2.1 Explanation of PESTEL
Political: Political stability play an important role in a business. There is a balance between systems of control and free markets. As global economics supersedes domestic economies, companies must consider numerous opportunities and threats before expanding into new regions. It also applies to firms identifying optimal areas for production or sales. Political factors may even help determine the location of corporate headquarters.
Economic: Economic factors are metrics that measure the health of any economic region. The economic state will change a lot of times during the firm’s lifetime. You have to compare the current levels of inflation, unemployment, economic growth, and international trade. This way, you can carry out your strategic plan better.
Social: Social factors assess the mentality of the individuals or consumers in a given market. These are also known as demographic factors. Social indicators like exchange rates, GDP and inflation are critical to management. They can tell when it is a good time to borrow. These factors help find out how an economy might react to certain changes.
Technology: This step entails recognizing the potential technologies that are available. Technological advancements can optimize internal efficiency and help a product or service from becoming technologically obsolete. Role of technology in business is increasing each year. This trend will continue because R;D drives new innovations.
Recognizing evolving technologies to optimize internal efficiency is a great asset in management. But, there are few threats. Disruptive innovations such as Netflix affect business for CD-players. The best strategy is to adapt according to the changes. Your strategies should sidestep threats and embrace opportunities.
Enviromental: Both consumers and governments penalize firms for having adverse effect on the environment. Governments levy huge fines upon companies for polluting. Companies are also rewarded for having positive impact on the environment. The consumers are willing to switch brands if they find a business is ignoring its environmental duties.
Legal: This step involves learning about the laws and regulations in your region. It is critical for avoiding unnecessary legal costs.