External Macro Environment Of Pestle Analysis Commerce Essay

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Business environment is a process which is based on political, economic, social and technological (PEST or PESTLE) forces it is largely outside the control of business influences. . By addressing a market can be defined, for example is it a product, company, organization, brand, business unit, proposition, idea and so on. So when we used pestle analysis it should be a clear definition on the market being addressed. Nowadays world business rapidly changing as a result developments across a range of factors on the business or organization. The framework of PESTLE (political, economical, social, technological and legal) which can identify five major factors that affect of the ability of organization to survive their business

There will be some factor of the political environment on business activity. Furthermore, general question concerning the nature of political environment and process, however, the more important or specific question will be government politics policies related where government involve into working in the economy and it influence market structure and behaviour. Moreover, government activity on business is very important whatever government act as directly or indirectly both of their activity on business it's influence of their business. Furthermore, government activity likes biggest business enterprise at national or local level. For the market globalization and international trading organisations, international politico-economic influences on business activity represent one of the key features of business environment. Sometimes, on the business environment there will be huge effect of wars or worsening relations with some countries. For instance, united state of America has worsening relationship with Iran. However, there is another influence of public on political factor.

Economical environment

The legal environment is little arbitrary because of the distinction maid between political and economical environment. Basically government plays an important role for local and national level and its influence both demand and supply sector. There are some other economic aspects related with business activity which is worthy of consideration and these different structural aspects of both firms and markets. The economical factor also depends on current and future level of government spending. For instance, last year economy may strong and nearly every part of it was growing and doing well. However, this situation might be change. moreover, some of the economical facts causes by the current and future level of interest rates, inflation and unemployment. For the reason of law interest rates this opportunities can be used the borrowing on research for new products or technology. For instance, as a result of researching for new products would cost less the soft drinks company and they will sell less, people will buy because they got cheap products from Soft Drinks Company.

Socio-cultural environment

Social and culture influenced to demand and supply. In cultural factor may affect the type of products being produced or sold, in the market what they sold in, the price which they are sold and an amount of other variables. In the organization resource and fundamental part of the market for products and service people are the key. Furthermore, lifestyle patterns and changes for example, many people practicing healthier lifestyles. As a result it's affect on the non-alcoholic drink industry likes people switching their demand on bottled water and diet colas instead of beer and other alcoholic drinks. Basically, bottled water and various convenient and healthy products are important in people daily life. Moreover, there is also some effect on attitude towards likes education, corporate responsibility and the environment. In addition, social cultural and developments has an important effect on business operations, as do demographic changes.

Technological environment

Basically technological environment create effect on both input and output of business organisations likes being an organisations influence on them. Furthermore, key to the success of an enterprise is investing in technological sector on their business. For instance, mobile phone, web 2.0, social network likes Facebook, Twitter, and my space. New technologies are taking the market place and it is continuously being developed and their changing rate is increasing. In the market place there is also some changes of barriers to entry and financial decisions like outsourcing and in sourcing is also changes. However, it is also important for any significant development of any internal enterprise of business in the market for economic source.

The Legal environment: Basically business operates in a framework of a law which has significant impact on the different aspects of their existences. Laws usually govern, among other things, and the organization status, it is relationship with its customers and suppliers and certain internal products and activity. Furthermore, they may also effect or influence on market structures and behaviour. In addition, sometimes it's impact on what is happening with the changes to legislation. Moreover, this may effects on the employment, access to materials, quotas, resources, imports/ exports, taxation etc.

The ethical environment: Ethical consider have become an important part on influence to business behaviour, particularly among the large or high profile company. It has been manifest is in the demand for firms act likes socially responsible way and to consider the impact they might have on people, communities and natural environment.

External Micro-Environment: porter 5 forces.

The treat of entry

This is power is affected by the ability of people to entry in the market. Furthermore, if it is cost less in time or money to entry in the market place and compete effectively, if there is only some of the economics of scale in place, or if there is little protection for key technology, in this case new competitors can quickly enter the market and weaken the market position of competitors. If any organization has strong position and durable barriers to entry, then they can preserve a favourable position and they can take fair advantage of it.

