Seminar 1 PEST Analysis PDF

External (Macro Environment) Analysis PEST (EL) 2024/25. 1. Macro Economic Analysis of a Certain Company in External Point of Wiev Seminar 1. by Hajnalka Madai  Requirents  2-3 student in a group  An operating company (woldwide…, any kind of business,  Written...

External (Macro Environment) Analysis PEST (EL) 2024/25. 1. Macro Economic Analysis of a Certain Company in External Point of Wiev Seminar 1. by Hajnalka Madai  Requirents  2-3 student in a group  An operating company (woldwide…, any kind of business,  Written version will have to be uploaded (25 pages overall for the end of the semester)  Presentation possibility for extra grades External Evironment - Macro and Micro Az üzleti küldetés level Technological Competitors Suppliers Consumers „ORGANIZATION” Financial corporations Natural environment Macro environment forces affecting a firm  Az üzleti Method to reveal küldetés - Key external factors Key external factors/forces; (STEP, PEST, PESTEL analysis) Social, cultural, demographic, and environment Technological Economic Political, governmental, and legal + Competitive  PEST & PESTEL Analysis  Understanding the tool  PEST or PESTEL analysis is a simple and effective tool used in situation analysis to identify the key external (macro environment level) forces that might affect an organization. These forces can create both opportunities and threats for an organization. Therefore, the aim of doing PEST is to:  find out the current external factors affecting an organization;  identify the external factors that may change in the future;  to exploit the changes (opportunities) or defend against them (threats) better than competitors would do.  PEST & PESTEL Analysis - Definition  1. PEST analysis – an  2. PESTLE analysis, we’ll analysis of the look at the Political, political, economic, Economic, social and Sociocultural, technological factors Technological, Legal, in the external and Environmental environment of an factors affecting the organisation/industry industry…. which can affect its activities and performance.  Using the tool The process of carrying out PESTEL analysis should involve as many managers as possible to get the best results. It includes the following steps:  Step 1. Gathering information about political, economic, social and technological, environmental, legal changes + any other factor(s).  Step 2. Identifying which of the PESTEL factors represent opportunities or threats for the organisation in the near future… Pestle Analysis Template  Political factors impacting the food industry Wide Regulation (WORLD, EU, REGIONAL, LOCAL…)  Governments across the world have expansive regulatory frameworks for every aspect of the food industry. This includes the cleanliness of commercial kitchens, the standards for storing and transporting produce, and even the requirements for laborers in the food business.  Without a doubt, this makes the food industry one of the most tightly- regulated industries of all. On the plus side, this ensures that consumers aren’t exposed to poor quality nutrition, but the complexities of regulation certainly take away from the margins of the food business.  political factors Environmental Law Government stability Education Law Bureaucracy Corruption level Anti-trust law Tax policy (rates and incentives) Discrimination law Freedom of press Copyright, patents / Intellectual Regulation/de-regulation property law Trade control Import restrictions (quality and Consumer protection and e- quantity) commerce Tariffs Employment law Competition regulation Health and safety law Government involvement in trade unions and agreements Data protection law Laws regulating environment pollution  Economic factors impacting the food industry Growing Increasing Disposable Labor Costs Incomes Disposable incomes are growing for a reason: laborers are earning more As a general trend, the world’s money these days. On the whole, the population is only getting richer. That cost of hiring workers is increasing means that individuals in the lower, across all industries. middle, and upper classes all have more This is caused by not only a growing money to spend on luxuries — including demand for employees, but also higher restaurant food. and higher government expectations As a result, the overall revenue of the for minimum wages. As in many other food industry is growing, as individuals industries, the effect of increasing labor cook less and eat out more often. This costs is simple: less margin for the has a positive effect on all corners of the owner of the business, and thus less space, including restaurateurs, food profit. distributors, and the individual workers who play a role in these businesses.  Economic factors Growth rates Level of consumers’ Inflation rate disposable income Interest rates Monetary policies Exchange rates Fiscal policies Unemployment trends Price fluctuations Labor costs Stock market trends Stage of business cycle Weather Credit availability Climate change Trade flows and patterns  Sociocultural factors impacting the food industry  Health Consciousness  Dietary Restrictions  Nowadays, scientists know more  Aside from having a better grasp of about the relationship between what kinds of food are and aren’t food and our bodies than ever healthy, consumers are also more before. There’s a clear relationship knowledgeable about their between the food we eat and our individual dietary restrictions. For personal health, and consumers example, many individuals now are conscious of this. As a result, understand the negative impact of many individuals are looking for gluten in those with Celiac disease. healthier ways to fuel their bodies.  