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                        PESTEL Framework Theory

                         
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                        The PESTEL framework is designed to provide managers with an analytical tool to identify different macro-environmental factors that may affect business strategies, and to assess how different environmental factors may influence business performance now and in the future.  

                         

                        The PESTEL Framework includes six types of important environmental influences: political, economic, social, technological, environmental and legal. These factors should not be seen as independent factors. Factors such as technological advances may probably affect the social and economic conditions in different markets.

                         

                        Below, some characteristics in each environmental factor are listed, which may give business managers guidance to, which factors may be of importance to a company's strategy. The list is however far from complete, and it only gives managers some preliminary inspiration to, which factors may be of relevance for handling business strategies. Many factors, that are not included below, may have an effect on business success, and each company must evaluate for themselves, which key drivers of change will potentially have strategic and competitive consequences.

                         

                        Political factors

                                  Stability of government

                                  Social policies: (e.g. social welfare etc.)

                                  Trade regulations: (e.g. the EU & NAFTA)

                                  Tax policies

                                  Entry mode regulations

                         

                        Economic factors

                                  Disposable income of buyers 

                                  Credit accessibility

                                  Unemployment rates

                                  Interest rates

                                  Inflation

                         

                        Social Factors

                                  Population demographics: (e.g. aging population)

                                  Distribution of Wealth

                                  Changes in lifestyles and trends

                                  Educational levels

                         

                        Technological factors

                                  New innovations and discoveries

                                  Pace of technological innovations and advances

                                  Pace of technological obsolescence

                                  New technological platforms (e.g. VHS and DVD)

                         

                        Environmental factors

                                  Environmental protection laws

                                  Waste disposal laws

                                  Energy consumption regulation

                                  Popular attitude towards the environment

                         

                        Legal factors

                                  Employment regulations

                                  Competitive regulations

                                  Health and safety regulations

                                  Product regulations

                         

                        The key for business managers is therefore to discover the main drivers of change that may affect business strategies, and to discover the factors most likely to influence the performance of the business.

                         

                        In conducting a PESTEL analysis, business managers may create strategies that take several macro-environmental factors into consideration, so that the strategy formulation process will be as sensitive to current and future environmental factors as possible.

                         
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                        Date Created: 2009-09-13
                        Posted by: Admin
                         
                         
                        PESTEL Framework Theory
                         

                        Related resources:

                        What is Michael Porter's 5 forces?
                        Internationalization of Multinational Corporations?
                        Global strategies for MNCs: Christopher A. Bartlett?& Sumantra Ghoshal?
                        What is the Balanced Scorecard?
                        What is the BCG Matrix??
                        What is a SWOT analysis?
                        What is Michael Porter's Diamond Model?
                        Reference(s)
                         
                        Exploring Corporate Strategy
                        Johnson, Gerry. Scholes, Kevin Richard Whittington: (2006); Prentice Hall
                        Keywords:

                        Online MBA, Online MBA Courses, PESTEL Framework, PESTEL, Environment, Environmental factors, business strategy, Strategy development, strategy formulation

                         






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