Unit IV

Business Environment

Definition of Business Environment is sum or collection of all internal and external factors such as
employees, customers’ needs and expectations, supply and demand, management, clients, suppliers,
owners, activities by government, innovation in technology, social trends, market trends, economic
changes, etc. These factors affect the function of the company and how a company works directly or
indirectly. Sum of these factors influences the companies or business organisations environment and
situation.

Business environment helps in identifying business opportunities, tapping useful resources, assists in
planning, and improves the overall performance, growth, and profitability of the business. There are
various types of Business Environment like Micro Environment and Macro Environment.

FEATURES OF BUSINESS ENVIRONMENT

(a) Business environment is the sum total of all factors external to the business firm and that greatly
influence their functioning.
(b) It covers factors and forces like customers, competitors, suppliers, government, and the social,
cultural, political, technological and legal conditions.
(c) The business environment is dynamic in nature that means, it keeps on changing.
(d) The changes in business environment are unpredictable. It is very difficult to predict the exact
nature of future happenings and the changes in economic and social
environment.
(e) Business Environment differs from place to place, region to region and country to
country.

IMPORTANCE OF BUSINESS ENVIRONMENT

There is a close and continuous interaction between the business and its environment. This
interaction helps in strengthening the business firm and using its resources more effectively.
As stated above, the business environment is multifaceted, complex, and dynamic in nature and has a
far-reaching impact on the survival and growth of the business. To be more specific, proper
understanding of the social, political, legal and economic environment helps the business in the
following ways:
(a) Determining Opportunities and Threats: The interaction between the business
and its environment would identify opportunities for and threats to the business. It
helps the business enterprises for meeting the challenges successfully.
(b) Giving Direction for Growth: The interaction with the environment leads to opening up new
frontiers of growth for the business firms. It enables the business to identify the areas for growth and
expansion of their activities.
(c) Continuous Learning: Environmental analysis makes the task of managers easier in
dealing with business challenges. The managers are motivated to continuously update
their knowledge, understanding and skills to meet the predicted changes in realm of
business.
(d) Image Building: Environmental understanding helps the business organizations in
improving their image by showing their sensitivity to the environment within which they are
working. For example, in view of the shortage of power, many companies have
set up Captive Power Plants (CPP) in their factories to meet their own requirement of power.
(e) Meeting Competition: It helps the firms to analysis the competitors’ strategies and formulate
their own strategies accordingly.
(f) Identifying Firm’s Strength and Weakness: Business environment helps to identify
the individual strengths and weaknesses in view of the technological and global
developments.

INTERNAL AND EXTERNAL ENVIRONMENT OF BUSINESS [TYPESOF ENVIRONEMTN]

I.INTERNAL ENVIRONMENT FACTORS
1. VALUE SYSTEM
The value systems of the founders and those at the helm of affairs have important bearing on the
choice of business, the mission and objectives of the organization, business policies and practices. It
is a widely acknowledged fact that the extent to which the value system is shared by all in
organization is an important factor contributing to success.
2. MISSION AND OBJECTIVES
The business domain of the company, priorities,
direction of the development, business philosophy business policy etc areguided by the mission and
objective of the company. Example: Ranbaxy’s thrust in to the foreign markets and developments
have been driven by its mission – “to become a researcher based international pharmaceutical
company.”
3. MANAGEMENT STRUCTURE AND NATURE
The organizational structure, the composition of board of directors, extent
of professionalization of management etc, are important factors influencing business decisions.
Some management structures and styles delay decision making while some other facilitate quick
decision making. The Board of Directors being the highest decision making body which sets the
direction for the development of the organization and which oversees the performance of
organization, the quality of the Board is a very critical factor for the development and performance
of company.
4. INTERNAL POWER RELATION
Factors like the amount of support the top management enjoys from
thedifferent levels of employees, share holders, and Board of Directors haveimportant influence on
the decision and their implementation. The relationship between the members of the board and
between chief executive and the Board are also critical factors.
5. HUMAN RESOURCES
The characteristics of the human resources like skill, quality, morale, commitment, attitude etc.,
could contribute to the strength and weakness of the organization.
 
