AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |
Back to Blog
Macro environment forces1/10/2024 American Electric Power, a large company that generates and distributes electricity, may be negatively impacted by environmental regulations that restrict its ability to use coal to generate electricity because of pollution caused by burning coal. They are simply things that a firm can take advantage of or treat as problems, depending on its own interpretation or abilities. Note that in PESTEL, factors are not characterized as opportunities or threats. Political factors in the macro environment include taxation, tariffs, trade agreements, labor regulations, and environmental regulations. Exhibit 8.5 The PESTEL Model for External Environmental Analysis (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license) However, the technological connectedness of those same urban millennials is exactly what makes it possible for ride-sharing services such as Uber and Lyft to thrive: their services are app based and provide convenience both by connecting drivers and passengers quickly and by making transactions cashless.Įxhibit 8.5 illustrates the components of PESTEL, which will be discussed individually below. For example, decreasing interest in car ownership among urban millennials would be a sociocultural trend. PESTEL can also reveal multiple impacts from a single element in the external environment. However, those same manufacturers might be able to adapt their sales methods to offer millennials car-sharing services, taking advantage of the opportunity to earn revenue from millennials who want access to cars for vacations or big shopping trips. Remember our earlier example: When urban millennials decide that car ownership is no longer attractive, car manufacturers’ sales are threatened. When using PESTEL to analyze a specific firm’s situation, overlap between different categories of PESTEL factors can sometimes happen just as it can with SWOT. In this case, the letters represent the categories to examine:political factors, economic factors, sociocultural factors,technological factors,environmental factors, andlegal factors. PESTEL is a tool that reminds managers to look at several distinct categories in the macro environment. Strategists have developed more discerning tools to examine the external environment. However, they do not usually just think in terms of SWOT. Strategists study the macro environment to learn about facts and trends that may present opportunities or threats to their firms. That is not to say that they do not affect firms or that firm activities cannot affect macro environmental elements both can and do happen, but firms are largely unable to directly change things in the macro environment. Note that the terms contained in the blue ring are all “big-picture” items that exist independently of business activities. In the Exhibit 8.4, the macro environment is indicated in blue. These elements are characteristics of the world at large and are factors that all businesses must contend with, regardless of the industry they are in or type of business they are. Exhibit 8.4 Components of a Firm’s Environment (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)Ī firm’s macro environment contains elements that can impact the firm but are generally beyond its direct control. Exhibit 8.4 illustrates layers and categories found in a firm’s environment. To make gathering and interpreting information about the external environment easier, strategic analysts have defined several general categories of activities and groups that managers should examine and understand. A firm must confront, adapt to, take advantage of, and defend itself against what is happening in the world around it to succeed. The world at large forms the external environment for businesses.
0 Comments
Read More
Leave a Reply. |