Power of buyer

Basically the power of buyer effect on the producing industry for customers. by using the power customer can create pressure on a business. Furthermore, if any customer has enough impact to affect a company's and volumes, then the customer hold substantial power. When buyer power will be strong in that time relationship with producing industry is near to what an economist terms a monopsony- a market where many suppliers and one buyer. Moreover, under market conditions, the buyer sets the price. Basically in reality there are only few monopsonies exist, but frequently there is some asymmetry between a producing industry and buyers. There are also some reasons where customers have power. For instance, few buyers, purchases large volumes, switching to another competitive product, product might not be extremely important to buyers, customers are may price sensitive.

Power of supplier: Basically producing industries need some raw materials likes labour, components, and other supplies. This requirement make to buyer and supplier relationships between the business and the firms that provide it the raw materials used to create products. When supplier is powerful then they can exert an influence on the producing industry likes selling raw materials at high price to get some of the industry profits. There are also some reasons where customers have power. For instance, there are very few suppliers of a specific product, there are no substitutes, switching to another (competitive) product is very costly. Particular product might be very important for the customers might they can't do without it.

The threat of substitutes:

The threat of substitutes will depends on the relative price to performance ration of the different types of products or service and it can turn to customer satisfy with the same basic need. Sometimes substitutes affected by the ability of the customer to find a different way of doing what to do. For instance, any organisation supply software product which is automates an important process, in that case people may substitute by doing this process manually or by outsourcing it. When substitution is easy and viable then that time it create the weakens power of the business. Basically in porter's model the threat of substitutes refer products in other industries. Furthermore, when any product is affected by price change of a substitute product then a threat of substitutes exists. Moreover, substitute products influence to a product's price elasticity likes more substitutes become available, the demand becomes more elastic when customers have more alternatives. The ability of firms in any industry to raise the prices only for a close substitute product.

Competitive Rivalry: It might be high where entry is likely and there will be some threat of substitute products, and suppliers and buyers in the market attempt to control

Swot analysis

Swot analysis is a process it can be use the swan hotel auditing. It is a process of business planning and it stand on four stage. These are strengths, weakness, opportunities and threats. However, the strength and weakness are internal factors and opportunities and threats are external factor.

Under this diagram shown the factor of swot analysis

It could be specialist marketing expertise of any business, exclusive access to natural resource, parents, any new product or innovative product or service of any business. Moreover, it could be any business location. The quality of product and processes. It could be strong brand or reputation.


Any business weaknesses could be their lack of marketing expertise or undifferentiated products and service for example what the relation with your competitors is. Furthermore, it could be location of your business. If any business has poor quality of their product and service it could be their big weakness. However, damaged reputation is also weaknesses of any business.


There will be some opportunities of any business when they developing their market for example china developing their internet. It could be moving into any new attractive market segments or a new international market. Furthermore, there will be creating some opportunities for any business when loosening of regulations or removal of international trades. However, if any organisation have weak competitor then they will get some priority and led the market.


When any new competitor enters in your home market then you will get some threats of your business for example there will be some price war of products or service. Furthermore, your competitor might think about new or innovative product or service. When new regulations and increased the trade barriers it is also threats for any business. However, sometimes any products or service might be introduced by taxation.

(threats )


Maslow's Hierarchy of needs

When motivation will be driven the existence of unsatisfied needs, on that time it will be worthwhile for a manager what needs are very important for their individual employees. For that reason Abraham Maslow create a model about, low-level needs likes physiological requirements and safety must be satisfied before needs of higher-level likes self- fulfilment are pursued. In this hierarchical model, if any needs is mostly motivates then the next higher need takes its place. Under this diagram shown the Maslow's hierarchy of needs.

Self-Actualization :

Basically Maslow's hierarchy of needs summit is the self-actualization. Furthermore, for full potential likes a person it is quest of reaching. On the other hand, dislike lower level needs, and it's never be fully satisfied; when one grows psychologically then always new opportunities to continue to grow. Self -actualized people should needs likes : truth, justice, wisdom, meaning. Moreover, self-actualized people have peak experiences of frequent occurrences, what is energized moments for happiness and harmony. There is only few amount of people are reaches the level of self-actualization according by Abraham Maslow.

Esteem needs:

when any person feels a sense of belonging then the person need to feel important arises. Internal or external is classify by esteem needs. Basically internal esteem needs are related with self-esteem likes self respect and achievement. External esteem needs are likes social status and recognition. In addition, some esteem needs are: self-respect, Achievement, attention, recognition, reputation. Moreover, Maslow later include a level between esteem needs and self-actualization in his model, it is the need for knowledge and aesthetics.