6. COMPANY IMAGE AND BRAND EQUITY
The image of the company matters while raising finance, forming jointventures or other alliances,
soliciting marketing intermediaries, entering purchaseon sale contracts, launching new products etc.
Brand equity is also relevant inseveral of these cases.
7. OTHER FACTORS
A) Research and development determine a company’s ability to innovate and compete.
B)Marketing – quality of marketing men, brand equity, distribution network have direct effect on
marketing.
C) FINANCE 0 financial policies; financial position and capital structure are also affecting business
performances.
D)Physical Assets – production capacity, technology, distribution logistics

II. EXTERNAL ENVIRONMENT FACTORS

It consists of 2 types.
 Micro environment
 Macro environment

I. Micro Environment
The micro environment is also known as the task environment andoperating environment became the
micro environment forces have a direct bearing on the operations of the firm. These include the
factors like …
1. SUPPLIERS
An important force in the micro environment of a company is the
suppliers,i.e. those who supply the inputs like raw materials and components to the company. The im
portance of reliable source of supply is for the smooth functioning of business.It is very risky to
depend on a single supplier became of skills, lock out or any other production problem with
that supplier may seriously affect the company.Hence multisource of supply often helps reduce risks.
2. CUSTOMERS
A business exist only became and its customers. A company may have different categories of
customers like individuals, households, industries and other commercial establishment and govt. and
other institution.
3. COMPETITORS
A firm’s competitors include not only other firms which market the same products but also all those
who compete for the discretionary income of the consumers.
4. MARKETING INTERMEDIARIES
The immediate environment of the company may consist of number of marketing intermediaries
which are “firms that aid the company in promoting, selling and distributing its goods to final
buyers.”The marketing intermediaries includes middlemen such as agents andmerchants who “help
the company find customers or close sales with them.”
5. FINANCIERS
Another important micro environmental factor is the financier of thecompany. Besides the financing
capabilities, their policies and strategies, attitudes,ability to provide non-financial assistance etc are
very important.
 
6. PUBLICS
“A public is any group that has an actual or potential interest in an impacton an organizations ability
to achieve its interests.” Media publics, citizen action publics and local publics are some examples.

MACRO ENVIRONMENT
It is also called as general environment and remote environment. The macroenvironment is
generally uncontrollable than micro environment, the success of  the company depends on
its adaptability to the environment. The important macro environment factors as follows:

I. TECHNOLOGICAL ENVIRONMENT
Technology is one of the important determinants of success of a firm as well as economic
and social development of nation. It includes both hardware andsoftware to solve problems
and promote progress.
1. Innovative drive of company
The term innovation means introduction of new product, the use of new method of
production. “The technical, industrial and commercial steps which leadsto marketing of new
products and to commercial use of new technical process andequipment.”
2. Customers’ Needs / Expectation
Technological orientation and R&D effects of a company may also
b e influenced by the customer needs and expectation. In several cases the
customer a n d   t h e   s u p p l i e r   h a v e   a   c o l l a b o r a t i v e   r e l a t i o n s h i p   t o   d e v e l o p   t h e   p r o d
u c t   o r   solutions. If the customers are highly demanding, companies would be compelledto be
innovative.
 
3. Demand conditions
The size of demand influences the choice of the technology . The size of  demand
influences the choice of the technological scale. Fast growing trend of  demand would
encourage development of technology of large scale.
4. Suppliers offering 
Many times technological changes are encouraged by the suppliers of a company, like a
capital goods supplier etc.
5. Competitive dynamics
C o m p e t i t i o n   c o m p e l s   t h e   a d o p t i o n   o f   t h e   b e s t   t e c h n o l o g y   a n d   c o n s t a n t endeavor
to innovate.
6. Substitutes
Emergence of new substitutes or technological improvements or substitutes which alter
technological change.
7. Social forces
Certain social forces like pretext against environment pollution or other  ecological
problems demand for eco-friendly products.
8.Research organization
T h e   t e c h n o l o g i c a l   e n v i r o n m e n t   o f   b u s i n e s s   i s   e n r i c h e d   b y   r e s e a r c h e d organizatio
ns which develops new technologies and provide other technical inputs.
9.Govt. policy
T h e g o v t . c o n t r i b u t e s t o t h e d e v e l o p m e n t t o t h e t e c h n o l o g y b y i t s o w n direct
involvement by establishing research organization and funding R & D. Thegovt. may encourage
private R & D by various incentives.

