Pestel Analysis of the Macro-Environment

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The ‘environment’ is everything happening in the world outside that is relevant to your business. As Baines(2011) describe : “The operating environment for all organisations is never static and seldom entirely predictable, and can therefore profoundly affect a company’s course of action.” Only after examine the nature of the marketing environment, we can therefore set up appropriate marketing strategies for organisation. Generally, the marketing environment can be classified into three levels: the external environment, performance environment and internal environment. Organization may have different degree of influence on each level and elements in each level may also have different impact on organization itself. The external environment is characterized in two ways. On one hand, the elements do not have an immediate impact on performance of an organization, on the other hand, organization may possess limit power to control them. The most popular framework examine the external environment is known as “ PESTLE” which stands for political,economic, socio-cultural, technological ,legal and ecological environment. PESTEL analysis of the macro-environmentThere are many factors in the macro-environment that will effect the decisions of the managers of any organisation. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. To help analyse these factors managers can categorise them using the PESTEL model. This classification distinguishes between: * Political factors. These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidising firms? What are its priorities in terms of business support? Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. * Economic factors. These include interest rates, taxation changes, economic growth, inflation and exchange rates. As you will see throughout the "Foundations of Economics" book economic change can have a major impact on a firm's behaviour. For example:               - higher interest rates may deter investment because it costs more to borrow                - a strong currency may make exporting more difficult because it may raise the price in terms of foreign currency                - inflation may provoke higher wage demands from employees and raise costs                - higher national income growth may boost demand for a firm's products * Social factors. Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staff are living longer. It also means some firms such as Asda have started to recruit older employees to tap into this growing labour pool. The ageing population also has impact on demand: for example, demand for sheltered accommodation and medicines has increased whereas demand for toys is falling. * Technological factors: new technologies create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products. * Environmental factors: environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major...
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