PESTEL analysis of the macro-environment
There 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 (interference) in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidizing (grants or loans) (buying) firms? What are its priorities in terms of business support? Political decisions can affect many important 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 (price rise) and exchange rates. As you will see economic change can have a major impact on a firm's behaviour. For example: -
higher interest rates may stop 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 lead to higher wage demands from employees and raise costs -
higher national income growth may increase demand for a firm's products .
Social factors. Changes in social trends (fashion/lifestyle) 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 staffs are living longer. It also means some firms such as Asda have started to recruit older employees to tap into this...
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