An overview of PESTEL analysis as external business factor.

1. PESTEL ANALYSIS

3. PEST analysis describes a framework of macro-environmental
factors used in the environmental component of strategic
management.
The PEST factors, combined with external micro-environmental
factors and internal drivers, can be classified as opportunities and
threats in a SWOT analysis.

6. PEST
SPELIETSTEEPLESTEEPLED
PESTELSLEPTLegal Environmental
Demographic Ethics
Intercultural

7. The PESTEL Analysis provides you with a framework that enables
you to investigate your external environment by asking questions
for each factor and discussing the likely implications.
• What are the key political factors?
• What are the important economic factors?
• What cultural aspects are most important?
• What technological innovations are likely to
occur?
• What current and impending legislation may
affect the industry?
• What are the environmental considerations?

13. POLITICAL FACTOR
Political
Factors
Government
Stability
Employment
& Operational
Laws
Government
Leadership
Trade
Restrictions
of Reforms
Tax
Regulation
Corruption
Levels
Bureaucracy
Issues
Stability of
Neighbors

14. GOVERNMENT STABILITY
World Bank
Worldwide
Governance
Indicators.
Political
Stability &
Absence of
Violence/Terr
orism Value
Date Value
2013-12-31 12.32
2012-12-31 11.85
2009-12-31 10.90
2005-12-31 17.79
1996-12-31 19.23
EMPLOYMENT &
OPERATIONAL LAWS
• Support to Training and
Employment Programme for
Women (STEP) .
• Entrepreneurship
Development Programme,
Skill Development Programme
(SDP),Management
Development Programme .
• Monetary & Fiscal Policy of
Govt. of India.

15. TAX REGULATION
• The rate of the individual and
corporate tax has been
reduced in order to bring more
people in the tax net.
• Local Arms Of MNCs Come
Under Service Tax Scanner.
• Heavy reduction in the import
duties has been implemented.
TRADE RESTRICTIONS OF
REFORMS
• FERA Restrictions Removed.
• RTP Restrictions Removed.
• Free Entry of Foreign
Investment.
• Reduction in Restrictions of
Export-Import.

16. GOVERNMENT LEADERSHIP
• Establishment of Foreign
Capital Market & Capital
Market Reforms.
• Providing Incentive for Export.
• Statutory Liquidity Ratio
(SLR) has been lowered.
CORRUPTION LEVELS
• 85th Rank In Corruption
Perception Index 2014.
• Countries at the bottom need
to adopt radical anti-
corruption measures in favour
of their people.

17. BUREAUCRACY ISSUES
• Abolition of Licensing.
• Freedom to Import
Technology.
• Contraction of Public Sector.
• MRTP Restrictions Removed.
STABILITY OF NEIGHBOUR’S

19. Economic Environment
• It is the environment in which business operates.
• It includes system, policies and nature of an economy, trade
cycles, economic resources, level of income etc.
• It is very dynamic and complex in nature.

20. Elements of Economic Environment{EEE}
EEE
Economic
condition
Economic
system
Economic
policies
Economic
legislation

21. Importance of Economic Environment
• Helps to estimate the market trends.
• It’s a leading indicator of government goals and its planned
use of economic tools and market reforms.
• Determine opportunities and threats.
• Giving directions for economic growth.
• Help to deal with business challenges.

22. Factors affecting Economic Environment
• Growth rate
• Inflation
• Business cycle
• Labor cost

23. Limitations of Economic Environment
• Reduces the individual freedom of choice.
• Less scope of foreign investment.
• Imposes too many restrictions.

25. • Sociological attitudes and profiles are constantly changing.
• These factors scrutinize the social environment of the market,
and gauge determinants like cultural trends, demographics,
population analytics etc.
SOCIAL FACTOR

26. This Social created by a society-at-a-large in which a business
functions can be referred to as its external social environment. If a
business operates in a multi –cultural society, then the social external
social environment is even more complicated because the
environment will consist of diverse sub populations with their own
unique values, beliefs and customs.

