Application of PESTLE analysis
1. Define the purpose of PESTLE analysis and spell out some of the main constituents of each factor.
PESTLE analysis “Political, Economic, Social, Technological, Legal and Environmental analysis” is used to evaluate the many factors in the macro environment that will affect the decisions of managers in any organisation. It is normally carried out before a SWOT analysis which is applied for assessing an internal environment of a business (Panah, 2012). Government policy, economic growth, social trends, new technologies, new laws and climate change are all examples of macro change. Political factors include tax policy, trade restrictions and tariffs. It’s what the government intends to change in the economy. Economic factors include interest rates, inflation rates and exchange rates. These factors influence a business’s day to day operations and decisions. Demand is affected by social trends such as age distribution, population growth rate and culture aspects. Technological factors can improve the competitive advantage of a business by affecting the cost, quality and innovation. Every business has to follow the law; this means that legal factors are essential for business practice. There is a rising awareness of the environmental factors, affecting how companies operate. Overall, PESTLE factors have major influences upon the success and failure of a business when setting up operation both nationally and globally (Panah, 2012). I will later apply this analysis to Alfa Romeo for all PESTLE factors and assess the risks, costs and benefits of this to the company. By using forecast trends and graph I will be able to come to a conclusion on Alfa Romeo entering the United Kingdom as a manufacturer.
2. Present forecast trends for one of your chosen element of each factor up to 2015 with a brief explanation.
Corporation tax is a tax on taxable profits of all limited companies and all organisations; it affects all organisations based in the UK. The graph shows, that the UK is decreasing their corporation tax to 22% by 2014, indicating that the UK is trying to encourage other countries to invest in the UK.
Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. In the graph below, it shows that from 2012 up to 2016 there is going to be a 2% change over the course of 4 years.
Social factors, such as age distribution using an age based population pyramid, allow businesses to implement segmentation. This allows marketing campaigns to create a strategy to target these specific customer segments. There is not much change when comparing both graphs, but from the age of 40 to 74 in 2020 it has decreased from 2010.
Technology is always improving, particularly in modern business, because of that, it is essential for businesses to keep on top of global technology standards. The graph below forecasts the demand of electric vehicles; it shows that there is a rising demand of electric vehicles in the following years and by 2015 there will be 480,000 units.
Minimum wage is considered to be a legal factor and this varies between different countries and regions; minimum wage laws are in effect in many jurisdictions, the benefits and drawbacks of the economy. The graph below shows a rising trend on minimum wage in the UK in the following years from 1999 to 2012.
The Spectator (2012)
Co2 emissions are one of the main contributors of global warming, which is why businesses have to be aware of such environmental factors. The graph below shows that car emissions are falling and forecasted to keep falling after 2015. This shows that car manufactures have to develop a way to reduce their Co2 emissions.
3. Discuss the implication of your findings with respect to the UK domestic market in terms of...
Please join StudyMode to read the full document