Transcript Chap 5 Ext. Env IB1 Ch 5 External Environment PESTSL

1.5 External Environment
PEST Analysis
PEST ANALYSIS
This form of business analysis examines the external
environment and the global factors that may affect a
business. It can provide a quick and visual representation of
the external pressures facing a business, and their possible
constraints on strategy.
It is usually divided into four external influences
on a business:
P – Political
E – Economic
S – Social
T – Technological
Similar to STEP, STEEPLE, and PESTLE.
External Factors that Impact Business
Political and Legal Issues
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Employment laws
Consumer Protection Laws
Business competition Laws
Political changes (elections?)
Policy changes
Can you think of anything in this category that has
currently affected business?
External Factors that Impact Business
Economic Influences
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Economic Growth/Recession
Rising or falling living standards/Inflation
Low or high levels of unemployment
Value of imports/exports-Exchange Rates
Interest Rates/Tax Changes
Can you think of anything in this category that has
currently affected business?
External Factors that Impact Business
Social and Cultural
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Population demographics-ageing population
Changing role of women
Improved Education
Retirement/Early Retirement
Divorce/Marital rates
Job (in)security-Underemployed
Immigration (results in changing consumer tastes)
Can you think of anything in this category that has
currently affected business?
Terms to know:
Recession: 6months of falling GDP
(negative growth. GDP is Gross Domestic
Product.
 Exchange Rate: the value of one currency
in terms of another currency.
 Cost-Push Inflation: caused by rising costs
forcing businesses to increase rates.
 Demand Pull Inflation: caused by excess
demand in an economy, i.e.: economic
boom.
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External Factors that Impact Business
Impact of Technology
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Costs (Equipment, labor training)
Labor relations
Data communication
CAD/CAM
(computer-aided design/computer-aided
manufacturing)
Internet/Intranet
Application programs
Can you think of anything in this category that has
currently affected business?