27. To understand the impacts better, you might need to
study the factors in details.
Some of the Social factors are:
Lifestyles
Buying habits
Population growth rate
Emphasis on safety
Health consciousness
Family size and structure
Attitudes towards saving and investing
Attitude towards customer service and product quality

28. If social factor is neglected
Organizations should be able to offer products and
services which aim to benefit people’s lifestyle. The offerings
should complement customers’ behaviour. Not reacting to
changes in the society can be a costly mistake. They might lose
market share. Demand for their products and services will fall.

29. • SOCIAL FACTORS WHICH IMPACT PEPSI CO
• SOCIAL FACTORS WHICH IMPACT NOKIA
• SOCIAL FACTORS WHICH IMPACT
MC DONALD'S

31. Technological Environment
• “Technological Environment means the development in the field
of technology which affects business by new inventions of
productions and other improvements in techniques to perform
the business work”.
• External Factor in Technology that impact business operations.

32. Features of Technical Environment
• The pace of change in technology is becoming more rapid, and
often changes that impact your market come from unexpected
sources.
• Technological factors can be broadly divided into two areas:
manufacture and infrastructure.
• Organizations that fail to keep up with technological advances
leave opportunities for a smaller producer or new entrant to
enter their market.

33. Technology
Factors
Rate of
Change
Use of
Outsourcing
Network
Coverage
Eliminates
Bottle Neck
Knowledge &
Management
System
Quality
& Price
Intellectual
Property
Patents &
Licenses
Research
&
Development
Production
Efficiency
Government
Activity &
Legislation

34. Importance of Technical Environment
• Automation
• Improved quality of parts and end product
• Incentives
• Significant cost savings
• Use of outsourcing to control costs and offer greater flexibility

38. ENVIRONMENTAL FACTORS
• Environmental factors include those factors that influence or determine
surrounding environment.
• Environmental factors talk about how people’s perception towards
environment can affect business.
• These factors have become important because of increasing scarcity of
raw materials, increasing pollution, amount of waste generation and it’s
disposal.

39. Environmental factors
1. Geographical location
2. Climate change
3. Disposal of waste material
4. Energy availability and consumption
5. Recycling procedures
6. Limited natural resources
7. Attitude towards environment

40. Starbucks company analysis
1. Recycling cups
2. composting of coffee grounds
3. Energy consumption is reduced by 10%.
4. Water consumption will be reduced by 25% by the year
2015.

42. Legal Environment
Legal environment of business means all factors relating to laws and legal
orders which affect business and its working. Law: system of rules, usually
enforced through a set of institutions
e.g., employment laws, health and safety regulations, IPR laws, copyright,
patent, discrimination laws, and antitrust laws.
• Regional Laws
• Law Enforcement
• Court System

43. Examples
• Facebook : Law suited in India, Privacy issues, Social monitoring.
• Tata Motors : Safety rules, Quality Control, Vehicle rules.
• Infosys: IT rules, Piracy Protection, Software Import rules & regulation.
Organization Government

44. Legal Environmental aspect of a Business
1. Indian contract act 1872
2. Indian sale of goods act 1930
3. Indian partnership act 1932
4. Industrial dispute Act 1947
5. Minimum wages act 1948
6. Indian companies act 1956
7. Foreign exchange regulation act (FERA ) 1973
8. Foreign exchange management act 1999
9. Monopolies and restrictive trade practice act 1969
10. Consumer protection act 1986
11. Indian income tax act 1961
12. Central excise act 1944
13. Security exchange board of India act 1992
14. Banking regulation act 1949
15. Chartered accountant act 1949
16. Information technology act 2000
17. competition act 2002
18. right to information act 2005
19. Micro, Small and Medium Enterprises Development Act,2006
20. Commissions for Protection of Child Rights Act,2005

45. CONCLUSION:
• All organizations need to identify external factors within their
environment that could have an impact on their operations.
• Many of these will be things that the organization has no control
over, but the implications of which need to be understood.