This has led to consumers expecting  This doesn’t necessarily have a greater understanding on behalf of positive or negative effect on the those who work in the food industry. food industry, but it means that Once again, this isn’t necessarily a businesses will have to adapt to bad thing, but it means that the food stay relevant. For example, fast industry will have to make changes food businesses will likely have to to keep clients happy. move away from traditional, high- calorie fried foods towards healthier alternatives like salads.  Sociocultural factors Health consciousness Attitudes toward “green” or ecological products Education level Attitudes toward and support for Attitudes toward imported goods and renewable energy services Population growth rate Attitudes toward work, leisure, career and retirement Immigration and emigration rates Attitudes toward product quality and Age distribution and life expectancy customer service rates Attitudes toward saving and investing Sex distribution Emphasis on safety Average disposable income level Lifestyles Social classes Buying habits Family size and structure Religion and beliefs Minorities  Technological factors impacting the food industry GMO Automation: Genomics We’re seeing various types of automation more and more in the food Engine efficiency industry..  E-Business, IT, Artificial Intelligency: As we find more ways to use The existence of 3D technology technology — including robots — in the Computer calculation speed/power food industry, there will be less need for laborers. Overall, this is a good thing for The ability of computers to create truly the industry, as it will allow businesses to ‘random’ numbers improve profitability and reduce the Internet connectivity likelihood of human error Wireless charging Security in cryptography  Technological factors Basic infrastructure level Rate of technological change Spending on research & development Technology incentives Legislation regarding technology Technology level in your industry Communication infrastructure Access to newest technology Internet infrastructure and penetration  Legal factors impacting the food industry Safety Standards  As touched upon in the Political section of this PESTLE analysis, the food industry has high standards for safety matters. In particular, there are scores of rules in every country on how food should be transported, stored, and prepared — including directions on what temperatures various food types can reach, how they should be cleaned, and so on. While this is indeed largely a Political issue, it becomes a Legal matter if any of these regulations are ever breached. As such, those in the food business need to be extremely careful to ensure that they stay within the bounds of these rules to prevent costly lawsuits.  Legal factors Anti-trust law Discrimination law Copyright, patents / Intellectual property law Consumer protection and e-commerce Employment law Health and safety law Data Protection Environmental factors impacting the food industry Impact of Meat  Not only is there growing awareness for the health repercussions of the food we eat, but also for the environmental repercussions of the food we eat. One particularly problematic food group from an environmental point of view is meat. The production of meat — especially red meats — uses huge amounts of water and creates a significant carbon footprint. No less, the meat industry is tearing down large amounts of forest to create new space for farms. The result of this is that more and more individuals are switching to plant-based diets, and governments are slowly taking interest. Once again, this isn’t necessarily a negative for food businesses, but they will have to recognize the impact of this shift in the long term.  Environmental factors Weather Climate change Laws regulating environment pollution Air and water pollution Recycling Waste management Attitudes toward “green” or ecological products Endangered species Attitudes toward and support for renewable energy Diseases and epidemics Natural disasters possible outcomes … - Final Thoughts  PESTLE analysis of the food industry is a mix of positives, negatives, and uncertainties.  On the one hand, consumers have more to spend on food and robots can reduce expenses.  On the other hand, the space is carefully regulated and labor prices are increasing.  What’s more, eaters’ diets are becoming increasingly more specific.  Of course, the food industry is here to stay, but it seems those who prevail will have to understand what consumers really want to be eating in the 21st century. EXAMPLE  Political factors affecting business  Several aspects of government policy can affect business. All firms must follow the law. Managers must find how upcoming legislations can affect their activities.  The political environment can impact business organizations in many ways. It could add a risk factor and lead to a major loss. It can also affect government policies at local to federal level. Companies should be ready to deal with the local and international outcomes of politics.  Changes in the government policy make up the political factors. The change can be economic, legal or social. It could also be a mix of these factors.  Increase or decrease in tax could be an example of a political element. Your government might increase taxes for some companies and lower it for others. The decision will have a direct effect on your businesses. So, you must always stay up- to-date with such political factors.  Government interventions like shifts in interest rate can have an effect on the demand patterns of company.  