Social needs:

When a person met with the lower level physiological and safety needs then higher level needs going become important, the first of which are social needs. Furthermore, it's include needs for belonging, love and affection. Maslow giving the priority on the physiological and security needs then the social needs. Relationship likes friendship, romantic attachment and families help this type of need for companionship and acceptance. Moreover, these are involvement in social, community or religious groups.

Safety needs:

These needs are include safety and security. For survival security needs is very important, but they didn't likes demanding as the physiological needs. For example, for steady employment the security include a desire, health insurance, safe neighbourhoods and shelter from environment. Furthermore, there also some needs might need to be full filled likes : living in a safe area, medical insurance, job security, financial reserves. When any person feels her or she is harm's way then higher needs will not receive much attention by Maslow's.

Physiological Needs

Basically these needs are required to most basic needs likes water , air, food and sleep. According to Maslow's theory, when any required needs are not satisfied then one motivation will came from the quest to satisfy them. Furthermore, higher needs likes social and esteem are not felt until one has met the basic needs for one bodily functioning. However, Maslow believes that these needs are most important instinctive needs in the hierarchy because of all needs become secondary before these physiological needs are met.


The BCG Growth- Share Matrix

The BCG growth-share matrix method is based on the product life cycle theory and that can be used to any company or business for what priorities should be given for any product portfolio of a business unit. Furthermore, product life cycle shows the stage of products from development to withdrawal from the market. In addition, in a long-term value creation of business, any company or business need a portfolio of their products that contains both high-growth products in need of cash inputs and low growth products generate a lot of cash. Moreover, there are two dimensions for example, market share and market growth. However, the main idea is hidden in that the bigger market share a product has or the faster the product's market grows the better it is for the company or any business.

Source: http://1.bp.blogspot.com/_V0HZuabCFVs/SVUsgtRLjWI/AAAAAAAAAOU/JLo9eC_osbQ/s320/picture_bcg_matrix.png : accessed on ( 25/05/10)

1. Stars (high growth, high market share)

Stars are leaders in high growth markets so they should generate large amounts of cash because of their strong relative market share. On the other hand, there are high growth rate because of consume large amount of cash, for that reason cash direction approximately nets out. When any star can maintain the large market share then it's become cash cow when the market rates declines. However, also use a lot of cash because of growth market conditions. For example, Apple Company has a large share in the rapidly growing market for portable digital music players (iPod) and iphone.

2. cash cows (low growth, high market share) basically cash lead the mature market and the exhibit a return on assets what is greater that the market growth rate, and these generate more cash than the consume. Furthermore, Cash cows are low growth markets so their profits and cash generation should be high because of the low growth, investments needed should be low. For example apple laptop (Mac book) its low growth but high market share. Moreover, in the market leader's cash cow provide the turn question marks for covering the administrative cost of any business, for funding researching product and development, for service the corporate debt and to pay dividends to shareholders.

3. Dogs (low growth, low market share)

Dogs are low market share and low growth rate and thus neither generate consume a large amount of cash. Avoid and minimize the number of dogs in a company. Beware of expensive 'turn around plans'. However, investing in a product that has little or no financial reward. Such businesses are candidates for divestiture.

4. question marks (high growth, low market share)

For consume large amount of cash question marks are growing highly, because they didn't generate much cash and also for their low market share. As a result, it's become large net cash consumption. Furthermore, Problem child is also known as a question mark likely to gain market share for becoming a star, and when market growth slows by a cash cow. When the question mark failed to become a market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. For example, Mac pro it is high growth product but low market share. However, question marks should be analyzed carefully in order to determine whether they are worth the investment required to grow market share.


In conclusion it can said that by using such model and tools we can describe any business or organisation position, where the position of the organisation right now or what type of problem in such business arena, which business arena they need to developed and how to developed. Furthermore, we can use different model and theory in such business arena and these are act likes tools for any business. Moreover, we can understand about any business environment, its marketing position and motivation by applying in such business tools likes swot analysis, pestle analysis, Maslow's Hierarchy of needs, porter 5 forces and BCG Growth- Share Matrix.