II. DEMOGRAPHIC ENVIRONMENT
The importance of demographic factors to business is clear from the facts t h a t “ M a n a g e m e n t i s
men” & “Market is people.” i.e., Management in Men, Material,  Machinery
a n d   M o n e y ,   a n d m a r k e t   i s   p e o p l e   i n   t h e s e n s e t h a t   t h e demand depends on the
people and their characteristics – the number, incomelevels, tastes and  preferences,
beliefs, attitudes and
sentiments.Important demographic bases of market segmentation include  t h e following:1
.Age structure2.Gender 3.Income
distribution4.Family  size5.Occupation6.Education7.Social  class8.Religion9.R
ace10.NationalityDemographic  factors such as size of population, growth rat
e ,   a g e c o m p o s i t i o n , e t h n i c , density of population, rural – urban distribution, nature
of family have very significant implication for business.
III. ECONOMIC ENVIRONMENT
Business partners and strategies are influenced by the economiccharacteristics. The
economic environment includes the structure and nature of theeconomy, the stage of
development of economy, economic resources, level of  income, global economic linkages,
economic policies etc.
1. Nature of the Economy
The general level of development of the economy has lot of implication for  business – it has
significant bearing on the nature and size demand, govt. policiesaffecting business. The widely used
method of classification of the economies ison the basis of per capita income. Accordingly
the low income, middle and highincome economies.Low income economies are economies
with very low per capita income. High income economies are economies with very rich income
per capita. Middleincome economies are sub divided into lower middle and upper middle
incomewhere income per capita is neither very high nor low.
2. Structure of the economy
Factors such as contribution of different structure like primary(agricultural), secondary 
(industrial) & tertiary (secondary) sectors, large,medicine, small sectors to economy.
These factors and the nature of each sector  have business implication. For example,
India is one of the largest producers of  agricultural products, because of the small and
fragmented nature of land holdings,efficient collection and processing of products become difficult.
The land holding pattern also makes productivity improvements difficult.
3. Economic policies
There are several economic policies which can have very great impact on  business.
Important economic policies are 
a) Industrial policy
It defines the scope and role of different sectors like private, public, joint and
cooperative. It may influence the location of industrial undertakings. Choice of technology, state of
operation, product mixes etc.
b) Trade policy
It can affect the fortunes of firms. For example a policy of protecting the home industry
may greatly help the import competing industries, while liberation of the impart policy may create
difficulties for such industries. This mean the firm should come up with quality, cost, and marketing
and after sales service etc.
c) Foreign exchange policy
Exchange rate policy and policy in respect of cross border movement of  capita are
important for business.
d) Foreign investment and technology policy
Foreign investment and technology policy will increase domesticcom
p e t i t i o n   a t   t h e   s a m e   t i m e   i t   w o u l d   b e n e f i t   m a n y   d o m e s t i c   f i r m s   –   b y  p
ermitting global sourcing of capital and technology, by increasing the quantity and
quality of domestic supply of many goods and services.
e) Fiscal policy
Govt. strategy in respect of public expenditure and revenue can have
significant impact on business. The pattern of public expenditure may affect the
develop of industries. Such as govt. often use tax incentives or disincentives to
encourage or discourage certain activities. For ex: when industry suffers from recession,
a reduction of taxes like excise duty or sales tax may help improve thedemand.
 
f) Monetary policy
The central bank, by its policy towards the cost and availability of
credit,can significantly influence savings, investments and consumer spending ineconomy. For
example – 1% reduction in cash reserve ratio will significantlyincrease loan able funds
with commercial banking systems.

IV. NATURAL ENVIRONMENT

The natural environment ultimately is the source and support of everythingused by business – every
raw material, energy resource, life sustaining factor etc. The natural environment determines what
can be got done in a society andhow institution can function. Resource availability is the
fundamental factor is thedevelopment of business in the society.Thus
geographical and ecological factors, such as natural endowments,weather and climatic
conditions, topographic factors, vocational aspects in the global context etc., are all relevant
to business.
1.Geographical factors
:   D i f f e r e n c e s   i n   g e o g r a p h i c a l   c o n d i t i o n   b e t w e e n markets may sometimes call for
changes in the market mix. It influences the location of some industries.E.g. Industries with
material index tend to be located near the raw material sources.
2. Climatic and weather conditions
: I t a f f e c t s t h e l o c a t i o n o f c e r t a i n industries like cotton textile industry. Topographic
factors may affect the demand pattern in some cases. E.g. in hilly areas Jeeps are greater demand
than cars.
 
