1.

5 The External Environment

THE PEST OR STEEPLE ACRONYM:
 MOST IMPORTANT TOOLS SO FAR:

1. SWOT analysis: to analyze the current position of the business(where are we now).

2. Ansoff matrix: the possible growth strategies a business can undertake.

3. PEST, PESTLE or STEEPLE: to analyze the external environment (factors) the business
operates in.
• https://www.mindtools.com/pages/article/newTMC_09.htm
• https://www.youtube.com/watch?v=_YhEpBvlO2M
 LET’S START WITH AN ACTIVITY TO TEST OUR PRIOR
KNOWLEDGE OF THE TOPIC:

• Analyze the external factors affecting Starbucks by completing the table below:( question on the
next slide and in your text book pg.17)

External factor Environment(categorized Impact on the business

under which ( opportunity or threat)-
environment) O or T and why?
 Environment(categorized under Impact on the business ( opportunity
External factor which environment) or threat)- O or T and why?

Alliance with Tata group Social environment Opportunity that Starbucks took to access the Indian
market.

Indian gov. limiting the entry of foreign retail chains into
India
The alliance with Tata enabling Starbucks to open branches
in hotels operating in India and open coffee shops too.
Legal environment
Social environment
Threat as it stops foreign chains from entering the Indian
market. However, if Starbucks is able to enter this market
due to its relationships then the legislations will protect
them creating an opportunity.
Opportunity as it allows Starbucks to expose its products to
those market segments.

Stabrucks purchasing coffee from Indian suppliers Social Opportunity since they built positive relationships in India.

Popularity of coffee in the northern part of India. Social Opportunity. A wider market segment is willing to consume
coffee.

Young people earning more and having a higher disposable Economic Opportunity. This segment of Indians will have a stronger
income to spend. purchasing power.

Growing GDP Economic Opportunity. Growth in GDP implies a more prosperous

economy and thus the ability of people to buy.

Starbucks becoming well known Social Opportunity. Enables them to sell more of their products.

Intense competition by other Indian and the Italian Barista Social Threat.
coffee producers
E
 LET’S REFLECT:
 Businesses operate in an environment, no matter how big or small they are.
 A business environment refers to the various conditions external to the business.
 Even when a business manages to control its internal environment, external factors
are not easy to control and are thus challenging, businesses have only a limited
means to influence those elements.
 Businesses can plan for those factors or have contingency plans to either take
advantage of those factors or minimize their negative impact.

• One way to assess the external factors is to use the STEEPLE analysis. Earlier versions
of STEEPLE include the PEST or PESTLE.
The addition of the extra elements(first legal and ecological and then ethical)reflect
the
evolution of the business practices. Many businesses have grown to become
multinationals and global so new considerations needed to be evaluated, Ex. The
legal, ecological and ethical frameworks.

The external environment is evaluated in the external part of the SWOT, however,
this does not imply that the STEEPLE is part of SWOT. Actually, a business operates
in a surrounding external environment
THE IMPACT IN ANY OF THE STEEPLE FACTORS
 
 If any of the STEEPLE factors change, there will be an impact on the business objectives and
strategy.
 In a STEEPLE analysis business first considers the influence of each element on the business.
Then,, the most important factors are determined to develop a business strategy.
 Factors affecting the business are summarized in the STEEPLE acronym. Each factor could affect
the business negatively (threat)or positively(opportunity). Those can also be referred to as
advantages or disadvantages.
 Different factors affect different businesses in different ways. For example changes in trends or
fashion would not affect a business in the food industry
 COMMON INFLUENCES IN A STEEPLE ANALYSIS(PG 62):
External environment factor  Examples  Examples

Social influences include:  Lifestyles  Education

 Social mobility  Fashions or tastes
 Demographics

Technological influences include: • Technological improvements • ICT

• New technology transfer • Research and development costs
• Infrastructure

Economic influences include:  The economic or business cycle  The rate of unemployment
 The rate of economic growth  The exchange rate
 The rate of inflation  Interest rates

Ethical influences include:  Corruption  Codes of business behavior

 Transparency  Fair trade

Political influences include: • Political stability • Regional policies

• Trade policies • Lobbying or electioneering

Legal influences include:  Regulations • Health and safety legislation

 Employment laws • Competition laws

Ecological influences include:  Depletion of renewable resources  Organic farming

 Global warming  Carbon footprints
• Demography: the study of population.
 ACTIVITY 2:
• 

 How will the following changes affect businesses? Answer in the context of STEEPLE.
 How will each external factor affect business operations?
 How will imposing a paternity law in Jordan which gives fathers three months paid leave
affect a business?
 Relocation in markets with fewer legal restrictions.
 Imposing a higher minimum wage?
 Political instability in Syria on local businesses?
 Economic growth which implies a higher GDP?
 Imposing higher quality standards that businesses(producers) must follow?
 Higher inflation rates?
External factor Environment(categorized under opportunity or threat)- O or T
Impact on the business ( which environment) and why?

Imposing a higher min.wage Legal Threat. Higher min.wage means

it’s a threat since the business costs
increase. Cost of hiring increases
which places a burden on
employment…
• Protect Ltd.identified a gap in the local market followed by targeting the European market due to
a gap in the product provided by the business. They took advantage of social opportunities in
both markets which currently gives them a clear strength in the leisure clothing industry.