AC1.1 Application of an analysis tool (such as PESTLE) to examine the key external forces impacting or likely to impact an organisation’s activities
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Both internal and external forces have an impact on the activities of an organisation. Internal forces are those that an organisation can influence, whereas external factors, such as the economy, are beyond its control. A company’s internal operations and its market relationships are influenced by external pressures. The PESTLE Analysis, which is described in greater detail below, is one of several methods used to analyze the external business environment. The acronym PESTLE refers to the Political, Economic, Social, Cultural, Technological, Legal, and Environmental factors that have an impact on businesses.
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The political environment of a country has an effect on the political aspect of that state, such as the degree of political stability, the prevalence of corruption, customs, and trade regulations. When a nation is politically stable, businesses can work in a conducive environment and move freely without fear of conflict. Government tariffs impact the growth rate of a firm since they influence taxation levels. When the environment is corrupted, growth is poor since most funds are not utilised for their intended purpose, resulting in mismanagement of resources. In each business context, the level of market control influences the degree to which a firm may invest and it’s Return on Investment. For example, Nike, a manufacturer and retailer, is impacted by the constant evolution of manufacturing regulation.
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The interest rate and the currency exchange rate are two examples of economic factors that have an effect on businesses and organisations. Businesses are less likely to borrow money when interest rates are prohibitively high, thus reducing their rate of expansion. In the event that investors’ rewards are delayed, this may deter them from making more investments. Any company’s foreign investment is influenced by the exchange rate since investors and shareholders would like to get the most out of their investments (PESTLE Analysis 2021). As a result, GDP growth might be either moderate or rapid.
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Organisational performance is influenced by social factors, such as organizational culture and other social elements. Culture influences the mentalities, perceptions, and even works cultures of individuals. The company must evaluate the culture of the people since it affects how employees and customers approach their jobs and products, respectively. Market research supports a company in maintaining contact with reality. Nike has benefited from positive social trends. More individuals would engage in physical activity as a result of the trend toward healthy living, resulting in increased sales of athletic apparel.
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Technological improvements are also changing the way businesses operate. New technologies are being embraced, and companies are being compelled to streamline their operation in order to compete and attract more customers. Remote working is also growing more common, with more firms enabling their employees to work from anywhere in order to increase their flexibility, performance, and effectiveness. Technology is also encountered in the course of customer service interactions. Nike has acknowledged that they make use of social media in order to promote awareness of their brand.
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Technological improvements are also changing the way businesses operate. New technologies are being embraced, and companies are being compelled to streamline their operation in order to compete and attract more customers. Remote working is also growing more common, with more firms enabling their employees to work from anywhere in order to increase their flexibility, performance, and effectiveness. Technology is also encountered in the course of customer service interactions. Nike has acknowledged that they make use of social media in order to promote awareness of their brand.
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The legal environment comprises the legal and judicial necessities of the country. In order to avoid unfavorable publicity and possible legal action, the organization must ensure that it complies with the legal system in each of its separate countries. In addition, the company has to make sure that all of its employees have the appropriate permits and licenses before they can begin working for the company. This is done to ensure that all employees have the essential skills and experience.
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The way in which businesses function is affected by environmental aspects such as conservation and preservation because these aspects need them to give thought to how trash can be disposed of in a responsible and risk-free manner. This is done to prevent damage to the natural world and to ensure that our surrounds will continue to be habitable in the long run. Reducing, reusing, and recycling materials are the three methods that are utilized in environmental protection efforts more frequently than any others.