Weather and climatic factors affect the demand of certain types of products.E.g. in region where
temperature is very high in summer, there is good demand for desert coolers.Weather and
climatic factors can affect the demand pattern of clothing,  building materials, food,
medicines etc. further, weather and climatic conditionsmay call for modification to the products,
packaging storage conditions etc.
3 .   E c o l o g i c a l   f a c t o r s :   I t   a s s u m e s   g r e a t   i m p o r t a n c e ,   t h e   d e p l e t i o n   o f   n a t u r a l re
sources, environmental pollution another disturbance of the ecological balancehave carried great
concern, govt. policies aimed as preservation of environment  purity and ecological balance,
conservation of non-replenish able resources haveresulted additional responsibilities and problems
for business.
V. Social and Cultural Environment:
Members of a society wield important influence over business firms. People these days do not accept
the activities of business firms without question. Activities of business firms may harm the physical
environment and impose heavy social costs. Besides, business practices may violate cultural ethos of
a society. It refers to people’s attitude to work and wealth; role of family, marriage, religion and
education; ethical issues and social responsiveness of business. For example, advertisement by
business firms may be nasty and hurt the ethical sentiments of the people.

Businesses should consider the social implications of their decisions. This means that companies
must seriously consider the impact of its actions on the society. When a business firm in their
decision making take care of social interests, it is said to be socially responsible.

Social responsibility is the felt obligation or self-enforced duty of business firms to serve or protect
social interests. By doing so they promote social well-being. Good corporate governance should be
judged not only by the productivity and profits earned by a business firm but also by its social-
welfare promoting activities.
It is worth noting that in modern management science a new concept of social responsiveness has
been developed. By social responsiveness we mean “the ability of a corporate firm to relate its
operations and policies to social environment in way that are mutually beneficial to the company and
society at large”.

It may be noted that social responsibility or social responsiveness is related to ethics. The discipline
of ethics deals with what is good and bad, or right and wrong or with moral duty and obligation.
Further, even if managers enjoy full freedom to adopt actions and policies in accordance with the
conceived notion of social responsibility, they may not do so if standards applied to evaluate their
performance are quite different.

Every manager would like its performance to be positively appraised. Therefore, if the performance
of managers of business firms are judged by the amount of profits .they make for the owners of the
firms, it is then not proper to expect socially responsible actions from them.

Political and Legal Environment:

Businesses are closely related to the government. The political philosophy of the government wields
a great influence over business policies. It refers to the influence exerted by the three political
institutions viz., legislature executive and the judiciary in shaping, directing, developing and
controlling business activities. A stable and dynamic political environment is indispensable for
business growth. 

ENVIRONMENTAL ANALYSIS PROCESS

The analysis consists of four sequential steps:
 Scanning
It involves general surveillance of all environmental factors and their interactions in order to:
• Identify early signals of possible environmental change
• Detect environmental change already underway
 Monitoring
It involves tracking the environmental trends, sequences of events, or streams of activities. It
frequently involves following signals or indicators unearthed during environmental scanning.

 Forecasting
Strategic decision-making requires a future orientation. Naturally, forecasting is an essential element
in environmental analysis. Forecasting is concerned with developing plausible projections of the
direction, scope, and intensity of environmental change.
 Assessment
In assessment, the frame of reference moves from understanding the environment- the focus of
scanning, monitoring and forecasting – to identify what the understanding means for the
organization. Assessment, tries to answer questions such as what are the key issues presented by the
environment, and what are the implications of such issues for the organization.
Dimensions of Business Environment:
The various forces that affect the business environment like suppliers, customers, investors,
competitors, etc. Now let’s understand the general forces that affect and shape the business
environment. There are five general dimensions of the business environment.

