Marketing Environment -
PEST Analysis
Marketing Environment - PEST Analysis
An organisation’s success is influenced by factors operating in it’s internal and external environment; an organisation can increa it’s success by adopting strategies which manipulate the factors to it’s advantage. A successful organisation will not only understand existing factors but also forecast change, so that it can take advantage of change within the environments in which it operates.
PEST & Micro environmental Factors
The following type of forces influence an organisation’s operating environment:• Pest Factors –The are external forces which the organisation does not have direct control over the factors. PEST is an acronym and each letter reprents a type of factor (Political, Economical Social and Technological).
• Micro environmental factors –The are internal factors, which the organisation can control.
PEST Analysis
A PEST analysis is ud to identify the external forces affecting an organisation .This is a simple analysis of an organisation’s Political, Economical, Social and Technological environment.
Political
The first element of a PEST analysis is a study of political factors. Political factors influence organisations in many ways. Political factors can create advantages and opportunities for organisations. Converly they can place obligations and duties on organisations. Political factors include the following types of instrument: - Legislation such as the minimum wage or anti discrimination laws.
- Voluntary codes and practices
- Market regulations
- Trade agreements, tariffs or restrictions
- Tax levies and tax breaks
- Type of government regime eg communist, democratic, dictatorship
Non conformance with legislative obligations can lead to sanctions such as fines, adver publicity and imprisonment. Ineffective voluntary codes and practices will often lead to governments introducing legislation to regulate the activities covered by the codes and practices.
Economical
The cond element of a PEST analysis involves a study of economic factors. All business are affected by national and global economic factors. National and global interest rate and fiscal policy will be t around economic conditions. The climate of the economy dictates how consumers, suppliers and other organisational stakeholders such as suppliers and creditors behave within society.
An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Converly a “booming” or growing economy will have low unemployment, high spending power and high stakeholder confidence.
A successful organisation will respond to economic conditions and stakeholder behaviour. Furthermore organisations will need to review the impact economic conditions are having on their competitors and respond accordingly.
In this global business world organisations are affected by economies throughout the world and not just the countries in which they are bad or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08.
Cheaper labour in developing countries affects the competitiveness of products from developed countries. An increa in interest rates in the USA will affect the share price of UK stocks or adver weather conditions in India may affect the price of tea bought in an English café.
A truly global player has to be aware of economic conditions across all borders and needs to ensure that it employs strategies that protect and promote its business through economic conditions throughout the world.
Social
The third aspect of PEST focus its attention on forces within society such as family, friends, colleagues, neighbours and the media. Social forces affect our attitudes, interest s and opinions. The forces shape who we are as people, the way we behave and ultimately what we purcha. For example within the UK peoples attitudes are changing towards their diet and health. As a result the UK is eing an increa in the number of people joining fitness clubs and a massive growth for t
he demand of organic food. Products such as Wii Fit attempt to deal with society’s concern, about children’s lack of exerci.
Population changes also have a direct impact on organisations. Changes in the structure of a population will affect the supply and demand of goods and rvices within an economy. Falling birth rates will result in decread demand and greater competition as the number of consumers fall. Converly an increa in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. Due to food shortages African countries such as Uganda are now reconsidering their rejection of genetically modified foods.
In summary organisations must be able to offer products and rvices that aim to complement a nd benefit people’s lifestyle and behaviour. If organisations do not respond to changes in society they will lo market share and demand for their product or rvice.
Technological
Unsurprisingly the fourth element of PEST is technology, as you are probably aware technological advances have greatly changed the manner in which business operate.
Organisations u technology in many ways, they have
1. Technology infrastructure such as the internet and other information
exchange systems including telephone
2. Technology systems incorporating a multitude of software which help them
manage their business.
3. Technology hardware such as mobile phones, Black Berry, laptops,
desktops, Bluetooth devices, photocopiers and fax machines which
transmit and record information.
Technology has created a society which expects instant results. This technological revolution has incread the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit business as they are able to react quickly to changes within their operating environment.
However an ability to react quickly also creates extra pressure as business are expected to deliver on their promis within ever decreasing timescales..
For example the Internet is having a profound impact on the marketing mix strategy of organisations. Consumers can now shop 24 hours a day from their homes, work, Internet café’s and via 3G phones and 3G cards. Some employees have instant access to e-mails through Black Berry but this can be a double edged sword, as studies have shown that this access can cau work to encroach on their personal time outside work.
The pace of technological change is so fast that the average life of a computer chip is approximately 6 months. Technology is utilid by all age groups, children are expod to technology from birth and a new generation of technology savvy pensioners known as “silver surfers” have emerged. Technology will continue to evolve and impact on consumer habits and expectations, organisations that ignore this fact face extinction.
