PESTAL Analysis

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Ref No: 2151

Question 3:

PESTEL analysis stand for political, economical, social, technological, environmental and legal analysis to determine the strategic position in a certain market and strategic capabilities of the organisation to expand into now market or to analyse the targeted market in which organisation want to expand to.

Pestel is employed by analysing the factors effecting the market ranging from political and legal to economical and social its is used to analyse if the organisation under consideration will be able to sustain in the political, economical, social, technological, environmental and legal environment of the targeted local or international market either its used to determine the strategic position of the organisation under consideration and its current market to utilise any opportunities to grow.

Pestel gives the in-depth analysis of macroeconomic environmental factors by employing following

• Political

Political analysis of local or international market under consideration analyses the political regime of the market any monopolies existing in that market the internal political structure of market it also urges to analyse the political factors of that country effecting the market the preferences  of the business the ruling party supports .

PESTAL Analysis

• Economical

Economical analysis of the market considers the economical factor majorly macro economical factors effecting the market under consideration in the it analyse the opportunities economic conditions of that market have to offer and the possible restraints that might a possible issue if the that market was undertaken

 

• Social

Social analysis of any market includes the analysis of demographics of the region in which targeted market is situated in the average social income and the preference of the social community and the dominance of social class to determine the social position of the market.

 

• Technological

Technological analysis of the market analyses the technological threshold of that market and the expense of the technology being used in that market and the basic trend and basic level of technology of that market being employed in that market .

 

• Environmental

PESTAL Analysis Environmental  analysis of the market analyse the environments legislations , climate of the region in which targeted market is present in it also analyses  suitable factor conditions that can be taken advantage of  in that region to gain competitive market.

• Legal

Legal analysis of the market analyse the legal legislation connected to that market and the legislation the can be employed in strategic decision making and strategic implementation and it also takes under consideration the legislations which may restrict the organisations strategy

 

Cage analysis like the pestle analysis is the macro environment analysing  model of analysing the market and indentifying any growth options and the entry ways into the targeted market it’s not as diverse of a model to analyse the under consideration market  but still holds strategic  importance .

 

CAGE stands for cultural , administrative , geographic and economic  as the name specify it analyse the following

 

• Culture

Analysing culture under cage means analysing the difference between the current culture of the organisation and possible change in the culture of the organisation and also the difference between the culture of the region in which organisation is operating  and in which its looking to grow into . Analyses of the culture also mean the cultural values of the market and region in which the organisation is expanding

 

• Administrative

PESTAL Analysis Administrative analysis stands for the analysis of legal administrative authorities connected to the nature of business of organisation  and their culture and the legislation connected to that and the regulation to be followed on an administrative level in the under considered market being local or international.

 

• Geographic

Geographic  analysis mean the analysis of the region and its geological positioning the factor conditions connected to that  it also analysis the climate conditions effected by the positioning of the region geographic analysis gives us the complete road of the geographic opportunities and geographic restraints that in international or local market in which the organisation is looking to grow into .

 

• Economic

Economic analysis as in Pestle its same, it analyses the economic conditions of the considered market on international or local scale the opportunities that can be availed and the restraint that may constraint the organisation from growing in that specific economic conditions

 

Five forced model defined by the Harvard school  :

”Understanding the economical forces, and their fundamental course, reveals industry’s current prosperity while on condition that a structure for anticipating and influencing competition and profitability” was said by porter .

The basis of earning profits and generating revenue is always identical regardless of the industry. Industry structure tells about the competition and profitability, i.e. how much the company is profitable and competitive as compared to other companies. This model describes both the competitive forces and the industry structure which is important for every company to make an effective strategic decision. Industry competition shaped by these five forces:

1. 1. COMPETITIVE RIVALRY:

This force describes the company’s current competition position in the market, which is determined by the existing number of competitors. When there are a few businesses of same size and same nature, growing equally in the industry, then Rivalry competition will be high. Customers can switch to other competitors easily who offers at a low cost.

Rivalry can be measured by Concentration Ratio (CR).

 

2. BARGAINING POWER OF SUPPIERS:

This force examines the power of a supplier, how much power does a company’s supplier has and how can it effect the prices which can decrease the business’s profitability, in turn.

When there are less number of suppliers, power of supplier is high and vice versa.

 

3. BARGAINING POWER OF CUSTOMERS:

This force analyzes how much power does a customer has and how does it affect the price and quantity. Buying power is high when there are lots of sellers but less consumers, and when it is easy for the consumers to switch from one product or services to another.

Buying power is low when seller is selling a very different product from any of its competitors and consumer buys the product in…