Introduction to Pestle Analysis Framework
Pestle Analysis Framework helps to track and monitor the factors related to the business for long-term growth. Basically, it hold track of all the changes acquired in the environment and also help in making effective changes which in turn gives the results. Overall, analysis helps evaluate the external environment related to the business (Natsir, 2022). It also guides as an experience to be prepared for the further changes that affect business in the future. These external strategies influence the marketplace.
Pestle Analysis Framework
Political factors and their impact on business
Pestle Analysis Framework consists of political factors, there would be influence of the government. The various political factors that are included are policies related to taxation, government policies, restrictions on trading, international trading, terms of government, labor policies, corruption, and budgets. Taxation gives the financial stability for the business. To emphasize, the trade policies include business expansions (Mitchell & Britt, 2019). The term of government defines the period of government’s term. The labor policies include the wages of workers like providing high wages and low wages. Hence, corruption could decrease economic growth and affect the structure of government. Security defines the protection of the safety of the public.
The policies related to taxation have a huge effect on businesses, in which more taxes reduce the profitability of the company. In fact, with lower tax rates there are positive benefits to the growth of the company. The restrictions related to trading that disturb business operations, like supply chain management, affect the imports and exports process. The trade policies involve regulations and trade agreements to reach the business to an extent in the market. Therefore, with proper political stability, the business maintains its operations without any risk.
Economic factors and their impact on business
For a business to become successful economic factors have a big effect. The factors include inflation rate, growth of the economy, demand in the market, rate of interest, present interest rates, and rates related to unemployment (Hatoum, Nassereddine, Musick, & El-Jazzar, 2023). The inflation rate defines the rising price or decrease in price. For instance, interest rates are the rates that are set during the money exchange. Economic growth refers to the economy which includes gross domestic product. The unemployment rate refers to the individuals who require employment for the economy.
The present interest rates define the exchange rates in the current period. A high inflation rate affects businesses with increasing prices, which makes it difficult to buy goods, and affects the profitability of the business. The economic growth of the company increases the demand for the services and products, with an increase in the competition, whereas a high unemployment rate leads to shortages in labor and a shortage of skilled workers, which directly affect the business. When unemployment is less, there are more benefits and opportunities for the employees of the businesses.
Social factors and their impact on business
Pestle Analysis Framework consists of social factors such as statistics related to health, ratio of gender, age, growth of the population, dividing of rural and urban, distribution of income, and wealth. The characteristics such as age, the structure of the family, and gender influences the business perspectives. There are beliefs values cultural management, and various lifestyles that affects the decisions of the customers. In Pestel Analysis Framework, the statistics related to health specifically include Wellness regarding health and lifestyle choices. The distribution of income and wealth where the inequalities define their position in the market.
The higher-income customers have an impact on the business by getting the premium products and services, and the low-income individuals have demand for the affordable products. However, the lifestyle changes and the preferences of the people evolve with the norms of the cultures and influence the various regions. Generally, some health-conscious customers demand organic food and fitness, which increases the business of well-being applications. The effect of education has an impact that promotes the development of skills and improves skills and makes advancements in careers, which increases demand for the business.
Technological factors and their impact on business
There will be threats created by the technological changes in businesses. The various factors in technology are innovations, technology in manufacture, new production technology, technological changes, and development. Technology innovation specifically refers to the advanced usage of technology such as artificial intelligence and automation to run businesses. Certainly, make sure of the availability of proper technology and tools of communication for the industries. The innovations brings change to the businesses by the development of new processes and materials and introducing new services to the businesses.
With the help of new technologies, traditional practices are replaced, and it creates competitiveness in the market. Moreover, it also maintains quality and improves the production efficiency they making them more responsive to the demands of customers. Using advanced technologies reduces human effort, which reduces time wastage, and efficiency is improved, and also reduces errors. Pestel Analysis Framework has an important technological factor that creates many opportunities for the business, creating revenue targets that require investment.
Legal factors and their impact on business
The legal factors are known to be the laws generated by the government to which the company should adhere to the laws. Generally, it includes business laws, health and safety guidelines, environmental laws, guidelines for equality of women, rights of consumers, and ethical laws. The business laws include protection related to the employees in the business. In addition, consumer rights include businesses to provide safe and honest services without any harmful practices.
The guidelines related to women give protection and guarantee to the women regarding their safety. The changes in the guidelines update the protection laws. The laws prevent the business from unethical behaviors. The protection loss is prioritized for the long-term loyalty of the customer. Companies safeguard by using those laws. For example, by using health regulations, it helps potential employees to work in a safer place, which ensures food safety and protects public health. It sets the trust of consumers and strives towards the growth of the business by imposing the laws.
Environmental factors and their impact on business
Various environmental factors affect the businesses such as weather conditions, changes of climate, energy consumption, and managing waste. The change of climate defines patterns of climate shift. Energy consumption refers to the goods and services that consume energy. Although waste management refers to the various activities related to a reduction in waste and disposal it also encourages the recycling of materials. The major weather changes affects the supply chain management and keep the supply in shortage.
Additionally, this also leads to a situation where expenses could be increased and it becomes a risk to the business. Extreme weather conditions also destroy the availability of materials. However, improving the waste management system helps businesses promote materials and reduce costs when buying products (Burin, 2018). With the management of waste, it also leads to a high volume of cost savings and re-usage increases. Finally, the best resource management, it reduces environmental impact and also protect the raw materials from the supply.
References
Burin, L. D. (2018, May 23). PESTEL Analysis EXPLAINED | B2U | Business To You. Retrieved from Youtube: https://www.youtube.com/watch?v=bYn4CyL3r5w
Hatoum, M. B., Nassereddine, H., Musick, S., & El-Jazzar, M. (2023). Investigation of PESTEL factors driving change in capital project organizations. Construction Management, 9, 1-20. Retrieved from https://www.frontiersin.org/journals/built-environment/articles/10.3389/fbuil.2023.1207564/full
Mitchell, M., & Britt, W. (2019, Oct 10). Introduction to PESTLE Analysis: Why a Systemic Approach is Best. Retrieved from Batonglobal: https://www.batonglobal.com/post/introduction-to-pestle-analysis-and-why-a-systemic-approach-is-best
Natsir, C. (2022, Mar 05). Get To Know the PESTLE Analysis Components! Retrieved from Hashmicro: https://www.hashmicro.com/blog/pestle-analysis/
Keywords
Environmental factors, PESTLE, government policies, Economic Factors, Economic growth
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