What is PESTEC?
- There are a number of key factors in the external environment of a business.
- All businesses must react efficiently in changes in the external environment if they don’t then they will fail.
How does Political factors affect an organisation? (4)
- Uk and EU laws and political decision affect every business in the UK.
- The governments introductions of a statutory minimum wage affects all businesses as do laws like Health and Safety at Work Act and the Data Protection Act.
- The government has also introduced laws on smoking in public and banning advertising on tobacco in shops and television.
- The purchase and sale of alcohol out with certain hours has also effected businesses with sanctions and penalties in place for businesses that do not comply.
What are the benefits of an organisation being political? (3)
- Government policy to support certain industries can have a positive impact on employment (government placing orders for new defence ships to keep shipbuilding alive)
- Corporation tax rates can be reduced to help business profits.
- Government grants can be made available to companies creating employment opportunities.
What are some political impact examples?
- Price of cotton increased by over 90%
- Drastic for companies such as Next and Primark
- Clothing manufacturers and retailers will seek alternative suppliers in cheaper countries such as Vietnam and Bangladesh and as a result will come under scrutiny
What are political impact example solutions?
- Employment legislation exists to protect the legal rights of both employees and employers but Primark found itself under scrutiny when it was accused of breaching employment legislation.
- Some organisations who seek for cheaper production costs can lead to their products being unknowingly produced in sweatshop conditions which has been exposed in the press. (June 2014)
How does economic factors affect an organisation? (5)
- All organisations are affected by national and global economic factors.
- Within the UK factors such as inflation, exchange rates of currency, interest rates and rates of taxation determine the climate of the economy and dictate how consumers might behave.
- When economies are at the boom stage there is high job confidence and low unemployment.
- Recession is characterised by high unemployment and low consumer confidence.
- Recovery stage results in a mixed consumer confidence.
What are some economic impact examples?
- Tesco and economic facts are the main points of concern, as they are most likely to leverage costs, demand, profits and prices.
- Therefore, the company should be aware of any changes in policies, such as changes in taxation or any other factors which could affect the accessibility of finance.
- Although the business is growing internationally, the company is highly dependent on the UK market where it has a market share of around 30% and one of the top UK 4 retailers.
- Tesco economic factors are of concern, because they are likely to influence demand, prices profits, and costs. One of the mainly influential factors on the economy would be high unemployment levels, which decreases the effective demand for several goods. The economic factors are largely outside the control of the company, but their effects the marketing and performance can be deep
How does social demographic changes factors affect an organisation? (2)
- UK has a slow growth population and an ageing one —> Growth in products for the elderly. Stores such as B&Q recruit older staff with experience to assist younger customers.
- The average for a first time mother is now 29 —> Business are now producing products for affluent firs time mothers.
How does social cultural factors affect an organisation? (5)
- More women are now at work —> Supermarkets now sell more ready made meals. Stay open 24 hours and provide internet shopping.
- Increased concern about the environment —> Car manufactures are developing cars that run on gas and bio-fuel instead of petrol and diesel.
- People have more leisure time —> Growth in hotels and restaurants as more people eat out and take more holidays.
- Increased car ownership —> Increase in out of town shopping.
- Increased awareness of the origins of production —> Significant rise in fair trade, organic products and individual choice for consumers.
What are the social impact example?
- Trends over the years reveal that UK customers have moved towards bulk shopping, which is due to a range of social changes. Tesco have, therefore, improved the quantity of non-food stuff available for sale including services such as banking and pet insurance.
- Demographic changes such as the ageing population and female workers have steadily increased and as a result a decline in preparation home meal mean that UK retailers are also focusing on providing nutritional whole meal services and added-value products.
- The type of goods and services demanded by customers is a meaning of their consequent attitudes and beliefs and social conditioning . customers are becoming more and more aware of their attitudes towards food are constantly changing and health issues. For instance to accommodate an increased demand for organic products Tesco adapting the product mix
How does technology factor affect organisations.
- Businesses must keep up with new technology or face losing sales and profits.
- The use of email, internet, databases, social networking and web pages can be used to attract new customers.
- Technological advances in production can reduce labour costs unfortunately which also leads to redundancies.
- Governments are also keen to encourage investment in research and to develop technology that will give their country a competitive edge.
- Technology will continue to evolve at a rapid pace and organisations that ignore this move will face extinction.
How does environmental factors affect an organisation?
- Factors can include storms, floods, pollution or noise.
- Floods in England have resulted in many companies being refused compensation due to insurance clauses.
- Environmental factors have become much more significant in recent years with pressure groups such as Greenpeace and Friends of the Earth becoming much more high profile and as a result they are able to exert more influence on how businesses behave
How does a competitive factors affect an organisation?
- Most businesses are likely to face a degree of domestic and foreign completion particularly from the EU where there is a policy for free trade.
- If there is a strong degree of competition between firms then action will have to be taken to protect sales, market share and profits
What are competitive impact examples?
- Competition occurs when two or more organisations act independently to supply their products to the same group of consumers.
- A good example of a competitive market in which there are many buyers and sellers is that of Internet booksellers. Because there are so many firms selling identical products then the price of these books will be highly similar. This competition helps to drive down the profit that such firms can make.
What is direct competition?
Direct competition exists where organisations produce similar products that appeal to the same group of consumers. For example when two supermarkets offer the same range of chocolate bars for sale
What is Indirect competition?
Indirect competition exists when different firms make or sell items which although not in head to head competition still compete for the same £ in the customers pocket. For example, a High Street shop selling CD’s may be competing with a cinema that is also trying to entice young shoppers to spend money on leisure activities.
What are competitive factors?
Businesses are strongly affected by competition:
a. the price they charge is limited by the extent of the competition.
b. the range of services and the nature of the product they sell is influenced by the level of competition. For example, a business selling an inferior product to that of a rival will struggle to make sales unless they cut their prices.
