PESTEL ANALYSIS

DEMONSTRATION BY:-ABHISHEK KANSALISHAN JINDALSONAAL GUPTAROHIN GUPTA

DefinitionDescribes a framework of macro-environmental factor used in the environmental scanning component of strategic managementBy understanding external environment one can take advantage of opportunities and minimize threat

IntroductionEarlier tools and techniques for ‘Scanning the Business Environment’ appears to be by Francis J. Aguilar (1967) who discusses ‘ETPS’.Thereafter, this(ETPS) or ‘environmental scanning analysis’ was modified yet again to become a so-called STEPE analysis.The model has recently been further extended to STEEPLE and STEEPLED, adding Ethics and Demographic factors.

What is Macro Environment?

The conditions that exist in the economy as a whole, rather than in a particular sector or region. It represents forces that affect all firms across all industries.Van Der Heijden a scenario planner identifies three types of uncertainty :

RiskStructural uncertaintyUnknowables

PESTEL Analysis

PESTEL

POLITICS

ECONOMY

SOCIAL

TECHNOLOGY

ENVIRONMENT

LEGAL

Factor affecting PESTEL Analysis :-

Political FactorsGovernment type Corruption Freedom of pressRegulation and de-regulationTax policyChange in political environmentTrade and tariff controlEmployment legislation

Political Heat Map

INDIA

Economic FactorsStage of business cycleCurrent & projected economic growthInflation rateInterest rateLabor costExchange rateImpact of globalizationTaxes

Social FactorsHealthCultural aspectsPopulation growth rateDemographics : age, gender, raceSocial mobilityEthicsEducational infrastructureDivision of wealth in society

Technological FactorsDegree of automationEmerging TechnologiesRate of Technological ChangeR&D activityTechnology legislationGlobal & local communicationTechnology access

Environmental Factors

WeatherGeographyInfrastructureCustomer valuesMarket valuesEnvironmental regulationsDisaster quotientclimate

Legal FactorsAntitrust lawConsumer lawEmployment lawHealth & safety lawIndustry specific regulationEnvironmental lawDiscrimination law

Applicability The model's factors will vary in importance to a given company based on its industry and the goods it produces. For example, consumer and companies tend to be more affected by the social factors, while a global defense contractor would tend to be more affected by political factors

Issues of concernThe main problem with these external PESTLE factors is that they are continuously changing. Analysis of what is affecting the organization or a project Now, and what is likely to affect it in the Future is important.

The analysis may be based on assumptions that prove to be unfounded.Collecting large amount of information may make it difficult.

Case study of STARBUCKS

StarbucksEstablished in 1971It offers world’s finest fresh roasted whole bean coffee.Total stores – 22519 in 67 countriesMission – To inspire and nurture the human spirit- One person, One cup and one neighborhood at a time.

Political Factor The main political factor is about sourcing the raw materials.Tax PolicyEmployment laws

Economic FactorsThe ongoing global economic recession.The company has to deal with rising labor and operational costs.Local currency exchange ratesLocal economic environment in different marketsInflation rate

Socio Cultural FactorChanging family patterns Consumer preferencesChanging work patternsChanges in lifestyles of populationThe level of education of the population in local marketsChanging values among population

Technological FactorEmergence of innovative technologyBiotechnological developmentsDevelopments in agriculture

Environmental FactorEnvironmental rules and regulationsEnvironmental disasters in countries which produce coffee beansGlobal warming and other environmental issues in a global level

Legal FactorsIntroduction of stricter customs and trade regulationsLicensing regulations related to the industry.Policies and regulations by health authorities.

Conclusion of Case Study

The PESTLE analysis above proves that Starbucks has a quite stable external environment. The key reason behind this might be because it operates in the Food and Beverages industry. This means consumers might reduce consumption partially but will not stop buying completely.So, as recession is the most important factor, Starbucks has to lower costs and increase the value. This way it can retain its consumer base and also gain consumer loyalty.

Thank you

Questions are welcomed