition in which many countries have given more importance to. This change process has rapidly transformed the environmental structure in which companies conduct their business activities. An external environmental factor, which was not regarded as important in the past, in achieving a company’s goals, may be considered increasingly important today. For example, new concepts such as environmental health, protection, precision and accountability have aroused more concern in commercial activities (Zhong 2000).
Change affects decision making, structure, business methods and actions of a company. Today it is more difficult than in the past for a company to last for long without considering the macro environment (Robert 2006). In conducting its business, a company must consider the environment within which it conducts its business operations. To meet its needs, the company managers should adopt strategies to manage environmental occurrences and operations.
Strategic analysis is the fundamental stage of strategic management. It involves an analysis of current factors both internal and external related to the environment that the company carries out its business operations (Miller 2011). In determining the external factors, companies consider the political, economic, social, technological environmental and legal (PESTEL) factors that may affect the company’s operations. Environmental analysis is vital for a company to sustain a competitive advantage. A company should be aware of its opportunities, threats, strengths and weaknesses to gain a competitive advantage. PESTEL analysis is involved with considering the most common macro-economic factors to comprehend their interactions. It is an external analysis when doing a strategic analysis or market research, and gives an outline of various macro-environmental factors a company has to consider (Robert 2006). Through PESTEL analysis, a company can understand its business position, market growth or decline, and its way of operations.
In PESTEL analysis, political factors are determined by the extent to which the government intercedes in the economy. GeYuksel (2012) in “International Journal of Business and Management” states that PESTEL factors include labor and environmental laws, tax policies, tariffs, trade restrictions and political stability. Economic factors consist of interest rates, economic growth, inflation rates and exchange rates. Social factors comprise of the cultural characteristics, population growth rate, health consciousness, and age distribution, emphasis on safety and career attitudes. Environmental factors are the ecological and environmental aspects such as climate change, weather, that may affect industries for example, farming, tourism and insurance. Technological factors include the technology ...
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