Economic Environment
 The Rate of Inflation: The simplest way to understand inflation is to see it as rising prices. If
the economy is in the state of boom. Where business is flourishing and everyone is earning
good amount of money which results in the increase in purchasing power of the consumer.
This means that producer is able to sell his commodity at a high price in the market.
Whereas, in a state of depression in the economy, the purchasing and investing power of the
customer falls down. As the firm can’t influence the general factors of business environment,
it has to change itself in order to survive the change. And producer has to re-establish the
prices of his commodity for people to afford it.
 Demand and Supply: When business identifies a profitable opportunity they are observing
the existence of a potential demand for the product. And businesses which can foresee
potential profits have an incentive to increase production. Demand and the supply of a
commodity in the market influence the business environment enormously. This factor is
based on the demand of a commodity in the market and the producer’s ability to produce it
on time.
 Economic Policies: Government seek out to control the business environment in order to
meet a range of objectives. These include stability and predictability, health and safety.
Local, state and national policies affect the planning and operations of business deeply.
Economic policies are drafted to direct the economic activities. They include import-export,
employment, tax structure, industry, public expenditure, public debt, foreign investment, etc.

Social Environment
 Culture and Traditions: In India, culture and traditions influence a majority of business.
Traditions mean the social practices that have passed down from one generation to another.
For example, Diwali, Christmas and Eid. These festivals prove to be a profitable period for
electronics, sweets, greeting cards and restaurant businesses. The business should plan it’s
strategies according to the traditions and social practices of a country.
  Social Trends: Social trends in a society are proportional to the demand for the product. The
example of the social trend is health and fitness. The products such as diet foods, diet drinks
and fitness centres have given a new face to the industry of health and fitness.
 Values: Values can be called as the standard society keeps about itself. Such as freedom,
social justice and equal opportunities.

Legal Environment
The legal environment includes the laws passed by the government as well as the decisions rendered
by the various commissions and agencies at every level of the government. It’s important that every
business must function according to the law of the area in which it wishes to operate.

Not obeying the rules can result in legal trouble for the business.  In India, business firms are
required to have complete knowledge of acts like Companies Act 1956, Consumer Protection Act
1986, Industrial Disputes Act 1947, and Competition Act 2002 and so on. For example, it is
mandatory for tobacco companies to print ‘smoking is harmful’ on its products.

Technological Environment
The primary forces that are responsible for the improvement in the scientific field and new
innovations being introduced in the market for improving the quality of goods and services and
techniques for operating business more efficiently are known as technological factors in the business
environment.

Just like two sides of the same coin, technological changes are threats to some organisations and
opportunities for other. The introduction of Television was a major blow to the industry of Radio
and Cinema industry. Mobile phones have snatched the market from Telephones.

These days, the online food delivery businesses are emerging in the market which is using
smartphone technology that is ‘Apps’ to order food online. This is a major change in the food
industry business and has affected the restaurant industry tremendously.

New innovations are occurring in medicine, telecommunications and biotechnology. Recent

advancement in the market of Autonomous cars i.e Driverless cars is proving to be a major threat to
the business of self-driving car industry.

Political Environment
This factor consists of external factors such as political stability and peace in the country. The
foresight of the ruling party and its perspective towards business. Needless to say, the political
environment is easily the most important dimension of the business environment.

As it decides what is the ideology of the party which is dominant in the country. For example, after
globalisation India let foreign companies enter Indian market for giving a boost to different
industries such as the food processing industry, the technological industry.
Businesses function with the nature and the framework of the political party. The components of a
political environment consist of the constitution of the country, political stability, political ideology,
political outlook on business sectors, the extent of government intervention and degree of politic of
business and economic issues.

The impact of political, economic, socio-cultural, environmental and other external influences

Introduction: 

Recent political and economic developments and associated changes in the practice and
delivery of health and social care have led managers and professionals to recognize the
importance and links between problem solving and decision-making skills. In particular,
assessing the impact of political, economic, socio-cultural, environmental and other external
influences upon health care policy, proposals and organizational programmes is becoming a
recognizable stage of health service strategic development and planning mechanisms.
Undertaking this form of strategic analysis therefore is to diagnose the key issues that the
organization needs to address.

This form of analysis can be undertaken by reviewing the organizational (external) environment
using the PEST-analysis (sometimes known as STEP-analysis), extended to the PESTELI
checklist described below. PESTELI Analysis is a useful tool for understanding the “big picture”
of the environment in which you are operating, and the opportunities and threats that lie within
it. By understanding your environment, you can take advantage of the opportunities and
minimize the threats.

