Pestel Analysis

Topics: Inflation, Economics, Policy Pages: 9 (2582 words) Published: April 18, 2013
Literature review

* Political factors – Essentials of Marketing (2002) says that many of the legal, economic and social developments in society is nothing more than political decisions put into action. The political climate is of great significance to the marketing firm and has a direct effect on many aspects of the economy and society. Factors in the political environment both national and international should be carefully monitored. Modern Management (2006) describes how nationally the government can affect business through its policies in relation to industrial service development, tax incentives, capital grants and expansion schemes that are available. Internationally it describes the influences the business has through policies in relation to international trade and deregulation. The main ways in which the government influence international trade in through their input into the general agreement on trade and tariffs. Individual governments can impose embargoes or sanctions on trade with any particular country they wish. Developments in the European Union in recent years have seen the deregulation of financial markets, public utilities and the airline industry. The aim is to remove protective restrictions on operations and to allow greater competition between countries.

* Economic factors – In Modern Management (2006) they describe the economic factors as being shaped by the state of the economy in a particular country and the economic policies that is implemented within that country. In Essentials of Marketing (2002) they describe economic factors as being vital to marketing firms because they influence cost, price and demand. They can be viewed as opportunities or threats. Tieran et al, (2006) describes government’s implementation of different economic policies which affect key areas such as taxation, inflation, exchange rates and economic growth. Interest rates determine the extent of an organisations loans and investments. An increase in the inflation rate results in a demand for an increase in worker’s wages. As inflation increases the purchasing power of consumer’s declines as they can no longer afford products or services that they have been previously buying. Exchange rates have a huge impact on company’s who export large amounts of their products. If the currency rises in the country that the business is exporting to, their goods become expensive and in turn reduce their competitiveness. A business needs a firm exchange rate and low inflation rate to ensure that their business grows. As Ireland is a small open economy an important development has been the emergence of global interdependencies between different economies.

* Social factors – Modern Management (2006) tells us that social factors are concerned with the demographics, attitudes and behaviour of members in society. Lancaster et al, (2002) say people’s basic beliefs, attitudes and values are shaped by the society they grow up in. Modern Management (2006) describes demographics as identifying characteristics of people living within society, these include work groups, organisations and countries. These characteristics can be measured in terms of age, gender, family size, education and occupation. Buying behaviour is influenced by social conditioning. The social culture has an impact on the business environment. The company needs to be aware of the demographics when planning recruitment, selection and training of employees. Demographics have an impact on human resource policies and on what kind of products and services are available within society. Developments in the social environment can have implications for a business in terms of the behaviour and attitudes of their workforce and consumers being more environmentally aware.

* Technology factors – Affect the way goods are distributed and promoted. It increases efficiency on how products can be distributed. Tieran et al, (2006) states that no organisation...
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