External Environment

IB Business and Management

Learning Outcomes

• Prepare a PEST analysis for a given situation and use it to analyse the impact of the external environment on a firm

• Evaluate the Impact on a firm’s objectives and strategy of a change in any of the PEST factors

• Explain how external opportunities and threats can impact on business decision-making and SWOT Analysis

Business Activity

The organisation

MarketingFinance

People Production

External Factors

Inputs/ resources

Land Labour Capital Enterprise

Outputs

Goods and services

External Factors

Achieving business objectives….

• In the pursuit of achieving their aims and objectives businesses face challenges and opportunities from outside the organisation…… We can call these PEST Factors (Or PESTLE, LEPEST)

So…. What does PESTLE mean?

PESTLE

A.K.A PEST, LEPEST, STEEPLE

PEST Analysis

• A PEST analysis of an audit of the external environment of a firm.

• External influences are outside of the control of the firm

• It involves trying to identify any potential Opportunities or Threats that the firm may be presented with

Why do a PEST Analysis?

• ‘Forewarned is forearmed’ What is the meaning of this saying?

• PEST may be done at any time but is particularly useful at times when strategic decisions are being made

• Could be done in general or for a specific industry

Task - Brainstorm• What might these external factors be?

Political• How and to what degree a government

intervenes in the economy. Specifically, political factors include areas such as:

• Tax policy (Consumer and Corporate)• Employment law• Environmental law• International trade restrictions• Competition legislation• Consumer protection Law• Government attitude and procedures• Political stability

Economic

• Economic Growth• Monetary Policy (interest rates)• Government Spending• Unemployment• Exchange rates • Inflation• Trade Cycle• Consumer Confidence

Social

• Income Distribution• Demographics (Age, Gender, Family Size,

Occupations)• Social Mobility• Lifestyle• Attitudes to Work and Leisure• Fashions and Fads• Attitude to work• Living conditions

Technological

• Government spending on research• R&D activity• Speed of technology transfer• New discoveries• Rates of obsolescence• Energy use and costs• New materials• Developments and availability of ICT• Internet

Your Task….

• We don’t have time to cover all of these PEST factors in detail.

• Over half term please read the ‘What you need to know’ document

• Add any questions you might have to the google doc ‘PEST Questions’

• We will go through any questions after the holidays.