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The External Environmental Analysis (Pestel)

908 words - 4 pages

Developing an external environment analysis

A business converts inputs into outputs in order to make a profit. However, the business does not exist in a vacuum, it exists within an external environment consisting of the actions of other players who are outside the business.

The external environment consists of:
• Political
• Environmental
• Social
• Technological
• Economic
• Legal


PESTEL analysis stands for "Political, Economic, Social, and Technological, Environmental and Legal analysis". It is a part of the external analysis when conducting a strategic analysis or ...view middle of the document...

Trends in social factors affect the demand for a company's products and how that company operates. For example, an ageing population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers).

Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.

Environmental factors include weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones.

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

How external environmental environment affect business

There is now growing political focus and pressure on healthcare authorities across the world. This means that governments will be looking for savings across the board. Some of the questions the industry should ask are:
• What pressures will be put on pricing?
• What services will be cut?
• Will the same selection of drugs be available to every type of animals?

The global economic crisis still exists yet government reports still show that the spending on healthcare per capital continues to grow. Will the current healthcare models exist tomorrow? The growth in homecare (as seen in the Nutrition sector) demonstrates how pharmaceutical services have moved to the private sector and have become a...

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