Political Factors Trends affect the food industry.: E.g. fast food restaurants are adding “healthier options” on their menus as public health policies are pushing for foods with lower sodium and sugar intakes. Current policies push for the public to be more conscious when buying foods. There are 4 main effects of these political factors on business organizations. : Impact on economy Changes in regulation Political stability Mitigation of risk The political environment is perhaps among the least predictable elements in the business environment.  EXAMPle: Mitigation of Risk The political environment is perhaps among the least predictable elements in the business environment.  Buying political risk insurance is a way to manage political risk. Companies that have international operations use such insurance to reduce their risk exposure.  There are some indices that give an idea of the risk exposure in certain countries. The index of economic freedom is a good example. It ranks countries based on how politics impacts business decisions there. 2015 Economic Freedom Heat Map [Courtesy of Heritage.org]  Economic Factors affecting Food business  Examples of economic factors affecting business include:  Interest rates  Exchange rates of main or certain currencies  Recession  Inflation  Taxes  Demand / Supply Collect data, and demonstrate them by applying tables, curves….  Examles:  Interest rates — Interest rates might appear in a range of different places, imposed by a range of different people. It’s obvious that the status quo for interest rates is of great interest to banking institutions, but it might also affect companies whose strategies rely on taking out large loans.  Exchange rates — Exchange rates are a complicated topic, but they clearly have to apply to those who deal with export or import. Changing exchange rates might affect how much a company has to pay to its international supplier to satisfy them, which can affect profit margins, as well as take a lot of resources to stay on top of.  Recession — An economic recession (of whatever scale) has the potential to change the purchasing attitude of customers, which might force companies to drop their prices or clear smaller volumes.  Burocracy, corruption Sociocultural factors affecting Food business  Food trends shift based on what consumers want and what they are able to buy (earnins and supply)  Healthiness is the focus in many countries. This is not only pushed by governmental authorities, but by consumers, as well.  The social aspect focuses on the forces within the society. Family, friends, colleagues, neighbors and the media are social factors. These factors can affect our attitudes, opinions and interests. So, it can impact sales of product and revenues earned.  Examples:  Organizations should be able to offer products and services which aim to benefit people’s lifestyle.  The offerings should complement customers’ behavior. Not reacting to changes in the society can be a costly mistake.  The social factors shape who we are as people. It affects how we behave and what we buy. (religoin, nationalism, pride, consciousness… Technological Factors affecting Food business 1.  Technology can give a competitive edge. Technology is necessary to create packaging, food labels, and the production of food. Newer corporations may be lacking in technology power compared to veteran food-based companies.  McDonald’s moved big screens into their restaurants to showcase their menu. Additionally, they show footage of new promotional drinks and foods, as a method of marketing. They also use their website to provide allergy notices, calorie information, and promotions.  With technology advancing, it helps food corporations reach consumers in new and easier methods. We even have online groceries which deliver fresh produce to customers quickly. Technological Factors affecting Food business 2.  Automation — The automation of many unskilled tasks can allow companies to replace human production lines with entirely machine ones. This can reduce costs for manufacturers, distributors, supermarkets, and many other different businesses. On the flip side, the gradual increase in job automation might not be such a great thing for job search firms.  Internet connectivity — It’s undoubtable that in recent years global internet connectivity has been on the rise. This presents an even larger market for many companies who use the internet to connect with their customers. On the flip side though, a global rise in internet connectivity might mean less interest in traditional communication means, which is a negative consequence for some — telephone service providers will have to change their offerings to stay relevant, while paper-and-ink printing companies might receive less business.  Global Trends Biotechnology Waste managenet Digitalization Turism and Gastronomy  Sources  1. Thompson, J. and Martin, F. (2010). Strategic Management: Awareness & Change. 6th ed. Cengage Learning EMEA, p. 86-88, 816  2. Rothaermel, F. T. (2012). Strategic Management: Concepts and Cases. McGraw-Hill/Irwin, p. 56-61  3. David, F.R. (2009). Strategic Management: Concepts and Cases. 12th ed. FT Prentice Hall, p. 104-114  4. Johnson, G, Scholes, K. Whittington, R. (2008). Exploring Corporate Strategy. 8th ed. FT Prentice Hall, p. 55-57  5. Oxford Learning Lab (2012). PESTLE - Macro Environmental Analysis. Available at: http://www.oxlearn.com/arg_Marketing-Resources-PESTLE--- Macro-Environmental-Analysis_11_31  6. Wikipedia (2013). PEST analysis. Available at: http://en.wikipedia.org/wiki/PEST_analysis  https://pestleanalysis.com