What is PEST(ELI)?
The term PEST has been used regularly in the last 20 years and its true history is difficult to
establish. The earliest known reference to tools and techniques for ‘scanning the business
environment’ is by Francis J. Aguilar who discusses ‘ETPS’ - a mnemonic for the four sectors
of his taxonomy of the environment: Economic, Technical, Political, and Social. Over the years
this has become known as PEST with the additional letters are: Ecological factors, Legislative
requirements, and Industry analysis (Aguilar, 1967).

PESTELI is known as a ‘trends analysis’. The external environment of an organisation,

partnership, community etc. can be assessed by breaking it down into what is happening
at Political, Economic, Social, Technological, Environmental, Legal and Industry levels.
The same checklist can also be applied inside an organisation.

Initially the acronym PEST was devised, which stands for:

Political factors - both big and small 'p' political forces and influences that may affect the
performance of, or the options open to the organisation

Economic influences - the nature of the competition faced by the organisation or its services,
and financial resources available within the economy

Sociological trends - demographic changes, trends in the way people live, work, and think

Technological innovations - new approaches to doing new and old things, and tackling new
and old problems; these do not necessarily involve technical equipment - they can be novel
ways of thinking or of organising
 The expanded PESTELI, also includes:

Ecological factors - definition of the wider ecological system of which the organisation is a
part and consideration of how the organisation interacts with it

Legislative requirements - originally included under 'political', relevant legislation now

requires a heading of its own

Industry analysis - a review of the attractiveness of the industry of which the organisation
forms a part.

To be useful as an analysis tool, these environmental factors have to be linked to the

organisation's mission: which are helpful or which make it more difficult to accomplish that
mission.

Why undertake a  PEST(ELI) Analysis?

To be effective a PEST(ELI) needs to be undertaken on a regular basis. Organisations that do

analyses regularly and systematically often spot trends before others thus providing
competitive advantage.

Advantages and disadvantages of using a PEST(ELI) analysis

Advantages

 Simple framework
 Facilitates an understanding of the wider business environment
 Encourages the development of external and strategic thinking
 Can enable an organisation to anticipate future business threats and take action to avoid or
minimise their impact
 Can enable an organisation to spot business opportunities and exploit them fully
 By taking advantage of change, you are much more likely to be successful than if your
activities oppose it
 Avoids taking action that is doomed to failure from the outset, for reasons beyond your
control.
Disadvantages

 Some users over simplify the amount of data used for decisions – it is easy to use scant data
 To be effective this process needs to be undertaken on a regular basis
 The best reviews require different people being involved each having a different perspective
 Access to quality external data sources, this can be time consuming and costly
 The pace of change makes it increasingly difficult to anticipate developments that may affect
an organisation in the future
 The risk of capturing too much data is that it may make it difficult to see the wood for the
trees and lead to ‘paralysis by analysis’
 The data used in the analysis may be based on assumptions that subsequently prove to be
unfounded (good and bad).
Who should undertake the analysis?

Decision-making is more natural to certain personalities, so these people should focus more on
improving the quality of their decisions.  People that are less natural decision-makers are often
able to make quality assessments, but then they need to be more decisive in acting upon the
assessments made. PESTELI is almost entirely based on external factors, so ensure at least
some members of each team have knowledge of, or are able to consider, the PESTELI factors if
you intend using this exercise. PESTELI is a good exercise for marketing people, and is good for
encouraging a business development, market orientated outlook among all staff. If you want to
 use PESTELI with staff who are not naturally externally focused you can have them do some
research and preparation in advance of the exercise.

Completing a PESTELI analysis can be a simple or complex process. It all depends how

thorough you need to be.  It is a good subject for workshop sessions, as undertaking this
activity with only one perspective (i.e. only one persons view) can be time consuming and miss
critical factors.

What areas of PESTELI are best to use?

Insert Subject for  PEST(ELI) analysis:  

Political Economic

 Stage of business cycle

 Government type and stability
 Freedom of press, rule of law and levels of
bureaucracy and
corruption
 Regulation and de-regulation trends
 Social and employment legislation
 Tax policy, and trade and tariff controls
 Environmental and consumer-protection legislation
 Likely changes in the political environment
 Current and project economic growth, inflation and
interest rates
 Unemployment and labour supply
 Labour costs
 Levels of disposable income and income
distribution
 Impact of globalisation
 Likely impact of technological or other change on
the economy
 Likely changes in the economic environment

 Socio-cultural  Technological

 Population growth rate and age profile

 Population health, education and social mobility, and
attitudes to
these  Impact of emerging technologies
 Population employment patterns, job market  Impact of Internet, reduction in communications
freedom and attitudes costs and
to work increased remote working
 Press attitudes, public opinion, social attitudes and  Research and Development activity
social  Impact of technology transfer
taboos
 Lifestyle choices and attitudes to these
 Socio-Cultural changes

Examples:

Ecological factors – Air quality, transportation, parking, pollution discharge, water quality, waste
management, land use, coastal resources etc.

