PESTEL ANALYSIS

PEST analysis describes a framework of macro-environmental

factors used in the environmental component of strategic
management.

The PEST factors, combined with external micro-environmental

factors and internal drivers, can be classified as opportunities and
threats in a SWOT analysis.
 PEST Legal SLEPT Environmental PESTEL

Intercultural
STEEPLED Demographic STEEPLE Ethics SPELIET
The PESTEL Analysis provides you with a framework that enables
you to investigate your external environment by asking questions
for each factor and discussing the likely implications.
• What are the key political factors?
• What are the important economic factors?
• What cultural aspects are most important?
• What technological innovations are likely to
occur?
• What current and impending legislation may
affect the industry?
• What are the environmental considerations?
POLITICAL FACTOR

Political Tax Corruption

Factors Regulation Levels

Trade
Government Bureaucracy
Restrictions
Stability Issues
of Reforms

Employment
Government Stability of
& Operational
Leadership Neighbors
Laws
GOVERNMENT STABILITY EMPLOYMENT &
OPERATIONAL LAWS
World Bank Political
Worldwide Stability & • Support to Training and
Governance Absence of Employment Programme for
Indicators. Violence/Terr Women (STEP) .
orism Value • Entrepreneurship
Date Value Development Programme,
Skill Development Programme
2013-12-31 12.32 (SDP),Management
2012-12-31 11.85 Development Programme .
2009-12-31 10.90 • Monetary & Fiscal Policy of
2005-12-31 17.79 Govt. of India.
1996-12-31 19.23
 TAX REGULATION TRADE RESTRICTIONS OF
REFORMS
• The rate of the individual and • FERA Restrictions Removed.
corporate tax has been
• RTP Restrictions Removed.
reduced in order to bring more
people in the tax net. • Free Entry of Foreign
Investment.
• Local Arms Of MNCs Come
Under Service Tax Scanner. • Reduction in Restrictions of
Export-Import.
• Heavy reduction in the import
duties has been implemented.
GOVERNMENT LEADERSHIP
• Establishment of Foreign
Capital Market & Capital
Market Reforms.
• Providing Incentive for Export.
• Statutory Liquidity Ratio
(SLR) has been lowered.
CORRUPTION LEVELS
• 85th Rank In Corruption
Perception Index 2014.
• Countries at the bottom need
to adopt radical anti-
corruption measures in favour
of their people.
BUREAUCRACY ISSUES STABILITY OF NEIGHBOUR’S
• Abolition of Licensing.
• Freedom to Import
Technology.
• Contraction of Public Sector.
• MRTP Restrictions Removed.
Economic Environment
• It is the environment in which business operates.
• It includes system, policies and nature of an economy, trade
cycles, economic resources, level of income etc.
• It is very dynamic and complex in nature.
Elements of Economic Environment{EEE}
Economic
condition

Economic
legislation EEE Economic
system

Economic
policies
Importance of Economic Environment
• Helps to estimate the market trends.
• It’s a leading indicator of government goals and its planned
use of economic tools and market reforms.
• Determine opportunities and threats.
• Giving directions for economic growth.
• Help to deal with business challenges.
Factors affecting Economic Environment
• Growth rate
• Inflation
• Business cycle
• Labor cost
Limitations of Economic Environment
• Reduces the individual freedom of choice.
• Less scope of foreign investment.
• Imposes too many restrictions.
SOCIAL FACTOR

• Sociological attitudes and profiles are constantly changing.

• These factors scrutinize the social environment of the market,

and gauge determinants like cultural trends, demographics,
population analytics etc.
 This Social created by a society-at-a-large in which a business
functions can be referred to as its external social environment. If a
business operates in a multi –cultural society, then the social external
social environment is even more complicated because the
environment will consist of diverse sub populations with their own
unique values, beliefs and customs.
To understand the impacts better, you might need to
study the factors in details.
Some of the Social factors are:
Lifestyles
Buying habits
Population growth rate
Emphasis on safety
Health consciousness
Family size and structure
Attitudes towards saving and investing
Attitude towards customer service and product quality
If social factor is neglected

Organizations should be able to offer products and

services which aim to benefit people’s lifestyle. The offerings
should complement customers’ behaviour. Not reacting to
changes in the society can be a costly mistake. They might lose
market share. Demand for their products and services will fall.
• SOCIAL FACTORS WHICH IMPACT PEPSI CO

• SOCIAL FACTORS WHICH IMPACT NOKIA

• SOCIAL FACTORS WHICH IMPACT

MC DONALD'S
Technological Environment
• “Technological Environment means the development in the field
of technology which affects business by new inventions of
productions and other improvements in techniques to perform
the business work”.
• External Factor in Technology that impact business operations.
Features of Technical Environment
• The pace of change in technology is becoming more rapid, and
often changes that impact your market come from unexpected
sources.
• Technological factors can be broadly divided into two areas:
manufacture and infrastructure.
• Organizations that fail to keep up with technological advances
leave opportunities for a smaller producer or new entrant to
enter their market.
 Technology Knowledge & Quality
Factors Management
System & Price

Rate of Eliminates Intellectual

Change Bottle Neck Property

Use of Network Patents &

Outsourcing Coverage Licenses

Research Government
Production
& Activity &
Efficiency
Development Legislation
Importance of Technical Environment

• Automation
• Improved quality of parts and end product
• Incentives
• Significant cost savings
• Use of outsourcing to control costs and offer greater flexibility
ENVIRONMENTAL FACTORS
• Environmental factors include those factors that influence or determine
surrounding environment.

• Environmental factors talk about how people’s perception towards

environment can affect business.

• These factors have become important because of increasing scarcity of

raw materials, increasing pollution, amount of waste generation and it’s
disposal.
Environmental factors
1. Geographical location
2. Climate change
3. Disposal of waste material
4. Energy availability and consumption
5. Recycling procedures
6. Limited natural resources
7. Attitude towards environment
Starbucks company analysis
1. Recycling cups
2. composting of coffee grounds
3. Energy consumption is reduced by 10%.
4. Water consumption will be reduced by 25% by the year
2015.
Legal Environment
Legal environment of business means all factors relating to laws and legal
orders which affect business and its working. Law: system of rules, usually
enforced through a set of institutions
e.g., employment laws, health and safety regulations, IPR laws, copyright,
patent, discrimination laws, and antitrust laws.
• Regional Laws
• Law Enforcement
• Court System
Examples

Organization Government

• Facebook : Law suited in India, Privacy issues, Social monitoring.

• Tata Motors : Safety rules, Quality Control, Vehicle rules.
• Infosys: IT rules, Piracy Protection, Software Import rules & regulation.
Legal Environmental aspect of a Business
1. Indian contract act 1872
2. Indian sale of goods act 1930
3. Indian partnership act 1932
4. Industrial dispute Act 1947
5. Minimum wages act 1948
6. Indian companies act 1956
7. Foreign exchange regulation act (FERA ) 1973
8. Foreign exchange management act 1999
9. Monopolies and restrictive trade practice act 1969
10. Consumer protection act 1986
11. Indian income tax act 1961
12. Central excise act 1944
13. Security exchange board of India act 1992
14. Banking regulation act 1949
15. Chartered accountant act 1949
16. Information technology act 2000
17. competition act 2002
18. right to information act 2005
19. Micro, Small and Medium Enterprises Development Act,2006
20. Commissions for Protection of Child Rights Act,2005
CONCLUSION:

• All organizations need to identify external factors within their

environment that could have an impact on their operations.
• Many of these will be things that the organization has no control
over, but the implications of which need to be understood.