Company Name PESTEL & Environment Analysis

Strategic Management Essays, Term Papers & Presentations

Company Name PESTEL analysis is a strategic tool to analyze the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of Company Name.

Changes in the macro-environment factors can have a direct impact on not only the Company Name but also can impact other players in the GICS industry group. The macro-environment factors can impact the Porter Five Forces that shape strategy and competitive landscape. They can impact individual firm’s competitive advantage or overall profitability levels of the GICS industry group industry.

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PESTEL analysis provides great detail about operating challenges Company Name will face in prevalent macro environment other than competitive forces. For example an Industry may be highly profitable with a strong growth trajectory but it won't be any good for Company Name if it is situated in unstable political environment.

Spanish oil giant Repsol had to face a similar instance. It started an above average profitability operations in Argentina and made strong returns in 5-7 years. But the business was later expropriated by the Left Wing government. So the decade long profits didn’t materialize in the end.

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Political Factors that Impact Company Name

Political factors play a significant role in determining the factors that can impact Company Name's long term profitability in a certain country or market. Company Name is operating in GICS industry group in more than dozen countries and expose itself to different types of political environment and political system risks. The achieve success in such a dynamic GICS industry group industry across various countries is to diversify the systematic risks of political environment. Company Name can closely analyze the following factors before entering or investing in a certain market-

Political stability and importance of GICS industry group sector in the country's economy.
Risk of military invasion
Level of corruption - especially levels of regulation in GICS industry group sector.
Bureaucracy and interference in GICS industry group industry by government.
Legal framework for contract enforcement
Intellectual property protection
Trade regulations & tariffs related to GICS industry group
Favored trading partners
Anti-trust laws related to GICS industry group
Pricing regulations – Are there any pricing regulatory mechanism for GICS industry group
Taxation - tax rates and incentives
Wage legislation - minimum wage and overtime
Work week regulations in GICS industry group
Mandatory employee benefits
Industrial safety regulations in the GICS industry group sector.
Product labeling and other requirements in GICS industry group

Economic Factors that Impact Company Name

The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle determine the aggregate demand and aggregate investment in an economy. While micro environment factors such as competition norms impact the competitive advantage of the firm. Company Name can use country’s economic factor such as growth rate, inflation & industry’s economic indicators such as GICS industry group industry growth rate, consumer spending etc to forecast the growth trajectory of not only --sectoryname-- sector but also that of the organization. Economic factors that Company Name should consider while conducting PESTEL analysis are -

Type of economic system in countries of operation – what type of economic system there is and how stable it is.
Government intervention in the free market and related GICS industry group
Exchange rates & stability of host country currency.
Efficiency of financial markets – Does Company Name needs to raise capital in local market?
Infrastructure quality in GICS industry group industry
Comparative advantages of host country and GICS industry group sector in the particular country.
Skill level of workforce in GICS industry group industry.
Education level in the economy
Labor costs and productivity in the economy
Business cycle stage (e.g. prosperity, recession, recovery)
Economic growth rate
Discretionary income
Unemployment rate
Inflation rate
Interest rates

Social Factors that Impact Company Name

Society’s culture and way of doing things impact the culture of an organization in an environment. Shared beliefs and attitudes of the population play a great role in how marketers at Company Name will understand the customers of a given market and how they design the marketing message for GICS industry group industry consumers. Social factors that leadership of Company Name should analyze for PESTEL analysis are -

Demographics and skill level of the population
Class structure, hierarchy and power structure in the society.
Education level as well as education standard in the Company Name ’s industry
Culture (gender roles, social conventions etc.)
Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship while some don’t.
Attitudes (health, environmental consciousness, etc.)
Leisure interests

Technological Factors that Impact Company Name

Technology is fast disrupting various industries across the board. Transportation industry is a good case to illustrate this point. Over the last 5 years the industry has been transforming really fast, not even giving chance to the established players to cope with the changes. Taxi industry is now dominated by players like Uber and Lyft. Car industry is fast moving toward automation led by technology firm such as Google & manufacturing is disrupted by Tesla, which has stated an electronic car revolution.

A firm should not only do technological analysis of the industry but also the speed at which technology disrupts that industry. Slow speed will give more time while fast speed of technological disruption may give a firm little time to cope and be profitable. Technology analysis involves understanding the following impacts -

Recent technological developments by Company Name competitors
Technology's impact on product offering
Impact on cost structure in GICS industry group industry
Impact on value chain structure in GICS industry group sector
Rate of technological diffusion

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Environmental Factors that Impact Company Name

Different markets have different norms or environmental standards which can impact the profitability of an organization in those markets. Even within a country often states can have different environmental laws and liability laws. For example in United States – Texas and Florida have different liability clauses in case of mishaps or environmental disaster. Similarly a lot of European countries give healthy tax breaks to companies that operate in the renewable sector.

Before entering new markets or starting a new business in existing market the firm should carefully evaluate the environmental standards that are required to operate in those markets. Some of the environmental factors that a firm should consider beforehand are -

Weather
Climate change
Laws regulating environment pollution
Air and water pollution regulations in GICS industry group industry
Recycling
Waste management in GICS industry group sector
Attitudes toward “green” or ecological products
Endangered species
Attitudes toward and support for renewable energy

Legal Factors that Impact Company Name

In number of countries, the legal framework and institutions are not robust enough to protect the intellectual property rights of an organization. A firm should carefully evaluate before entering such markets as it can lead to theft of organization’s secret sauce thus the overall competitive edge. Some of the legal factors that Company Name leadership should consider while entering a new market are -