Legislative requirements – Primary and secondary legislation in relation to Health Bills e.g. employment
laws, contracts over rights of staff, rights of patients, direct payments etc.

Industry analysis – Demand, liaison and selection for services, products and/or component parts on the
basis of price, quality, delivery times and services support; market knowledge, forecasting, purchasing
strategies, liaising with users, business
efficiency;

For most situations the original PEST analysis model arguably covers all of the 'additional'
factors within the original four main sections. For example, Ecological or Environmental factors
can be positioned under any or all of the four main PEST headings, depending on their effect.
Legislative factors would normally be covered under the Political heading since they will
generally be politically motivated. Demographics usually are an aspect of the larger Social
issue. Industry Analysis is effectively covered under the Economic heading. Ethical
considerations would typically be included in the Social and/or Political areas, depending on the
perspective and the effect. Thus we can often see these 'additional' factors as 'sub-items' or
perspectives within the four main sections. Examples of these have been added to Table 1.

Keeping to four fundamental perspectives also imposes a discipline of considering strategic

context and effect. Many of these potential 'additional' factors (ethical, legislative,
environmental for example) will commonly be contributory causes which act on one or some of
the main four headings, rather than be big strategic factors in their own right.

How to undertake a  PEST (ELI) analysis?

It is important to clearly identify the subject of a PEST(ELI) analysis, because a PEST(ELI)

analysis is four-way perspective in relation to a particular policy, proposal or business plan  - if
you blur the focus you will produce a blurred picture.

The shape and simplicity of a four-part model is also somehow more strategically appealing and
easier to manipulate and convey.

The PEST(ELI) template below (Table 1) includes sample prompts, whose answers can be
inserted into the relevant section of the PEST(ELI) Grid (Table 2). The prompts are examples of
discussion points, and obviously can be altered depending on the subject of the PEST(ELI)
analysis, and how you want to use it. Make up your own PEST(ELI) questions and prompts to
suit the issue being analysed and the situation (i.e. the people doing the work and the
expectations of them).

The following factors may help as a starting point for brainstorming (but make sure you include
other factors that may be appropriate to your situation):

 Decide how the information is to be collected and by whom (often a team approach is much
more powerful than one person’s view).
 Identify appropriate sources of information.
 Gather the information - it is useful to use a template as the basis for exploring the factors
and recording the information.
Table 1: PEST (ELI) Template

 
Now go to the Grid: 

Table 2: PEST (ELI) Analysis Grid

(Adapted from https://rapidbi.com/the-PESTLE-analysis-tool/)
PEST(ELI) Analysis Grid

Subject Area:

Date:
 PEST (ELI)
Potential
Analysis Implication and Importance
Impact
Factors

Use the lists Time

in Table 2 to Frame: Impact:
get you Relative
started. H- High 0- 6 Increasing Importance:
month Type: >
M- medium 
Consider
6-12 Positive + Unchanged Critical
changes to
L – Low months Negative – = Important
treatment and
public U- 12-24 Decreasing Un-important
attitudes as Unknown
Undetermined months <
well as Unknown
government 24+ Unknown
changes months

Political          

Economic          

Socio-cultural          

Technical          

Ecological etc.
         
…

 
Analysis checklist:

 Analyse the findings

 Identify the most important issues
 Identify strategic options
 Write a report
 Disseminate the findings
 Decide which trends should be monitored on an ongoing basis.
In reviewing the data drawn from undertaking a PESTELI analysis it will be important to assess
whether there are any disproportionate impacts on particular groups of people, especially those
who are vulnerable. Proposals, organisational missions and policy development should not
widen inequalities, but actively seek to reduce them. Part of the decision-making that follows
the analysis will be to consider what could be done to counterbalance the negative impacts for
groups which may get less health benefit from positive proposals or may be adversely affected
by proposals with a negative impact on health.