Question

International Business

Identify and explain the 6 components of PESTEL analysis?

Answer 1

PESTEL analysis: this analysis is done to understand the macro economic factors affecting an organisation ,to identify the strenghts and weaknesses of an organisation which is also used in SWOT analysis.

P= political

E= economic

S= social

T = technological

E= environment

L = legal

the first factor P, stands for political it analyses to what extent the government intervenes in the economy. the policies framed by the government, the political stability or instability .the government imposes certain trade restrictions which hampers a buisness. the environmental laws and the corporate governance policies fromed by the government.

the next factor is E, E stands for economic. this factor analyses the interest rates, inflation, exchange rate and economic growth. these factors can be broken down into micro and macro factors.

the micro factors are the way the consumers spend their income. the macro economic factors are interest rates, taxation policy.

the next factor is S , S stands for social. this factor analyses, the beliefs, cultures , age, health consciousness, career attitudes. this factor helps to determine how the market understands the customers.

the next factor is T, T stands for technological. this deals with the new way of creating goods, distributing goods and communicating it with the customers.

the next factor is E, E stands for environment. this factor deals with the restrictions on the carbon limits, the raw materials used in the production process and the increasing scarcity of it, the pollution limits,the ethical ways by which the businesses can conduct operations.

the next factor is L , L stands for legal,thsi factor analyzes into protecting the labels, trademarks,consumer rights and laws . a business should know what is legal to trade successfully.