LECTURER WEEK 3 (24/9/2013)

Chapter 3: Evaluating A Company’s External Environment. 

We get a lot of new information. In this chapter, I know about PESTEL analysis. PESTEL is a company’s external environments that influence the organisational. It is used to describe an analysis that is used for determining the opportunities and risks of global expansion. PESTEL issues often differ domestically and even more so internationally. As a company who looks to leverage the advantages that the democratisation of technology, information and finance, and grow beyond the national borders that previously confined them, it is imperative that they consider a PESTEL analysis that provides a strong framework to set the stage to develop specific tactics to mitigate the risks involved in executing their vision in unfamiliar environments.

PESTEL analysis focuses on the six principal components which consist of:

Political factors

We can see how far government intervention on the system of economic. The government intervention include in matters like tax policy, fiscal policy, labour law, tariffs, the political stability and trade restrictions. These include goods and services which the government wants to provide or to be provided or do not want of both. Moreover, governments have great influence on the health, education, and infrastructure of a nation.

Economic conditions

Include the economic growth, interest rates, exchange rates and the inflation rate, unemployment rate and etc. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firms cost of capital and how far a business grows and expands. Exchange rates can affect the costs of exporting goods and the supply and price of imported goods in an economy.

Sociocultural forces

Include the cultural aspects, societal values, attitudes and also include demographic factors such as the population growth rate and age distribution. Sociocultural forces vary by locale and change over time. For example, a population may imply a smaller and less-willing workforce can cause a increasing the cost of labour. Furthermore, companies may change various management strategies to adapt to these social trends such as recruiting older workers.

Technological Factors

A technological aspects such as R&D activity, automation, technology incentives and the rate of technological change and also government control over the Internet that have the potential for wide-ranging effects on society. Technological change can encourage the birth of new industries such as based on nanotechnology and furthermore, technological shifts also can affect costs, quality, and lead to innovation.

Environmental forces

This include ecological and environmental aspects such as weather, climate, and climate change, which may affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer. They may have an indirect but substantial effect on other industries such as transportation and utilities.

Legal and regulatory factors

These include the regulations and laws include discrimination law, consumer law, employment law, and health and safety law and so on. These factors can affect how a company operates, the costs and the demand for their products. Others, such as minimum wage legislation, affect certain types of industries (low-wage, labour-intensive industries) more than others.

In tutorial class, we were asked by the tutor who is the new giant economy? We state various answers such as United States, Hong Kong, United Kingdom, Switzerland and other. Actually the new giant economy was called:

Brazil

Russia

India

China
Korea